For a second month, the war in Ukraine has taken the full attention of Foreign Secretary Liz Truss and meant that her role as the UK’s Brexit negotiator has gone unfilled, with no meetings or discussions recorded in April.
However, the vacuum left by the failure to conduct official negotiations has been filled by the sound of business groups demanding action or complaining about the impact of post-Brexit red tape on their members’ trading prospects. News that Prime Minister Boris Johnson was considering a further delay to the introduction of import checks on goods arriving from the EU, scheduled to be introduced in July 2022, dismayed Logistics UK. Any additional delays to the introduction of post-Brexit border checks on imports would simply postpone the inevitable, it warned, and send mixed signals to businesses that have been urged for months to get ready for the additional formalities involved with moving goods across the UK’s borders.
A billion pound Brexit bonus
The freight transport body pointed out that the sector had already had to deal with three false starts with regard to the introduction of import controls from the EU, but its pleas fell on deaf ears. Brexit Opportunities Minister, Jacob Rees-Mogg, announced that the remaining import controls on EU goods would not be introduced on 1 July, indeed they would not be introduced this year. Arguing that postponing their introduction would save British firms up to £1 billion in annual costs, he said that it would be wrong to impose new administrative burdens, and risk disruption at ports, when consumers and businesses are being hit by rising costs caused by Russia’s war in Ukraine and soaring energy prices.
“Instead,” Mr Rees-Mogg went on, “the Government is accelerating our transformative programme to digitise Britain’s borders, harnessing new technologies and data to reduce friction and costs for businesses and consumers. This is a new approach for a new era, as Britain maximises the benefits of leaving the EU and puts in place the right policies for our trade with the whole world.” The new Target Operating Model will, the Government explained, be based on a better assessment of risk and will harness the power of data and technology. It will be published in the Autumn with the new controls regime coming into force at the end of 2023.
The controls which have been postponed until late next year are:
a requirement for Sanitary and Phytosanitary (SPS) checks currently at destination to be moved to a Border Control Post (BCP)
prohibitions and restrictions on the import of chilled meats from the EU
a requirement for safety and security declarations on EU imports
a requirement for health certification for further SPS imports
a requirement for SPS goods to be presented at a BCP.
Mr Rees-Moggs’ attempt to sell this decision as a Brexit benefit was successful in a number of areas, with the British Chambers of Commerce (BCC) saying that the extra costs from new checks on meat, fish, dairy and other products would have fuelled inflation and the Institute of Directors (IoD) agreeing that businesses will be relieved that they will not have to incur the burden of full import controls until 2023.
However, the IoD went on, if EU companies are able to send goods to the UK without full controls while UK companies are subject to checks when sending goods to the EU, then UK companies are at a competitive disadvantage on the continent. The EU had introduced customs checks on goods arriving in the single market from the UK at the end of the post-Brexit transition period in January 2021.
Meanwhile, the British Ports Association (BPA) said that it will be immediately pressing the Government for compensation as it is concerned that ports that have invested in infrastructure will be “left to pick up the pieces”. Specifically, it explained that infrastructure had had to be prepared for the expected sanitary and phytosanitary inspections and these newly-built Border Control Posts (BCPs) were now potentially useless. Logistics UK also returned to the argument pointing out that the planned move to digitisation, better use of data and trusted trader schemes, as outlined by Mr Rees-Mogg, was a good idea but “it should not have taken years of wavering on the nature of checks for these goods and changing deadlines for their implementation”.
That pesky Protocol
The shadow falling over any plans that the Government has for post-Brexit controls remains the Northern Ireland Protocol. Presented by the Prime Minister and his then Brexit negotiator, Lord Frost, as the oven-ready deal that would “get Brexit done”, the Protocol created the boundary in the Irish Sea that Mr Johnson had promised would never be allowed to happen. Now one of the leading parties in the current Northern Ireland elections has said that it will not return to the power-sharing agreement until the Protocol is scrapped. The EU continues to insist that there must be some point at which goods entering Northern Ireland are checked, given that it remains part of the EU single market, and so the impasse continues.
According to the Brexit Opportunities Minister, the UK signed the Protocol on the basis that it would be reformed and, if the EU refuses to introduce those changes, then the UK will act alone. "That is really important to understand,” Mr Rees-Mogg said. “A lot of commentary says, we signed it and therefore surely we should accept it lock, stock and barrel. That's absolute nonsense.”
The American connection
If the UK takes unilateral action, it is clearly going to be faced with a very angry EU which continues to insist that the Protocol is part of an international agreement and that the UK’s actions could threaten the whole UK-EU Trade and Cooperation Agreement (TCA). However, the Government must also take into account the likely reaction of the United States given that US Trade Representative Katherine Tai has said that the current stand-off over the Protocol is one of the main obstacles to a US-UK trade deal. In a meeting with International Trade Secretary Anne-Marie Trevelyan to discuss what has been described as the holy grail of post-Brexit trade deals, Ms Tai said: “There’s a lot of interest in the US, from the president and from leading members of Congress, and also from our very, very large Irish-American population”.
An olive branch from the Union…
Two moves this month suggest that the EU is interested in promoting closer links with the UK. It introduced, and quickly passed into legislation, proposals to ensure the continued long-term supply of medicines from Great Britain to Northern Ireland. Food Safety Commissioner, Stella Kyriakides, said: “The continuous supply of medicines is essential for hundreds of thousands of patients in Northern Ireland — as well as Cyprus, Ireland and Malta, whose markets are historically dependent on medicines from the UK”.
Later in the month, the European Commission published legislation amending the European List of ship recycling facilities to include facilities in the UK. It received applications from two ship recycling facilities located “in other parts of the United Kingdom than Northern Ireland” and agreed that they met the requirements set out in EU legislation and could therefore be accepted onto the approved list.
…and a trade warning
The EU has requested consultations with the UK at the World Trade Organization (WTO) on what it has described as the UK’s discriminatory practices when granting support for green energy projects. The criteria used by the UK Government in awarding subsidies for offshore wind energy projects favour UK over imported content, the EU claims. If this is established, then it violates the WTO’s core tenet that imports must be able to compete on an equal footing with domestic products and harms EU suppliers, including many SMEs, in the green energy sector.
Moreover, the EU highlights, such practices ultimately increase costs of production and thereby risk slowing down the deployment of green energy. This is the first step in WTO dispute settlement proceedings and could lead to a panel bring set up to rule on the matter.
Brexit blues continued
The Foreign Secretary may be otherwise engaged, but her Inbox continues to accumulate bad news from a variety of sources. During April, the IoD responded to a request for information from Parliament’s International Trade Committee which is carrying out an inquiry into the UK-EU trading relationship. It told the MPs that 42% of businesses that trade internationally are now exporting less to the Union, compared to the last five years, with 28% importing less from the EU’s Member States.
A survey by the BCC of over 2700 UK exporters then revealed that export sales growth has been effectively stagnant for the past year. Head of Trade Policy, William Bain, said: “This is in contrast with the performance of our near neighbours, with Germany’s exports both within and outside the Single Market steaming ahead by double digit margins and with trade losses from the pandemic already effectively recovered.”
Finally, research published by the LSE Centre for Economic Performance has found that UK imports from the EU abruptly declined by about 25% more than UK imports from the rest of the world after the TCA came into effect, and this decline persisted throughout 2021.