Dutch Fear Brexit Aftershocks
A report by the Dutch parliament’s European Affairs Committee released on November 18 warns of the possibly harsh implications of Brexit for the Dutch economy.
The report recommends that Dutch government and industry make serious plans for the possibility that the U.K. leaves the EU without an agreement, which members of parliament (MPs) noted is increasingly likely considering the current issues that plague talks between the U.K. and EU. Specifically, they noted the recent June elections in Britain in which the Conservative Party lost its majority and the lack of progress on the key issues of the Irish border, financial settlement, and citizens’ rights, all of which represent minefields for politicians and negotiators.
“What was long considered impossible is suddenly thinkable: a chaos scenario in which the U.K. abruptly leaves the EU on March 29, 2019 without an exit agreement, a transition period, or a framework for future relations,” the committee said.
The senior MPs who authored the report believe a hard Brexit is likely, employing strong language blaming stalled talks on Britain’s “unrealistic expectations” and “inconsistency.” Talks, the report said, stalled because of insufficient progress on EU citizens’ rights, the Irish border, and financial settlement.
Due to geographic proximity and strong trade links, the Netherlands would be strongly affected by a chaotic Brexit without a pre-negotiated deal. The Netherlands is one of Britain’s main trading partners and third largest export market; roughly €50 billion ($59 billion) in goods and services flow between the two nations each year.
In the first three quarters of 2017 alone, the U.K. imported roughly £29 billion ($39 billion) from and exported £15.5 billion ($21 billion) to the Netherlands. The port of Rotterdam, the largest in Europe, manages over 54 million tons of British or Britain-bound cargo per year, over 11 percent of the port’s total imports and exports.
The Netherlands’ Bureau for Economic Policy Analysis (CPB) estimated that the nation could lose up to €10 billion ($11.8 billion), or 1.2 percent of the Dutch GDP, if the U.K. leaves the EU with an agreement. Without an agreement, and under WTO-established frameworks, losses could rise to around 2 percent of GDP, roughly €17 billion ($20 billion), or €1,000 ($1,184) per person.
Rabobank, an Utrecht-based bank, issued even starker estimates. Should the U.K. leave without a deal, the shock could remove 4.25 percent from Dutch GDP by 2030. Even with a comprehensive free trade deal, the Netherlands’ GDP could suffer by 3 percent.
The report finds the former scenario more likely. “Negotiations are in a deadlock. The U.K. is divided, and some politicians in the U.K. are unrealistic. This is a negotiation about limiting the damage,” said Anne Mulder, one of the MPs who compiled the report.
To mitigate damage to the economy, the report urges the government and industry to develop plans to respond to a no-deal Brexit. It also calls for negotiations to speed up or have the two-year deadline extended in order to ensure a deal is reached. The report further proposes forging new alliances with other free-trading countries and engages more closely with the Franco-German partnership.