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Euratex Says Uncontrolled Brexit Would Have a Grave Impact on the Textile Sector

In a position paper, Euratex said, “An uncontrolled separation of the U.K. from the EU would have a very serious impact on the industries of both sides…given comparably high import tariffs that would apply in the textile and clothing sector. The avoidance of legal uncertainty is of high priority for economic operators, requiring an early arrangement on the legal relationship between both contracting parties in the medium term.”

Euratex said a transitional arrangement should cover suspension of customs duties and all legal and regulatory areas with relevance for the textile and clothing industry, and should directly lead to a comprehensive trade and investment agreement in the long run.

“A future comprehensive EU27-U.K. trade and investment agreement should consider the already existing close economic relationship between the European textile and clothing industries,” the paper noted.

On Monday, a spokesman for the so-called “Article 50” negotiations between the European Commission and the U.K., noted that at the first meeting last week, both parties agreed to create working groups on citizens’ issues, the financial settlement and other separation issues.

These talks are also expected to lead to a U.K.-EU free trade agreement if they go well.

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(Read more about Brexit: UK Retail Sales Up in April But Consumers Fret Over Brexit)

“The European Council can then decide on whether we can show sufficient progress, or not. And if we can move to scoping the future relationship on trade and other matters,” Michel Barnier, the EC’s chief negotiator, said following the first round of talks.

The textile and clothing sector is one of the EU’s major industries. With 1.7 million workers, it generated sales of 171 billion euros ($191.36 million) in 2016, according to Euratex.

“European textile and clothing companies are globally leading, regarding technical textiles, sophisticated high-quality yarns and fibers, as well as high-end apparel goods,” Euratex said.

The U.K. lies in third place in textile and apparel two-way trade, with a combined 16.2 billion euros ($18.13 billion) in bilateral commerce.

Euratex said the major threat of a “hard Brexit” is the imposition of high customs duties, as the level of customs duties is generally higher in textiles and apparel than in other industrial sectors. Today, for the countries not benefiting from any FTA or GSP regime, the EU duties are 4 percent to 5 percent for yarns, 8 percent for fabrics and 12 percent for apparel entering the EU market.

“If duties of that kind were introduced, even on a temporary basis, between the EU27 and the U.K., it would have a negative impact on both industries,” Euratex said.

A future trade and investment agreement between the U.K. and the EU “should bring opportunities for growth, investment and job creation on both sides of the Channel,” Euratex said.

It should cover the confirmation of a zero-duty level, customs procedures, public procurement, state aids and protection of investments, and intellectual property rights provisions. It should also cover environmental and sustainability goals, standards and regulations.