Brexit: all eyes are now on the trade deals

AcademicConsumerEducationPress Release

By Dan Conway, Director of External Affairs at the Publishers Association

The UK book industry has reacted with resilience to the regulatory and political uncertainty of recent years. The Publishers Association’s latest market statistics indicate that the industry revenue from books, journals and rights sales has grown since the 2016 referendum, now totalling £6bn (roughly €7bn). However, it is important to note that £3.5bn, roughly 60%, is export sales and in the physical book market, 35% of total value is made up of European sales. Any disruption to trade with Europe could prove debilitating to UK book publishers.

In the immediate term, publishers have little to fear from Brexit thanks to the transition period that ends on 31 December 2020. However, from 1 January 2021, there are several scenarios that could play out:

Free Trade Agreement

The EU and UK could have a full Free Trade Agreement (FTA). The basis for this is the mutually agreed “Political Declaration” which gives a direction of travel including the establishment of “high levels of protection” for intellectual property assets. There is some scepticism that this can be done in the timeframe of the current transition period, but it is possible.  

The FTA scenario and the setting of the future relationship would, presumably, end regulatory uncertainty. The key questions for UK and EU publishers would be:

  1. People. Freedom of movement would end and the UK’s independent immigration policy would begin. It is currently reported that the Prime Minister wants to bring in a points-based system on 1 January 2021. Publishing is an international, multi-lingual business. The question will be, can we recruit the people that we need?
  2. Copyright and Intellectual Property. The Political Declaration says there will be ‘protection and enforcement of intellectual property rights beyond multilateral treaties to stimulate innovation, creativity and economic activity.’ This means keeping to and building on the international frameworks, such as the Berne Convention, which we already abide by and is good for publishing. Both the Political Declaration and the Withdrawal Agreement say we will continue to work together in international forums, which is also positive. We now know that UK Government has no plans to implement the Digital Single Market Copyright Directive, but key questions remain about the future framework for copyright exhaustion post-exit.
  3. Tariffs, customs and data. Luckily books and journals are likely to have zero-tariffs associated with them, but what will the import and export requirements be? We also hope that a “data adequacy agreement” will be put in place so that data will be allowed to flow freely across borders.

There are lots of unknowns about what would be negotiated, but there is a distinct chance that an FTA could work for publishing if the provisions facilitate trade in goods (i.e. books) and services (i.e. digital and rights sales). The Publishers Association has a seat on an Expert Advisory Group set up by the UK Government to advise on specifically on this Deal. This is a really useful forum that places publishing at the centre of these trade discussions.

No Deal or “Disorderly” Brexit

Far less desirably, the EU and the UK may not agree an FTA. If the transition period is not extended this will trigger a so-called “disorderly” Brexit, where the trading relationship is severed with no agreement in place. It is the No Deal “disorderly” Brexit which brings with it the greatest level of risk. The Publishers Association ran a significant workstream preparing UK publishers for this outcome and identified the below issues as being of most importance:

  1. Citizens’ rights. The current situation is that EU citizens living in the UK have until 30 June 2021 to apply for “Settled Status”. The number of applicants to the scheme has already hit more than 2.7 million people. The UK has also confirmed that, thankfully and unsurprisingly, those who don’t apply will not face automatic deportation.
  2. Travelling. After Brexit, we have been told that we will need to make sure we have 6 months validity on our passports to travel. For trips over 90 days you may need a Visa. This would also be true in an FTA scenario.
  3. Movement of physical books between UK and EU. From a practical perspective, businesses need to understand their supply chains and identify customs support ahead of time. This means contacting freight forwarders and customs agents to manage potential risks. Our legal advice indicates that physical books will not incur any tariffs even in a hard Brexit scenario. Although we have been told there will be some changes: books would become subject to import VAT. Regardless of extra taxes, customs declarations would be required causing significant administrative burden to businesses. To move books between UK and EU both parties will need to have EORI (Economic Operators Registration and Identification) numbers. There may also be additional requirements as “distributors” become “importers” on both sides.
  4. Data. Without an “adequacy agreement” between the UK and the EU, the rules for transferring personal data will change. Specifically, transferring data from the EU to the UK could become more difficult and EU businesses should prepare for this by making sure that the right contractual clauses are signed with UK partners and retailers. If the UK and EU data regimes diverge then companies in the EU may need to appoint their own data representatives in the UK.
  5. Economic shocks. Perhaps the most important outcome of a disorderly Brexit is the wider economic impact. The extent of this has been hotly contested. But if the worse predictions are to be believed then this could be considerable and shock all consumer markets, not least books.

Extension of the transition

Finally, the transition period may need to be extended again, meaning we would not need to worry about most of the above for a longer period.

***

Broadly speaking, we should all be economically better off if the UK is able to sign up to a full FTA with the EU.

There is one final factor that needs to be considered: President Donald Trump. The UK government is concurrently considering an FTA with the United States, the other mega regulatory power in the Western world aside from the EU. It may prove impossible to do concurrent deals on regulatory alignment with the EU and the US, so contradictions may present themselves in the coming months as negotiations deepen.

Big tech companies have a lot of power over the US political administration and big tech tends to push for the loosening of copyright and champion the culture of free information. As trade deals discussion continues, the UK is looking West as well as East and that is of potential concern for publishing.

When it comes to Brexit, this is just the beginning. We have signed the divorce papers, but the future relationship is still unclear. Correspondingly, so is the business impact on publishing. We can only continue our work to ask the right questions and prepare accordingly.

This article was originally published on BookBrunch.