(Bloomberg) -- German industry called for a customs union between Europe and the U.K., saying it would soften “the horror of Brexit.”
Declining trade with Britain, the threat of U.K. regulatory hurdles to German industrial exports and the risk that talks will end in a “hard Brexit” require a broader solution than a free-trade agreement, Germany's BDI industry federation and the VDMA machinery association said on Tuesday.
The groups, which commented in separate statements, are seeking to inject urgency into divorce talks between Britain and the European Union ahead of German Chancellor Angela Merkel's inauguration to a fourth term on Wednesday and an EU summit next week.
Read more: EU calls on U.K. to provide ‘clarity' on Brexit
“For German companies, trade in manufactured goods without duties and quotas is the minimum requirement, ideally within a customs union,” BDI general manager Joachim Lang said.
For the U.K., “Brexit is casting its shadow” as United Nations data suggest that foreign direct investment fell by 90 percent last year and Britain declined to Germany's fifth-biggest trade partner from third in 2016, Lang said in the statement.
EU leaders meeting next week in Brussels should commit to a transition period for the U.K. starting next year, “otherwise some companies will be forced to activate their emergency plans,” the BDI head said.
Rising Costs
VDMA, which represents about 6,400 companies in mechanical and plant engineering, said Brexit threatens to increase the cost of German exports to the U.K. because legal and technical requirements will diverge from EU rules over time.
“A trade agreement would result in border inspections and customs processing, even if both sides agree to forgo customs duties,” VDMA general manager Thilo Brodtmann said. In contrast, “a customs union between the EU and Britain would ease much of the horror of Brexit.”
To contact the reporter on this story: Birgit Jennen in Berlin at bjennen1@bloomberg.net.
To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Tony Czuczka, Jones Hayden
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