Fiona Dawson, AmChamEU Speech, 10 March 2017
FINAL DRAFT
[Check Against Delivery]
Thank you.
It is a pleasure to be with you this morning at what is a very international gathering, and one
which reflects the interconnected world in which we now live; a world where people, goods
and services move more fluidly across borders than ever before.
But the question that faces us today is whether we will be living in that fluid world ten years
from now.
As various commentators have suggested, we are perhaps coming to the end of a distinct
economic and geopolitical period that stretches back to 1945, which saw the creation of
international institutions and the rise of international travel and trade. That process
accelerated after the collapse of communism and the fall of the Berlin wall.
It brought many benefits. It opened up borders, allowed for plural identities and fueled
economic growth leading to more affluent societies and less poverty.
But the tailwinds that have been driving us towards a more closely connected world appear
to be changing direction. We risk being blown backwards into a period of deglobalisation
and division.
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The future relationship between Britain and the European Union is a critical test as to what
future will unfold.
In June last year the British people were asked a question about the UK’s continued
membership of the European Union and a majority of those who voted answered that they
wanted to leave.
But in so doing they posed a much bigger set of questions about what should replace the
UK’s membership of the EU. What should the new trading arrangements be? How should
immigration between the UK and the EU be handled? How should UK and EU citizens living
outside their home countries be treated? How should future customs checks be
undertaken? How should the land border between Northern Ireland and the Republic of
Ireland be enforced? The list goes on.
These are not just questions for the British government to answer. They are questions that
the EU and its 27 remaining member states need to address, and which businesses across
the globe need to engage with.
Because how they are answered will impact significantly on economic relationships not just
between the UK and the EU but more widely; and that will impact on jobs and investment,
and on consumers.
So this is a big moment. We are about to turn a corner in history.
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An unravelling of economic and political structures on this scale presents enormous
challenges.
It was not what my company wanted. Mars was and remains an advocate of the European
single market and of similar cooperation in other parts of the globe. In advance of the
referendum Mars made clear that we supported the UK remaining part of the EU and its
commercial market.
But we also said that we would respect any decision the British people made and would
remain committed to our business in Europe, including the UK.
We have reaffirmed that commitment since the vote. Mars has a long heritage in many
European countries which stretches back long before the creation of the EU. That heritage is
particularly strong in the UK.
The first Wrigley factory was opened in London in 1927. The first Mars factory was opened
in Slough in 1932, and we are still there today. From these roots, we grew our business
across the continent, investing heavily in the process.
Over the past 20 years Mars has expended over €4.4 Billion in capital infrastructure in EU
member states, including over €1.3 Billion in the past five years alone. Those investments
have enabled us to maintain a modern, efficient and sustainable network of European sites
and factories that employs more than 18,000 people.
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Our presence in Europe, including in the UK, is a proud legacy that we wish to maintain. We
were one of the first manufacturers to announce new investment in Britain shortly after the
referendum, injecting £23m into our Mars Food facility at King’s Lynn in Norfolk. That
underlined our ongoing commitment.
Brexit clearly poses some problems, but the fact is Britain has decided to leave the EU and
the task now is to look forward and ensure that the decisions taken from this point forward
achieve the most positive outcome for all concerned.
In looking forward we are, however, informed by the past, because there were good
reasons why structures such as the single market and the customs union were created.
They lowered trade barriers by removing tariffs and customs checks; they allowed for the
movement of labour between states; and they introduced common regulatory standards.
This spurred investment and encouraged the development of integrated supply chains
which have increased efficiency, reduced manufacturing costs, created jobs and delivered
direct benefits to consumers in the form wider availability at lower prices.
This is strikingly evident in the food industry, which is not always given the prominence it
deserves. In recent discussions around Brexit and future UK-EU trading relations the focus
has often been on financial services or the automotive sector.
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But, as FoodDrinkEurope recently reported, our industry is “the largest manufacturing
sector [in Europe] in terms of turnover, value added and employment. Its contribution to
Europe's economy is crucial: 4.25 million employees throughout the EU, over €1 trillion
turnover and a positive trade balance of €25 billion.”
In the context of Brexit it is worth underlining that food and drink is the largest
manufacturing sector in the UK, accounting for 16% of total manufacturing turnover. In
other words, our sector adds almost as much gross value to the UK economy as automotive
and aerospace combined.
Significantly, Prime Minister Theresa May has acknowledged the importance of food and
drink, arguing that the erection of trade barriers in this and a number of other sectors would
be injurious not just to Britain but to other countries in the EU.
That brings me to the question of what is going to happen next.
As you know, Theresa May recently confirmed that Britain would be leaving the single
market and would not remain a full member of the customs union.
In their place the UK will seek a new free trade agreement with the EU and a customs
arrangement that allows Britain to negotiate new trade deals on its own.
Importantly the Prime Minister said that, and I quote:
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“Free trade between Britain and the European Union means more trade, and more trade
means more jobs and more wealth creation. The erection of new barriers to trade,
meanwhile, means the reverse: less trade, fewer jobs, lower growth.”
That is undoubtedly true in the food sector.
At Mars we have sites and factories that are interconnected across Europe, stretching from
the UK to France, Germany, Poland, the Czech Republic, Hungary, the Netherlands and
elsewhere.
These facilities make up an integrated network in which raw materials are moved across
borders and finished products made in one country are packaged, distributed and sold in
others.
The absence of hard borders with all their attendant tariff, customs and non-tariff barriers
allows for this integrated supply chain, which helps to keep costs down. The return of those
barriers would create higher costs which would threaten that supply chain and the jobs that
come with it.
Such barriers would also impact on consumers. If Britain ends up trading with the EU on the
basis of WTO rules, ‘Most Favoured Nation’ rates would come into force. In the area of
confectionery that alone would mean tariffs of around 30%. For animal products, it would
be 20%; for cereals over 15%; and for fish and fruit over 10%. Significant new tariffs would
also apply outside the food sector, notably in the area of clothing and textiles.
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Unfortunately there is no way that those costs could be absorbed without flowing through
to consumers in the form of higher prices.
However we should not just look at trade through the prism of tariffs and customs checks,
significant though they are.
Regulatory barriers are also important.
EU regulation is often maligned but at a fundamental level it delivered an equivalence in
areas such as labelling, packaging and environmental standards that has helped to facilitate
better and more efficient manufacturing and distribution within the whole of Europe and
even beyond.
If, over time, the UK gets significantly out of step with the EU regulatory environment then it
will impact negatively on its ability to trade with its nearest neighbours.
And that issue of proximity is a critical one.
According to Angus Armstrong, of the National Institute for Economic and Social Research,
“Trade between two counties approximately halves as distance between them doubles.”
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That is an important economic reality which should not be ignored, because while Britain
may have opted to leave the European Union it has not, and cannot, opt to relocate from
Europe.
It is a fact that Europe after Brexit will remain a critical market for UK exports and likewise
the UK will remain an important market for goods produced and manufactured in other
European states. There can be no economic advantage either side restricting trade with a
large market situated on its doorstep.
In simple terms, if the UK and the EU fail to agree on a new preferential deal, it will be to the
detriment of all. Yet that realisation may not be sufficient to produce an agreement.
Some argue that politics is trumping economics in this process; that the UK has decided to
put questions of sovereignty and immigration ahead of economic concerns; and that the EU
may adopt a similar approach by prioritising European integration above all else.
On the face of it this situation seems to turn on its head that famous American political
maxim: “It’s the economy, stupid!”
The new maxim might read: “It’s the politics, stupid!”
But the reality is that politics and economics are interwoven.
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Moreover, the Brexit vote should not be seen as a “non-economic” vote. Clearly there were
political and social concerns at play, and there is a need to respond to those. But economic
damage will not make it easier to address such concerns and there is a need to examine all
these issues in broad perspective – because Brexit is a problem for all Europeans.
As an important Bruegel Institute paper published last August said: it is vital that “the EU
and the UK enter exit negotiations not only with a clear view of their near-term goals but
also of their long-run interests and likely interdependencies”.
That sentiment resonates with me and I would urge all those engaged in the Brexit
negotiations to view this process through the prism of mutuality and shared benefits, and to
enter the talks in that spirit. My hope is that the more the talks advance, the more all
parties will realise the common economic interests at stake.
In my experience, the business deals that are most successful and most enduring – in fact
most enjoyable – are those that have delivered a win-win outcome. That should be the aim
here.
Of course the talks around Brexit are about much more than business and economic
concerns. But there are common elements to any negotiation and perhaps the most
significant is the way that it begins.
Tone is critical.
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That is why framing these discussions in the language of divorce is unhelpful. Britain may be
leaving the EU but the key task at hand is to agree on the framework for a new relationship,
not to only dissolve an old one.
Reaching an agreement will require compromise and an appreciation of the economic
interdependency between the UK and EU. It requires an acceptance of the benefits that
common regulatory standards and the movement of labour can bring, and an understanding
that the imposition of significant trade barriers would ultimately hurt everyone and
undermine, rather than strengthen, European unity.
Other member states should remember this is not about “punishing” Britain for her decision
to withdraw but rather about finding the best solution for European and UK workers and
consumers. That consideration must come first as we build the future.
Achieving a lasting agreement will take time and as many have said the business community
is unanimous in wanting sensible transition periods to enable new arrangements to be put
into place.
This is a pivotal moment. The decisions taken now around Brexit will impact on the longterm prosperity of Europe, the wider world and our equally global company. Indeed they
will strongly influence the debate about the future of global trade deals and how
international business is conducted.
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More than that, it will influence the sort of world we will live in and that our children will
grow up in.
The period of globalisation that I have lived through has delivered many benefits. But it has
also thrown up some significant challenges which have the potential to push us into a less
prosperous, less stable and less harmonious place.
There is a responsibility upon all of us to meet those challenges with solutions that deliver
mutual benefits and a shared future.
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