Episode Transcript
[00:00:00] Speaker A: Welcome to Business Beyond Borders. I'm Cynthia Deeran. Today's show is all about Europe, one of the world's biggest markets, but also one of the most diverse. A trading bloc with 450 million people, 50 countries and 287 languages. It's a market with a lot of opportunity, but it's not without risks. Today I'm joined by Catherine Reed, one of our senior advisors here at Dehren and Associates.
So, Catherine, you're from the uk, you live in Austria, you have worked across Asia, Western Europe, Central Europe, Eastern Europe.
From where you sit in Europe at the moment, what is changing in the global trade landscape that business leaders really need to be paying attention to?
[00:00:43] Speaker B: I think it as many stories in the last years, it started from that point of the pandemic where people felt that the old certainty was moving away. So during the pandemic, we had this situation that effectively Brexit took place whilst we were still in a kind of pandemic situation.
And what it means is that trade effectively is no longer just that question of moving goods around borders, but is being used much more by the EU consciously as a policy tool. And that effect of Brexit moving or the UK moving out of the eu, that bringing up a lot of uncertainty within the eu, because of course, there were other members who were thinking, well, maybe this could be a good idea, like Hungary and so on, were thinking, maybe, maybe we could be better off. The grass was greener on the other side of the fence.
And then, of course, there came that moment where Russia invaded Ukraine.
And I mean, from here, the Ukrainian border is almost as close to where I'm sitting as the very western tip of Austria.
[00:02:07] Speaker A: So how far is that in kilometers?
[00:02:09] Speaker B: So I would say from me, the Ukrainian border is about 800 km.
[00:02:15] Speaker A: Do you find that stressful at all?
[00:02:17] Speaker B: No, because, I mean, the Ukraine is a huge country and obviously that is literally like the western border of the Ukraine, but it is close enough, you know, you can get in the car and drive there and people do.
[00:02:30] Speaker A: That's so wild.
[00:02:31] Speaker B: And so you have to also remember that both the Ukraine and Russia, historically speaking, and when I say historically, I'm talking during the last 20 years, have been major trading partners for Central Europe, especially for Austria, who had extremely good connections. The main hub, if you wanted to fly somewhere within Russia, that wasn't Moscow, the main hub that you flew from would be Vienna. So most Europeans were used to the idea of hubbing via Austria to go into Russia. And I think that that has brought up a lot of uncertainty. And on the other hand, parallel to that, the Europeans brought in all kind of regulations around, things like compliance, data security.
And combined with that situation of maybe having Russian hacker attempts on all kinds of companies and institutions, it just kind of has accelerated that move that perhaps had already begun 2018, 2019, when Brexit was still being hatched, as it were.
[00:03:40] Speaker A: Do you think there was one thing that played more than another? I mean, you know, you've got Brexit Covid, new regulations, war in Ukraine. This situation where, you know, east and west are tightly meshed together through a country like Austria, where you are sitting, can you point to a standout thing that's really changed the equation, or is it really just a confluence of factors?
[00:04:05] Speaker B: I think it's more of a confluence of factors because, I mean, the more I think about it, you could even go back to that point in 2013, 2014, when Europe was receiving, for a short period of time, a really huge influx of refugees who came across from Syria.
And at that point, the European Union started to, let's say they allowed certain countries, including Germany and Austria, to start doing border controls within Schengen, which in the past, if you travel, you know, if you traveled between Germany and Austria, from which is about an hour away from, from where I am, then, yes, you could see the old border, which was from 30 years ago from, I mean, when I was a student, there used to be a proper border there and some of the infrastructure was still there.
And suddenly there are border controls. And those border controls, even though there is no longer that kind of a refugee problem, those border controls are still in place.
So I think it's one of those things that, you know, that dream of open borders, free movement of people, free movement of goods and services, all started to crumble a little bit quick sidebar.
[00:05:29] Speaker A: 1998, I was studying in France and traveling on a train from, I think it was from Hamburg down we're going down to the Czech Republican. Because I had a visa to be in France, I thought it would be fine for me to travel on the train down through Germany into the Czech Republic. And I was with my sister and we went through Baden something or other in the south of, you know, down in Bavaria, right there on the border. And of course, somebody came and checked my visa and said, I've got the wrong visa. And they kicked me off the train in the south of Bavaria with my sister. And we were standing there with, like, no money and frantically thumbing through the Lonely Planet guide and having to go back to Dresden and nearly being in tears because we couldn't find anything we could afford to stay in, in Dresden. It all ended well. But there's a story there. I'll tell you some other time. So just going back to this situation in Europe, I mean, if we think about trade risks, what trade risks in Europe do you think business leaders are underestimating right now?
[00:06:39] Speaker B: I think one of the topics that's really key to take a look at is this question of the Data Security regulations, because as soon as you are marketing a product to the EU in any way, shape or form, then you are affected by the GDPR Data Protection act.
And that also applies in a slightly different form in the uk. But it doesn't matter whether you're talking about the UK or you're talking about the eu then data protection is a massive topic and a lot of companies have been hit by hacker attacks within Germany and they have been literally laid out for months because trying to get all of their email and trying to get all of their data back.
So it's something that is taken very seriously. And I think the other topic is the whole block of environmental topics, sustainability, which are also, they might be treated differently across the eu, but things like carbon reduction, traceability, recyclability of packaging, all of those kind of topics are things that can easily catch you out if you're not expecting to have to do it.
[00:08:06] Speaker A: Because it's. So there's, there's such an emphasis on that in Europe, I mean, to a higher degree than elsewhere. So I think yeah, that's completely right. Especially perhaps companies coming out of Asia where the awareness of the environment and sustainability is really just starting to grow and it's not even legislated in a lot of places. People think, oh, it'll be fine, we'll just use our same old, same old packaging and you know, our scale. Oh, we don't really have a sustainability scheme, but we'll go to Europe and then they get there and it's not quite the way they thought it would be.
[00:08:36] Speaker B: Yeah, or they get stung with the cost because, you know, within Germany it's the producer who pays for the, the green dots, the recycling, green dots for the cost of recycling, the packaging.
[00:08:49] Speaker A: What's the cost of that, more or less? I mean, do you have an idea as a percentage?
[00:08:54] Speaker B: I don't know what the up to date costs are on that because it varies very much depending on what you have and often those packages are like compound materials. If you just have cardboard or just have metal, then it's relatively straightforward. But often they're those kind of hybrid materials that make it much more complicated.
And I think that one of the regulations that works both ways, that it causes issues on both sides, are all of these questions about supply chain due diligence, which are not going to be implemented in quite such a draconian way as it looked. But EU companies are being forced to ask their suppliers much harder questions earlier in their processes.
Where is this made?
Under what conditions are the workers being treated properly?
What kind of inputs are there? And so, you know, if you're looking to export into the eu, just having a good price and a good product isn't enough anymore. You've also got to be able to explain your production story and you've also got to be able to prove it.
You've also got to be able to prove, you know, that you don't have slave conditions in your factories and that you don't have. You're not using raw materials that have been mined by small children somewhere in Africa. I mean, you know, that it goes back through the whole chain. And I think that this whole level of traceability is something that China, for example, actually is okay with because they're used to this idea of people wanting to trace all the supply chains through the country.
[00:10:39] Speaker A: What about India though?
[00:10:41] Speaker B: India or Vietnam, where maybe there's a slightly higher general level of consumer trust within their home market. They're not used to having to take those kind of precautions within their domestic market. And so suddenly being asked all of these difficult questions by a potential customer who they haven't even signed a contract with yet is something that can be quite challenging before you even get as far as delivering something.
[00:11:09] Speaker A: It's interesting. We've worked with some companies out of Asia coming into Australia and it's somewhat similar in many ways.
If you go and visit the factory and do a QA visit, it all looks fantastic. But when you then start to ask the questions about Modern Slavery act and the process by which you verify that there's no modern slavery and all the environmental pieces, it breaks down because even though a lot of them might have really good processes and good quality control and they actually might be adhering to a lot of that stuff in, in practice that hasn't been documented. And I don't think that Australia is even as stringent as Europe.
[00:11:50] Speaker B: On the other hand, also don't think that necessarily Europe is as stringent as you might think when it comes to, because often within Europe. I'm not quite sure how the process works in Australia, but lots of processes In Europe, work on the basis of you trust your supplier's certificate. You don't have to check if you're being a responsible company. Yes, you'll go and audit your suppliers even within Europe. But if we're talking about the letter of the law for lots of things, you don't necessarily have to audit suppliers under certain conditions. So if somebody says to you that they have, for example, an organic certificate in the food and beverage space and they supply you and say, we're delivering to you, I don't know, we're delivering to you organic apples, then you as a producer are allowed to trust that certificate. You don't have to go and check their trees and do analyses on whether they've been spraying them with something nasty. Whereas certain other countries, if you want to have an organic certification, for example, to deliver those apples or that apple product later on to China, you have to go with the Chinese inspectors, have your apple trees looked at, and they will analyze the soil, the water, the trees, everything that your suppliers further back upstream in your supply chain have. So, you know, sometimes I've been on audit visits with visiting people and, you know, it's difficult. One, the Ministry of Health visits and somebody from the production is explaining, oh, and of course we don't mix, I don't know, we don't mix raw materials and finished products in any of our cool rooms, you know, and they open the door to the cool room and straight in front of you, you've got raw materials and finished products in there because somebody's just pushed them in there, gone to take a bathroom break and thought, when I come back, I'll take them back out again and put them where they're supposed to be. And exactly in that moment, you come in with the order visit. So, yeah, these things happen.
[00:14:06] Speaker A: You and I have both seen and worked with companies who think, oh, you know, getting into Europe is going to be a breeze. It's so sophisticated and regulated. This will be easy. We're going to go in, we, we're going to have a distributor signed up in a few weeks and then within a few months time, we will have done the first and second turn of stock and we'll be making money and we'll be profitable.
And in reality, months later, they have not sold a thing.
Execution's drifting and the board's tearing its hair out because it's not going according to plan. I mean, what have you. Have you, what stories can you share without, you know, getting anybody into trouble of, you know, similar experiences, people assuming it's Going to be a snack and it turning out to be anything but.
[00:15:01] Speaker B: Yeah, I mean I think, I think there's, there's often that, that feeling that many, there are a lot of brands out there who for one reason or another they might have been very lucky with one of their initial forays into export markets.
So for example, if you go into a market at a time when a local producer has had some kind of a food scandal, it doesn't matter whether we're talking, you know, somewhere in Europe or in the US or somewhere in Asia, then you can get quite a lot of traction very quickly by virtue of the, there been a certain vacuum in the market or if, you know, if there's been a situation that something has been sanctioned in one market and suddenly opens up and you're one of the first people in that first mover advantage can give you that impression that it's really easy to do export.
And of course European retail just isn't, isn't that easy. And I mean I think that across most of Europe it's that question that retailers have one window mostly per year, some of them have two and some of them are more flexible. But as a general rule it's one window per year. If you come with a new, I don't know, a new super cookie, then you're looking at 18 month lead time.
And there's got to be a really good reason for them to take a risk on you to kind of cut the queue and get in there faster than that. And I think that if you're used to working in a lot of other markets in, in some Asian markets in Korea, for example, if your distribution partner has good relationships with retail, they can probably get you onto the shelf. They probably can get you onto the shelf within a month or two.
But that's if they already have other products in the portfolio that the retailer actually needs for their business.
You know, and if you, if you go to a European distribution partner, you're probably going to, even if they are really keen on your product, you're probably going to need a couple of months to go through all of the.
How do I need to change my packaging?
Do I need to change my formulation?
Then you've got to get your goods into Europe physically, which if we're talking about an Australian or an Asian supplier, then that's another couple of months.
[00:17:47] Speaker A: So I want to hear, I'd like to hear a story of where you've seen somebody come unstuck.
A cold supply chain story would be amazing if you have one.
I'd also love to hear about one in another, you know, food sector.
[00:18:05] Speaker B: One of the, let's say worst issues I had in temperature control with supply chain was actually in the time when I was employed and working in baby food.
And you know, these small jars of baby food, they're not only sensitive to too much heat, which you can deal with that in the production process to a certain extent, but they're also, a jar is also quite sensitive to cold because if it freezes then you know, the water separates out from it and the lid, the seal on the lid can pop.
And we had a truck going from Austria to Kazakhstan probably about this time of year in the middle of one of these kind of really cold snaps.
And the truck driver, because he was trying to save some money during the nights, he basically didn't plug the, the aggregator in to make sure that the temperature control kept the truck above freezing.
All of the products in the truck froze and within three weeks of them arriving in the warehouse at the importers they'd all, it was obvious that they'd all like pop their lids and the products were basically spoiled.
So when it was, when it was just the fruits, it just looked, you could just see, it looked like a little curve and at the edge there was like a little moat of water where the fruit and its liquid had separated out.
[00:19:50] Speaker A: Yuck.
[00:19:51] Speaker B: Not quite so desperate. But when you've got then products, jars that have got meat inside and things like that, then it starts to get, you know, more critical that you catch them before they actually end up in retail. Because of course you can do massive damage to your reputation if something like that has to be recalled out of, out of trade.
[00:20:11] Speaker A: Talk to me about other assumptions that people get wrong. You know, they were talking about it being a snack. Hey, we're just going to cruise into this European market and it's all going to be awesome.
[00:20:22] Speaker B: So a couple of years back I had this, this client who in the past had produced for a number of very well known brands who probably you would have some of those brands, at least one item in your house.
And he now had his own brand and was convinced that because he was a very well known person in his industry, which was very true, that this would be enough to carry his brand through and onto the shelves of central and eastern European retail. And the products were very good quality, they were a good price point, but the brand was unknown.
And he for various reasons was insisting that a distributor would always have to pay in advance, that he would never, not even further down the road, offer any form of credit. And if a distributor wanted to have credit, they would have to find a way on their end. But he wasn't going to do anything to do that.
And they found one distributor who was willing to work on that basis. But they also had to had quite high minimum quantities. Everything was produced literally to order.
So it was a six figure amount that each distributor had to pay upfront six months before they were actually likely to get any products.
And when I was, I was dealing with a couple of markets for them and each distribution partner that I spoke to who might have been interested in the products, even though it was a bit of a red ocean type category, the minute it was mentioned, the minute we got as far as talking about payment terms or there being no investment in marketing, branding other than visuals, that kind of asset, then everybody was just like, you know, actually we're not that interested after all. And up until now, even though at that time, a couple of years back they told me that products were going to be, they'd already got agreement with some supermarkets within Germany.
There still are no products on the shelf.
[00:23:06] Speaker A: Let's change tack a little bit. I want to talk about European trade policy.
And from where I sit, it looks a little bit as though European trade policy has shifted from, from enabling business activity to actually shaping behavior.
And as a result, Europe is becoming a place where it is more difficult to do business.
Do you think that is right? And if it is right, do you think that that was a, a key driver of Brexit?
[00:23:38] Speaker B: I think the roots of Brexit lie very far back.
Even at the time when the UK joined the European.
What was it at that time? The European Coal. And I don't remember the exact definition, they joined what became the eu.
[00:24:02] Speaker A: So the EC and then the, the eu, I think the European Community.
[00:24:05] Speaker B: And then it was something before that when they originally started talking about it. And I think that the seeds were already sown at that time and the Brexit situation was simply very badly managed by all sides.
And it probably shouldn't have ever got as far as it did. But I think that one of the problems that the European Union has is just the fact that it's 26 very disparate markets. We're not, we're not a homogenous region as such. Each region has, has certain similarities with the neighbors.
But at the end of the day, I would say the big, the big success of the EU has been in holding peace in Western Europe for the last 50, 60 years.
And that this question, people have fallen a little Bit out of love with the vision of having a united Europe as this huge trading block. And of course there are big disparities in purchasing power, in economic policies between the members of the union, which makes it really hard to get any kind of decision through.
And often a decision that then is actually made and goes through into law is something that is such a compromise that it doesn't actually keep anybody happy.
[00:25:35] Speaker A: I always think of Greece and Germany in this scenario. Before the EU happened and the common currency came into being, you had Germany with a very strong deutsche mark and you had Greece with a very weak dinar. And so it could make its living out of hosting everybody from northern Europe all summer at a very reasonable price. And then suddenly you get this common currency coming in and the poor old Greeks get their competitive advantage blown away and the economy just tanks. And I'm sure that's not the only example. But anybody who was benefiting off that currency arbitrage lost that, you know, that ability to compete once they joined the community and got drawn into the sort of the homogeneous. What's the word? Homogeneousness. Homogeneousness.
I don't even know the sameness of it all.
[00:26:28] Speaker B: That's what you get when you put two linguists together. We can't come up with something in our.
[00:26:32] Speaker A: It's like, is it German, English or French? We're not sure.
I wanted to ask you also just thinking about this question of whether it's getting more difficult to do business.
Obviously you are sitting much closer to the whole UK Europe cross border trade equation than I am. I'm seeing it from other side of the world. You're seeing it from, you know, maybe a couple of thousand Ks away at most.
I know when Brexit first came in, you went from seamless trade between, you know, across the channel to suddenly 40 kilometer tailbacks while people fiddled endlessly with their hundred page stacks of paperwork.
How is it now?
[00:27:14] Speaker B: I would say people have got more used to it, the systems are now better in place because at the end of the day, the actual agreement between the UK and the EU really went down to the line on the last minute before they signed it, which meant that it was signed and it was supposed to be implemented more or less two days later.
And of course that meant that nobody knew what the hell they were doing.
And so I would say it's put a lot of friction into moving goods out of the uk. But what is also true is that in the past, going in both directions, a lot of smaller companies were doing exports or they were doing Trade between, for example, the UK and London, Netherlands, or they were doing trade between Germany, Austria and the UK when actually they were not really big enough to be doing it and they were working on paper thin margins, which the minute anything came in that interrupted that. And of course, Brexit was a big interrupter moment they suddenly couldn't manage because they. They didn't have any teams in house who actually could do export.
And so just that fact of May of needing to do an export declaration or a customs declaration to get stuff out of the country really kind of blew their minds. And having to have a registered exporter number and all of that kind of thing was just more than they could cope with. And of course, any type of additional administration is an additional cost. That may be what makes your business deal not worth.
Not worth doing.
And I think that that's.
It's a pity.
I think the problems arise in products like seafood, where it really is critical every hour, you know, And I think that it has got better.
But there are still a lot of people who talk about the cost of customs and it's not cost of customs, it's the cost of the customs clearance process.
So if I want to send lots of people in Austria, for example, Brits in Austria have complained because, for example, grandparents in the uk who probably all voted for Brexit, send Advent calendars or small Christmas gifts for the kids in Austria and Austria, post goes to everyone, even if it's anything bigger than an envelope, they go, and you have to pay customs clearance fee.
There's no customs duty on it, but you actually have to pay for them to have done the administration, because it's coming in from a third country. Wow. They do it because. Because the Europeans are so. Still so resentful of the whole Brexit thing. Literally. I have packages sometimes. If you have packages coming in from other third countries, which obviously I do sometimes, they sometimes go through without being.
Without being charged. If something comes in from the uk, without fail, the postman will knock on the door and say, there's five euros, or, you know, on tea bags, there's five euros to pay on this package. And you're just like, that's more than the package is worth.
[00:31:10] Speaker A: Yeah. And you get your Advent calendar at Easter time.
[00:31:13] Speaker B: Something like that.
[00:31:14] Speaker A: Let's chat about EU Mercasure. And for people who don't know what it is, it's a sort of a giant trade deal between the EU and Latin American countries, which has been agreed and signed, but not yet ratified. What I would like to know Catherine is if you were advising a board, would you tell them, hey, get prepared for EU Mercosure? Or would you say it's never going to happen, don't worry about it, or would you say keep a watching brief? Where do you think it's up to?
[00:31:44] Speaker B: I think, think it would depend very much on what kind of business I was dealing with.
I think if I was in the business of importing commodities, then I might be quite happy about the potential of getting cheaper beef, cheaper soy, sugar, those kind of things where tariffs are massively reducing.
Obviously, if I'm, if I'm looking for things like machinery, chemicals, industrial equipment, the Europeans are all going to be looking to export into South America, but specialized manufacturing, Austria has quite a lot of specialized manufacturing, extruded plastics, these kind of things.
And so industry is looking at it and thinking that they're going to have, for them, it's going to be a good idea.
But environmental groups, farmers, they're all concerned about the kind of deforestation implications, sustainability, how it's going to be enforced and whether it's going to create massive problems. Carbon leakage, you know, lower quality food products, flooding the market. French farmers are against it. So probably they will go on strike again because I'm not sure if farmers in France ever really do any farming. But.
[00:33:29] Speaker A: Well, my theory is everybody in France goes on strike between September and December because that's the only time of the year when there are not a string of public holidays. So you have to go on strike between La Rentraille et Noel just to pass the time.
[00:33:43] Speaker B: You could be right, in which case we might be in for a couple of months where it's not happening. But obviously France, Austria, who else voted against it? I think Poland, Hungary, Ireland, those five all voted against it and Belgium abstained.
[00:34:00] Speaker A: So it's not a done. Done deal.
[00:34:01] Speaker B: It's not a done deal.
But then it's been on the table officially for quite a long time already. I think 2023 was supposed to be all sorted and, you know, the EU wants better access to South American raw materials and products.
[00:34:21] Speaker A: And so given the speed at which. Given the speed at which the US is moving to try and really reinforce its influence in Latin America, I mean, we've seen it with what happened in Venezuela a few weeks ago. And I was reading some press which suggested that the US is also putting a lot of pressure on Bolivia to list, you know, Hamas and several other groups as terrorist organizations and to do a bunch of things that they hadn't previously requested. I mean, that goes hand in hand with wanting greater market access, you would think that Europe might want to come of, come to a consensus and, you know, move forward so they could ward off that threat. Right.
[00:34:59] Speaker B: I think that that, realistically speaking, is the only reason it's gotten as far as it has right now, because otherwise would still be stalled as it was in 2023. And it's the same with the, with the free trade agreement with India that, you know, has been under negotiation for 20 years. And all of a sudden now Europe is decided that maybe they can't place their trust quite as much as they have in the past in the us and that they need to extend their trading partners and extend their horizons a little.
[00:35:36] Speaker A: Yeah, it's very interesting that you mentioned that. So, you know, my observation is that free trade agreements often take a very long time.
I was on the very first round of the negotiations for the Australia United Arab Emirates FTA all the way back in 2005, and I'd been working in the UAE in the embassy there, and I got put on the negotiating team back in Canberra and I was saying to myself, this is definitely not going to happen.
This won't happen.
Anyway, it didn't happen. And the negotiations went on and on and it turned into a negotiation with all of the GCC states because the Kingdom of Saudi Arabia got very annoyed that the UAE was going to negotiate its own bilateral FTA with Australia. And so that negotiation started up, I think the UAE, Australia one paused in 2007 or so, then the one with the GCC started up again in about 2013 or 2014. And it went on and on, never got anywhere, got called off.
And then suddenly last year, over about four months, Australia and the UAE got it all together and quickly negotiated an fta. I think a lot of the driver behind that was the fact that we have a giant amount of uranium down here. And, you know, the UAE wanted access to yellow cake for, so it could sort of shore up its nuclear future, but what had taken 20 years got done, you know, in five months. So I think it really depends what's driving the agreement. And often these trade deals are seen as secondary and not that important, and people get hung up on language and details and they go back and forth for a really long time when in reality, if they wanted to get it done more quickly, they could.
[00:37:22] Speaker B: Also, when a trade deal is done, you see it. It like if you're somebody who's outside of the. Of the negotiations, as it were, you see it in the news, like now you see the Europeans and Modi, the signing this week of this Indian Free Trade, EU Indian Free Trade Agreement, and everybody's like celebrating it, but it's still got to be ratified by 26 member states before that actually will make any difference to exporters on either side of that. So the fact that there are some things in there that are really important for EU exporters, especially around the automotive industry, especially around the wine and spirits industry. The French, you know, up until now India's had tariffs of things like 150% on alcohol. And so that being reduced TO I think 20% will make a massive difference to them. But the question is when? And I know when the EU FTA with Vietnam came into force, because Vietnam is a largely agricultural country that grows a lot of fruit and vegetables. If, if you were an EU exporter even of processed fruit and vegetables in some form, then those were the last things that actually where actually the tariffs fell because there was a certain staggered time frame where things were introduced and it was a few years further down the line before you really, truly felt the full benefit of that fta.
And I think that that is something that exporters need to be aware of. Doesn't matter which side of an FTA they're sitting on, they need to really check the specifics of it as to how that applies to them.
[00:39:19] Speaker A: Absolutely. And speaking of FTAs, which may or may not have an impact, what's your take on the Australia, UK or UK Australia FTA that was announced with a great deal of fanfare a couple of years ago as Brexit was kicking off, and everybody in the UK is like, well, this is going to solve our European export problem. We're going to diversify the markets and of course we're going to do Australia because it's our friend and we been there for forever and common framework, common language, common culture. My take on it is, I mean, it doesn't change the fact that we're still 12,000 miles, if you're thinking in Imperial away, and the UK makes up 4% of Australia's trade. So while it's a fantastic announceable, I'm wondering whether it's had any concrete benefit for people who are exporting. I haven't spoken to anybody who's told me one way or the other that it hasn't. But that's just my. That's my read on it. Have you come across anybody who's tried to use it directly and had a good, bad or indifferent experience with it?
[00:40:20] Speaker B: I've spoken to a couple of people who've Said, yeah, you know, obviously we've bounced Australia a little bit further up our priority list because of it. And like you said, it's a natural. I would say the UK and Australia through that Commonwealth connection is a, is a natural one to start out with. But, but even though there's a certain commonality of history and language and, and so on together with Australia, it would be, let's say, it would be really, really weird for anybody to try and actually say, look, we expect Australia, which is a market of how many people?
[00:41:07] Speaker A: 25 million tops.
[00:41:10] Speaker B: Yeah. To be able to replace the EU in general. I'm not saying there might be individual, there could well be individual industries.
I don't know, maybe the uranium question is again, something of interest, like there could be really niche opportunities in there.
And of course I think one of the things was giving young professionals under 35, five easier rights to work in the other country. Which I think if you're one of those people who really would like the idea of gathering a few years experience either in the UK or in Australia, then that's, then that's obviously a great opportunity.
But it doesn't replace the market, the closest market on the doorstep, either in terms of size or convenience of actually doing business there. Even if it's easier to have a conversation with somebody where you can speak to somebody in their native language and it's the same native language as yours.
[00:42:14] Speaker A: As you know, not all sectors are created equal.
If you look at the way the European regulatory framework is changing at the moment, which sectors do you think are most exposed in terms of a change in regulations, but maybe still behaving as though nothing has really shifted.
[00:42:34] Speaker B: Automotive, I think, is for sure a big one, partly because Germany, when we talk about industrial power, Germany sits really at the heart of the EU and the German automotive industry and a lot of the other, you know, if you look at Seat or Skoda, some of you know, they belong to the bigger German groups when it comes down to it. So I think that the Europeans are as they are in many things. Europeans tend to do things, they want to over engineer everything. So if you look at German cars, they tend to be a little bit over engineered for the job that they actually have to do.
Whereas some of the competition, and I'm particularly looking at, you know, Chinese electric vehicles, BYD and co. BYD and Co who come in and offer something which is above EU standard but not as over engineered and therefore considerably cheaper.
[00:43:43] Speaker A: And I, I think I'm right in saying that in Australia, BYD and I think this is right, that in 2026 BYD has, has become the leading car brand sold. I mean, at a minimum it's completely overtaken Tesla in terms of sales in Australia. And BYD have done some very aggressive things like parking an entire fleet of BYD cars and signs outside the Tesla showroom. So like, you know, they're moving very aggressively to, to actually become. To become.
[00:44:14] Speaker B: And of course they've got a factory, they're building a factory and I guess
[00:44:17] Speaker A: they can now do it at a lower cost because of robotics. Right. So they can actually reduce the cost maybe not right down to the level that you could produce for in China, but if you take out the transport you produce in Hungary with robotics, you don't, your supply is close to market and it's cheap and you've got your quality control there and so forth.
[00:44:36] Speaker B: And you've already got Hungary and that corner, Hungary and Slovakia. There are already a number of automotive companies who are producing there. So there are already qualified staff, there's already a certain network of suppliers and so first tier suppliers. And so, you know, a number of Chinese companies have moved into home, Hungary are moving into Austria. All of those, all of those countries around who have that network of producing in order to be the suppliers of for example, byd, NEO is NIO is also doing quite well.
And of course since, let's say since Elon Musk took his interests in a more political direction than sales of Tesla in Europe tanked.
[00:45:37] Speaker A: Do you have the sticker that we have in Australia? Some people have been sticking stickers on their Tesla saying I bought this before Elon went crazy. Yes, same thing in German.
[00:45:47] Speaker B: I haven't seen many of them, I've only seen one or two, but yeah, same thing.
[00:45:54] Speaker A: Catherine, we're going to wrap in a second, but before we go, I would love to know what piece of advice would you give to non European business leaders who are looking to enter European markets and in particular the EU in 2026.
[00:46:10] Speaker B: If you're going to enter into the EU, you need to do your homework up front.
Get things straight on the sustainability and data protection fronts and of course on the product compatibility and be prepared for it to take maybe a bit longer than you would like, but that if you find the right partner within Europe that they will be, they'll be of an attitude that they really want to do long term business.
And so if you can go into that with seeing the partnership and the long term aspects of it, then you'll be going in with the right attitude. I think if you go in looking to make a quick book, then maybe the EU is not the right place to go. There are possibly other markets where you can go with more of a gold rush mentality, but the EU is not
[00:47:13] Speaker A: the one, and we might talk about that in a later episode.
[00:47:18] Speaker B: Sounds like a good idea.
[00:47:19] Speaker A: Great to have you on the show today.
[00:47:21] Speaker B: Thank you for having me. It's been a pleasure.
