Last reviewed 29 October 2020
For many months, the date looming over the Brexit negotiations was the planned October meeting of the EU Council. It was generally expected that this would be the final deadline for agreeing a deal with just enough time left for it to be ratified by the European Parliament (and the House of Commons) before the transition period ends on 31 December 2020.
Indeed, Prime Minister Boris Johnson had several times warned that if negotiations were not at an advanced stage by that date in October, he would walk away. When the other Member States leaders met, however, there was still no agreement on the table and their response to Mr Johnson’s demands for action was, in his opinion, lukewarm at best.
The EU has “abandoned the idea of a free trade deal”, the Prime Minister said. “The trade talks are over. The EU have effectively ended them by saying they do not want to change their negotiating position.” However, in a clear sign that neither side seriously wanted to abandon the talks, the EU’s chief negotiator, Michel Barnier, and the UK’s lead man, Lord Frost, immediately spoke on the phone and agreed that there was still room to manoeuvre. A statement from the Prime Minister’s Office then welcomed Mr Barnier’s recognition that he is dealing “with an independent and sovereign country”
We’ll meet again
Given that Mr Barnier had shown respect for British sovereignty, the Number 10 statement continued, “we are ready to welcome the EU team to London to resume negotiations later this week.” To mark how seriously it was taking this latest, and presumably final, series of talks, the Prime Minister’s Office issued a paper entitled “Organising principles for further negotiations with the EU”. Available at https://www.gov.uk/government/publications/organising-principles-for-further-negotiations/organising-principles-for-further-negotiations-with-the-eu, this noted that both parties have agreed to intensify negotiations.
Talks will take place across all topics concurrently, the document states. Meetings will take place daily, including weekends, unless both sides agree otherwise. Reflecting a well-known saying about EU negotiations, it concludes: “It is understood that, regardless of progress in individual workstreams, nothing is agreed in these negotiations until a final overall agreement is reached.” In a variation on his often repeated warning that the clock is ticking, Mr Barnier returned to London and told reporters: “Every day counts”.
Before conceding that the talks could resume, Mr Johnson repeated his complaint that the EU was refusing the UK’s legitimate request for a Canada-style deal. “Here we are,” he said, “we’re the biggest trading partner of the EU, their biggest export market, plus we’ve been a member for 45 years – we want a deal like Canada’s, we want that one.”
The EU's agreement with Canada is called the Comprehensive Economic and Trade Agreement (CETA) and took eight years to complete. It removes most, but not all, tariffs on goods traded between the EU and Canada. They remain on poultry, meat and eggs. In addition, CETA increases but does not remove quotas, barely touches on trade in services and requires border checks to ensure that goods being imported meet regulatory requirements.
Even if such a deal were on offer from the EU, therefore, it would involve UK traders in considerably more paperwork and delays than the free flow of goods they currently enjoy through the UK’s membership of the single market. Furthermore, the UK is asking for ‘zero tariffs, zero quotas’ access for its exports to the EU – much more than Canada gained. However, the Canada option is clearly not on offer as the EU has two major objections: the UK is too close geographically; and the amount of trade is out of all proportion. Where the UK sent 45% of all its exports to the EU in 2018 and imported 53% of its imports from the Union, the equivalent Canadian figures were 7.9% for exports and 10.5% for imports from the EU.
Advance Australia Fair
The Prime Minister turned elsewhere in the Commonwealth as his fallback position if the Canada bid failed. The UK would, he insisted, manage perfectly well with an Australia-type deal. Unfortunately, as has been pointed out several times previously, this is simply a euphemism for “no deal” as Australia by and large trades with the EU on World Trade Organisation (WTO) terms. In fact, it has secured some specialist agreements with the Union and is considering moving to formal trade talks, so the UK could not even claim to be moving to an Australian style deal. As a number of commentators rather cruelly pointed out, the Prime Minister could have chosen other countries as his preferred option given that Afghanistan and Mongolia both trade with the EU on similar terms to Australia.
The Government press offices have been working overtime this month as every day has seen dozens of press releases alerting business es to what they will need to do after the end of the transition period. What UK goods vehicle operators need to do to carry out international road haulage; pharmacovigilance system requirements; the rules that will apply to buying and selling timber and timber products; supplying authorised medicines to Northern Ireland; employing EU citizens in the UK; what food and drink producers with ‘geographical indication’ (GI) protection need to do….the list goes on and on.
The Cabinet Minister with responsibility for Brexit, Michael Gove, has stressed that businesses must start preparing for life after the transition period as, even if a last-minute deal is agreed, there will still be considerable changes when it comes to trading with the EU. The Government has begun spelling out, to the haulage industry in particular, that life after 31 December 2020 will involve a great deal more red tape for those trading with the EU and very probably some lengthy queues at the border.
It has introduced new rules confirming that it will be mandatory for all heavy goods vehicles (HGVs) using the Channel crossings to obtain a digital Kent Access Permit (KAP), following completion of the Government’s new ‘Check an HGV’ service. This will, the Department for Transport (DfT) said, ensure that HGV drivers who come prepared can move smoothly through Kent to the UK’s trading ports. Radio, press and digital advertising will aim to make sure that hauliers are aware of the upcoming changes and have the correct documentation for each stage of their journey, reducing the risk of delays at the border.
The devil is in the detail
Despite this flood of information from the Government, hauliers remain unhappy that the plans still lack the detail operators need to plan effectively. Systems must be finished and thoroughly tested before the end of the transition period, they insist, while the Government continues to promise that the relevant services will be in place in December. And, despite the convictions of the Prime Minister and Mr Gove that the UK would thrive on WTO terms, the CEO of one of the UK’s largest trade groups, Logistics UK, has warned that a no deal exit from the EU could have a significant effect on the price of all imported goods. In a letter to the Sunday Times, David Wells said that “everyday household items we import will become more expensive under WTO tariffs, some by 30% or more”. The actual cost of moving goods will also increase, he went on, if new vehicles, parts and tyres are also subject to tariffs. ”This is more than ‘turbulence’, as suggested by Mr Gove last week,” Mr Wells concluded, “and logistics businesses, operating on 2% margins, cannot afford to take on these costs.”
To add to the Government’s worries, the Organisation for Economic Cooperation and Development (OECD) has warned that the combination of the coronavirus pandemic and the exit from the EU Single Market makes the UK outlook “exceptionally uncertain”. Even assuming a smooth transition to an EU free trade agreement (FTA), the OECD projects an unprecedented fall in GDP in 2020 of 10.1%, with activity still below its pre-crisis level by the end of 2021. Managing a disorderly exit would, it points out, be complicated by the fact that firms have diverted their attention to dealing with COVID-19, and those with reduced earnings will be less able to invest in new systems, staff and training.
Completing a difficult month for the Government, Parliament’s influential Treasury Committee wrote to Chancellor Rishi Sunak expressing reservations about the UK’s customs preparedness for the end of the Brexit transition period. In particular, the Committee said that it was extremely concerned that the necessary IT might not be ready in time to allow companies to prepare sufficiently, with testing and changes still being made with only two months to go.
To end on a positive note, the Department for International Trade (DIT) announced the completion of two of the trade deals that will be required to replace those which the UK currently enjoys as part of the EU. A Political, Free Trade and Strategic Partnership Agreement has been signed with Ukraine that will allow businesses to continue trading with that country as they do now after the end of the transition period. Trade between the UK and Ukraine was worth £1.5 billion in 2019. More importantly, the UK hopes to have secured the £31.6 billion of trade with Japan that was completed in 2019, as a result of signing a new Comprehensive Economic Partnership Agreement (CEPA) with that country.