Last reviewed 7 June 2021
This month’s look at the post-Brexit relationship between the UK and the EU examines problems with the Northern Ireland protocol, fishing negotiations and the challenges that firms are encountering in trading with the EU.
It would be fair to say that Brexit and its ongoing problems dropped out of the headlines in a month which saw important elections, increasingly good news about vaccinations and growing opposition by UK farmers to a UK-Australia trade deal. The public’s attention may have turned to the cost of decorating Boris Johnson’s flat, attacks on the Health and Social Care Secretary by the former chief aide to the Prime Minister and even the Eurovision song contest but, behind the scenes, the Brexit saga was continuing to play out.
Thanks for all the fish
May began with the news that the UK Government had failed to land a fishing access deal with Norway that would have allowed the British distant-waters fleet to keep working. Consequently the UK has no rights to fish in Norwegian sub-Arctic waters in 2021 and, according to UK Fisheries, hundreds of crewmen have no work. The industry body’s chief executive, Jayne Sandell, described it as a very black day for Britain. Ministers owed crews an explanation, she went on, as to why “Defra was unable even to maintain the rights we have had to fish in Norwegian waters for decades, never mind land the boasts of a ‘Brexit Bonus’, which has turned to disaster”.
British politicians have, Ms Sandell complained, failed to land a single bilateral deal with any of the UK’s traditional partners around the North Atlantic — The Faroes, Greenland, Iceland and now Norway. The only beneficiaries of Brexit, she concluded, will turn out to be a handful of “Scottish pelagic fishing barons”.
HM Revenue and Customs (HMRC) has continued to issue its regular notices to companies trying to get to grips with the new post-Brexit trade complexities. One aspect which continues to confuse people several months after the new rules came into force are rules of origin. HMRC explains that, if a company buys goods from the EU or sends or sells goods to the EU, it must take account of these rules. This is because UK goods exported to the EU, and EU goods brought into the UK, are eligible for zero tariffs if they meet the rules of origin requirements set out in the UK-EU Trade and Cooperation Agreement (TCA) and have the right documentation.
The purpose of rules of origin is to ensure that only goods produced or manufactured in the countries that are part of the trading agreement in question benefit from preferential tariffs. “By 'origin' we mean where goods (or the materials, parts or ingredients used to make them) have been produced or manufactured,” HMRC emphasises. “It is not where they have been shipped or bought from.”
Just to make matters more confusing, rules of origin are not the same for all types of goods. Different kinds of goods face different rules and specifications - called product-specific rules - so businesses need to check the individual rules for their goods. Anyone still struggling to understand what is involved might want to look at www.gov.uk/guidance/check-your-goods-meet-the-rules-of-origin.
There’s an Act for that
May also saw Royal Assent being given to the Trade Act which, International Trade Secretary Liz Truss said, allows the UK to put the agreements it strikes as a newly independent 21st-century trading nation on to the statute books. This means, she went on, that the trade deals with 67 countries worth £218 billion already signed can become part of UK law permanently — and that British householders’ and businesses’ interests “can be put first in future agreements, for the first time in almost 50 years”. The Act also provides the certainty needed for British firms to trade successfully overseas, Ms Truss argued, and means they will not face additional costs when doing so.
Available here, it will uphold high food and environmental standards by placing the Independent Trade and Agriculture Commission (TAC) on a statutory footing and will maintain access for UK businesses to public procurement opportunities worth approximately £1.3 trillion per year globally, through the World Trade Organization’s (WTO’s) Agreement on Government Procurement (GPA). It will also enable the Government to collect data on exporters, providing an accurate view of exporting activity across the UK. This will, Ms Truss concluded, help to provide targeted support for businesses to access new export opportunities.
Our friends in Europe
Despite the Prime Minister’s insistence on referring to our “good friends in the EU”, there has been little in the way of cooperation between the two sides in recent weeks. This has not stopped a leading UK business organisation showing the way by joining with the Confederation of Swedish Enterprise to publish a roadmap for cooperation between the UK and EU on a positive long-term global trade agenda. The Institute of Directors (IoD) said that “A trade policy roadmap — Sweden, EU and the UK”, available at www.iod.com/Portals/0/PDFs/Policy/A-Trade-Policy-Roadmap.pdf, outlines areas and proposals where the UK and EU share common long-term interests in the rules-based system.
Dr Roger Barker, Director of Policy and Corporate Governance for the IoD, said: “This report is a timely reminder that on the big issues for trade, there is much more in common than divides the UK and EU. With Brexit in the rear-view mirror, it is time for all sides to focus on the partnership side of our new relationship.”
Gloom over future trade with EU
The IoD may have been pushed into developing its own plan for future trade after one of its surveys showed that, after almost five months of familiarisation with the post-Brexit arrangements, 40% of its members that trade with the EU expect that trade to decrease compared with pre-pandemic levels. The survey of more than 700 directors also found that, of those businesses actively trading with the EU or who have temporarily suspended EU trading, 60% are still finding it challenging to adjust to new trading arrangements.
The Institute’s Chief Economist Tej Parikh said: “Smaller traders have come through the past year with damaged balance sheets, and are currently finding it harder to justify the additional time and cost expended in exporting and importing across the Channel.” Many organisations are still getting their heads around customs changes and new non-tariff barriers, he pointed out, while snags in global supply chains and high shipping costs are also complicating things.
Northern Ireland still likely to be the main stumbling block
On Christmas Eve 2020, the Minister responsible for the UK’s relationship with the EU, Lord Frost, tweeted; “I'm very pleased and proud to have led a great UK team to secure today's excellent deal with the EU.” It would be fair to say that in the months since that date he has become far less pleased with the deal and particularly the part of it dealing with Northern Ireland. He recently told MPs on the Commons European Scrutiny Committee that “if the way the (Northern Ireland) Protocol is operating is undermining the Good Friday agreement, rather than supporting it, we obviously have a problem”.
Speaking to the Lords, he was asked about reports of a UK “roadmap” on the Protocol, containing proposals to phase in new checks between Great Britain and Northern Ireland on food products from October. Although it has not been released, reports suggest that it covers as many as 30 issues, including medicines, access to databases, pet travel and VAT on second-hand cars.
After meeting business leaders in Northern Ireland, Lord Frost went so far as to say that the NI Protocol is unsustainable in its current form. The EU has suggested a temporary Swiss-style veterinary agreement as a solution for Northern Ireland, where the UK would continue to follow all EU agri-food rules. It is unfortunate that this suggestion was followed, a few days later, by Switzerland walking out of talks with the European Union that have lasted more than a decade.
The uneasy peace with the EU may well be disturbed by problems in Northern Ireland, particularly as the marching season approaches with the potential that will offer for protests against the impact of the Protocol. This is not the only issue causing worries for the Government, however, as the weeks ahead include some potentially problematic deadlines.
For example, 30 June will see the end of the temporary bridging period for the free flow of personal data from the EU to the UK while one day later will take the UK to the end of a six-month grace period for Great Britain-Northern Ireland trade on chilled meat products. Also on 1 July, fishing will be back in the spotlight as it marks the deadline for agreeing guidelines for the setting of Total Allowable Catches (TACs) for special stocks of fish, subject to quotas.
Then, 1 October is the unilaterally-set UK date for ending the grace period in relation to food safety paperwork when moving agri-food goods between Great Britain and Northern Ireland. Finally, 31 December marks the conclusion of the transitional period allowing more time for exporters to obtain the suppliers’ declarations needed to prove the origin of their exports (so that they qualify for preferential treatment under the TCA).