Portugal has strong ties with the UK. The Anglo-Portuguese Alliance (or Aliança Luso-Britânica) between Portugal and England (succeeded by the United Kingdom), ratified at the Treaty of Windsor in 1386, is the oldest alliance in the world that is still in force. This alliance, which goes back to the Middle Ages, has served both countries well. It has been very important throughout history, influencing the participation of the United Kingdom in the Iberian Peninsular War, the UK’s major land contribution to the Napoleonic Wars and the establishment of an Anglo-American base in Portugal. In return, Portugal has aided England (and later the UK) in times of need, for example, in the First World War.
Today that historic bond of friendship is as strong as ever. About 80,000 British citizens live and work in Portugal and almost 200,000 Portuguese nationals live and work in the UK. Around 2 million Brits visit Portugal every year. Britain is a huge market for a whole range of Portuguese products and Portugal is a gateway to a market of 250 million people worldwide thanks to its ties with its former colonies. These Portuguese speaking markets, namely Brazil, Angola and Mozambique are known as the Lusophone markets.
It is for these reasons that it was an honour to be invited to address students from the Instituto de Estudos Políticos da Universidade Católica Portuguesa, on the very timely topic of Brexit and the EU27 from the business point of view. I believe these bonds of friendship, family, trade and tourism are at risk if we opt for the wrong sort of Brexit. The UK may want to open to trade with the rest of the world, particularly the Commonwealth countries, but we should not forget our oldest friend in Europe.
At this moment of huge uncertainty, and as Article 50 is about to be triggered, questions arise regarding the future of the EU and UK relations, the future of the UK itself and what it means for business. And for this particular audience, what does it mean for Portugal and UK trade relations?
Sadly, there is as yet no clear answer to what Brexit exactly means. The UK Prime Minister, Theresa May, has stated that Brexit means Brexit. At the same time she said she would like to keep some elements of what is to be part of the EU, namely: parts of the single market (for example aviation), an arrangement with the EU customs union and participation in the rule making, standardisation and regulatory bodies of the EU. As a result the UK’s negotiating objectives are simply not clear and for business this means uncertainty and a potentially negative impact on Portugal – UK trade relations.
That’s because if there is no comprehensive trade deal after two years of the Article 50 negotiations then trade with the UK, which is Portugal´s 4th biggest market, will be disrupted, particularly affecting sectors such as textiles and beverages, including port wine. A lack of trade agreement would mean that the UK would have to fall back on complex WTO rules, which could result in tariffs of up to 20 percent, and a whole host of non-tariff barriers, such as rule of origin checks. For example, for the metal mechanic sector, despite the tariff being lower (about 5 percent),’ the issue of standardization compliance would be a major problem. Nowadays, vehicle parts travel between EU Member States several times until the final product is complete. This process would be rendered virtually impossible under WTO rules.
So faced with such huge uncertainty it is vital that the UK and the EU agrees on a completely new type of trading relationship as soon as possible. That can only be achieved in a spirit of goodwill and compromise. Portugal, a key player in shaping the Brexit debate among the EU 27, and as Britain´s oldest ally, has a special status and unique role to play in fostering that spirit of compromise and facilitating an early and comprehensive trade deal.