Brexit Update: Knives Sharpened Ahead of Trade Negotiations

 In Brexit

Last week we updated you on the draft negotiation directives outlined by the European Commission. In these weeks running up to the negotiations both the United Kingdom and European Union representatives seem to be sharpening their knives…

I Want to Break Free

David Frost, the UK’s Chief Brexit Negotiator has set out his intentions for the upcoming negotiations.

Frost conceded that the negotiators would need to build on the models contained in other EU free trade deals. But he insisted that the ability to break free from the EU’s rulebook was essential to the purpose of Brexit and that the UK’s position would be tabled in “written form” next week.

Frost offered an opening, however, for the two sides to develop the models of free trade agreements that the EU has signed with Canada, South Korea and Japan. Those agreements include provisions that prevent either side from ignoring or lowering labour standards to boost trade. They also provide for both sides to consult with each other on subsidies and find solutions where such state aid creates unfair competition.

Read the full article by The Guardian here.

Not the Canada Deal

The BBC reports in this article that Michel Barnier, Chief Brexit Negotiator for the EU, told reporters:

“We remain ready to offer the UK an ambitious partnership,” he said.

“A trade agreement that includes in particular fishing and includes a level playing field, with a country that has a very particular proximity – a unique territorial and economic closeness – which is why it can’t be compared to Canada or South Korea or Japan.”

Almost all trade agreements include them to some degree, but the EU is demanding particularly strict rules because the UK is a major economy right on its doorstep – therefore a bigger potential competitor than a country like Canada.

The EU wants a common set of rules on things like workers’ rights, the environmental regulations that businesses have to follow, and, in particular, state aid (or support, including subsidies) for business.

France Sets the Stage

French Foreign Minister Jean-Yves Le Drian is predicting rough negotiations.

Speaking at a security conference in Munich on Sunday, Mr Le Drian said the two sides were far apart on a range of issues.

He said: “I think that on trade issues and the mechanism for future relations, which we are going to start on, we are going to rip each other apart.

“But that is part of negotiations, everyone will defend their own interests.”

Read the full article by the BBC here.

Checking the Irish Border Situation

With the United Kingdom leaving the EU an interesting situation has arisen at the Irish border. How will that be solved?

Brandon Lewis, the new Secretary of State for Northern Ireland, has said the UK will “not be having a border down the Irish Sea.”

Under the Brexit withdrawal deal, Northern Ireland will continue to follow EU legislation on agriculture and manufactured goods. The rest of the UK will not. 

That means that there will have to be some form of border check on certain goods coming from Northern Ireland into the rest of the UK – something that led to fears among Unionists that Northern Ireland would become isolated from mainland Britain.

Read the full story on Irish Central here.

Impact on Customs Related Processes

The UK Warehousing Association (UKWA) estimates that this will equate to more than 200 million additional UK customs declarations. This scenario is far from ‘frictionless’ and there seems little doubt that the changes to the way we trade with the EU is going to have a significant impact on most supply chains. 

There will certainly be interruption of flow, which, to maintain equivalent lead times, is likely to be mitigated by companies holding additional inventory and, accordingly, demanding additional warehousing space.  This is happening at a time when the market is almost at capacity as the industry recalibrates to accommodate the massive shift from high street retailing to online and ecommerce fulfilment.

Bottlenecks at Ports seem inevitable as UK businesses grapple with the process, systems and documentation they will need to move their goods to and from the Euro zone; whilst both public and private sectors face the challenge of recruiting additional staff – knowledgeable and trained customs administrators within the logistics sector, and for HMRC and Border Force the increased workforce that will be needed to police the new customs formalities.

Read the full story here.

Major trade and Industry organizations have also responded to the latest customs check plans in the UK. You can find all the responses in this article by eDelivery.net. Some quotes:

“As representatives of the logistics industry, we are naturally disappointed that the promise of frictionless trade has been replaced with a  promise that trade will be as seamless as possible but not until 2025, with a more realistic but costly “make do and mend” approach to be employed until then.  Industry will need the support of government during this period to Keep Britain Trading effectively.”

“The Government needs to establish import and export processes along with necessary infrastructure capable of conducting checks on rules of origin, SPS, VAT and more1. Staffwill need to be hired and trained to carry out these checks on the thousands of lorries that enter the UK every day.”

“Long delays at the ports are going to be part and parcel for this new Brexit reality. If your business ships into the EU, and in the event of a backlog at the Channel tunnel for instance, partners will need to be able to divert product from the road to the air to avoid delays to the end customer. Adopting a paperless clearance system will also help minimise delays from reading handwritten documents, plus ensuring you have the right European Union Registration and Identification Number. An 8 or 10-digit HS code (Harmonised Commodity Description and Coding System) will also need to be supplied to support efficient customs clearance and enable accurate duty and tax calculations.”

Be in the Know

Follow our Brexit updates via www.Brexit-support.eu. If you have any questions about importing from the UK or exporting to the UK, please contact one of our experts. We are prepared to take the load off your mind.

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