Addressing the Needs of ACP Triangular Supply Chains Within the Forthcoming EU/UK Trade Negotiations
Summary
Given the UK governments commitment to leaving the EU custom union and single market by 1st January 2021 and the time constraint this places on establishing a successor trade agreement, the EU takes the view only a ‘light’ EU/UK trade arrangement can be in place by 1st January 2021. It is essential such a ‘light’ trade arrangement addresses the specific policy and administrative issues which will arise along ACP triangular supply chains as a result of the UK formally leaving the EU customs union and single market on 1st January 2021. For this to occur a specific commitment will need to be included in the EC’s negotiating mandate, to be finalised by February 2020, to addressing triangular supply chains issue. This is a particularly important issue for cut flower, fruit and vegetable exporters in Eastern Africa, whose principal supply routes to UK markets lie through initial ports of landing in the Netherlands and Belgium. A political initiative towards the President of the European Commission will be required from the governments of concerned ACP exporting countries if arrangements to ensure the continued smooth flow of short shelf life cut flowers, fruit and vegetable products to the UK market along triangular supply chains is to be assured.
Following the UK general election which delivered an 80-seat majority in the House of Commons for the Conservative Party, Prime Minister Johnson now has an unassailable majority for the passage of the revised EU27/UK Withdrawal Agreement through the UK Parliament, with this process now well underway. On Friday 19th December the Brexit Withdrawal Bill passed the House of Commons second reading by a majority of 124 (358 to 234) (1).
While the legislative timetable in the UK will be tight, the European Parliament is scheduled to ratify the Withdrawal Agreement on the 29th January 2020. The UK thus now appears on track to leave the EU on 31st January 2020 (1).
This will see the transition period (or ‘implementation period’ as it is referred to in the UK) enter into effect. This will see the UK remain part of the EU customs union and single market until at least 1st January 2021. Although provision is made in the Withdrawal Agreement for the extension of the transition period for a further two years, should this time be needed to complete the EU/UK trade negotiations (1), the UK government is committed to leaving the EU customs union and single market on the 1st January 2021.
While once the UK has left the EU, the process can begin of negotiating a new future UK/EU trade arrangement, this cannot commence immediately. According to press reports the European Commission is on schedule to have draft negotiating instructions for the conduct of trade negotiations with the UK drawn up by the 1st February (1). These draft negotiating instructions will then need to be reviewed and approved by EU member states governments. This approval is expected to be granted by the 28th February, with formal EU/UK trade negotiations then commencing at the beginning of March 2020.
The launching of these UK/EU trade negotiations needs to be seen in the context of EU concerns over the perceived desire of the UK to diverge from existing EU regulatory requirements in ways which will generate a competitive edge for UK producers. The new EU Council President Charles Michel has made clear that ensuring a ‘level playing field remains a must for any future relationship’ (1). Indeed, it has been emphasised how the extent of continued duty free access for UK products to the EU market and the extent to which tariff rate quota restrictions will be placed on EU imports from the UK, will be determined by the extent to which the UK moves away from the EU regulatory framework (1).
While the EU is reluctantly willing to allow a 2-year extension of the transition period to avoid a no-deal Brexit from the 1st January 2021, the UK government believes a comprehensive free trade area with the EU can be negotiated and be in place by the 1st January 2021. The UK government thus believes it is possible to leave the EU customs union and single market on the 1st January 2021 without any disruption of existing EU/UK trade relations. There is however widespread scepticism in the EU over the prospect of concluding a comprehensive free trade arrangement with the UK within the far less than 10 months nominally available for the conduct of complex trade negotiations. This is particularly the case given the very uncertain policy context in the UK.
EC President Von Der Leyen has described the timetable for EU/UK trade negotiations as set out by the UK government as ‘extremely challenging’ with the EC believing there is ‘very little time to conclude negotiations’ (2). The institutional reality of the EU is that substantive trade negotiations would need to be completed by the summer of 2020, if the EU ratification process for an EU/UK trade agreement were to be launched and completed by 1st January 2021 (3).
Against this background the President of the European Commission has suggested only a very ‘light’ trade agreement could be concluded within this timetable. Within the negotiations process therefore the EC plans to prioritise bilateral trade in goods negotiations, fisheries access arrangement and future security arrangements. Other issues such as trade in services, data sharing and transport issues (such as the right of UK registered airlines to transport passengers between points in the EU) would all need to be left to a future date.
Given the tight table for negotiations faced this raises the question as to: what trade in goods issues will be substantively addressed under any likely EU/UK ‘light’ trade agreement which could be in place by 1st January 2021?
| Comment and Analysis
During the transition period the smooth free movement of goods between the EU27 and the UK will continue without any changes to existing trade administration and regulatory requirements. In addition, existing EU trade agreements and arrangements will continue to apply to the UK, with the terms and conditions of access for both ACP agri-food exports and other third country exports to the UK remaining unchanged. However once the UK leaves the EU customs union and single market, then the smooth free movement of goods across the EU/UK border will be determined by the specific provisions of the successor ‘light’ trade agreement, the precise content of which will depend on the level of continued regulatory alignment between the UK and the EU. This issue of regulatory alignment is particularly important in the agri-food sector, especially for short shelf life cut flowers, fruit and vegetable products. Any regulatory divergence is likely to lead to additional controls on EU/UK cross-border trade which could slow down the smooth movement of goods along ACP/EU/UK supply chains. This would be likely to increase costs and reduce the value of the final product delivered to UK customers via these triangular supply chains. The deterioration in the competitive position of ACP cut flower, fruit and vegetable exporters using triangular supply chains would be compounded by the implementation of the UK’s currently proposed autonomous MFN tariff schedule, which for all cut flowers, fruit and vegetables (except for fresh beans and bananas) would see the application of a zero MFN tariff regime and the abandonment of existing EU minimum import price requirements and associated supplementary levies. Against this background there would appear to be an urgent need to ensure that within any ‘light’ EU/UK trade arrangements specific measures are set in place to allow the continued smooth flow of short shelf life ACP cut flowers, fruit and vegetables across EU27/UK borders without any additional controls. This would then allow traders, freight companies and port authorities to set in place compatible logistical arrangements on both sides of the channel which facilitate the loading and un-loading of short shelf life ACP cut flowers, fruit and vegetables delivered to the UK market via initial ports of landing in the EU Critical to this will be ensuring both EU member states authorities continue to carry out SPS inspections at their initial ports of landing in the EU of ACP cut flowers, fruit and vegetables destined for the UK market and that the UK authorities continue to recognise these inspections and facilitate the unloading and onward shipment of such consignments. Only once such a firm policy commitment is in place at the EU/UK level will traders, freight companies and port authorities adjust their operational practices to allow the continued smooth movement of such goods across the EU/UK border. However, for this process to be set in train it is vital that within the EC’s negotiating mandate for a ‘light’ trade agreement with the UK, a specific commitment is made to addressing the policy and administrative issues which will arise along ACP triangular supply chains as a result of the UK formally leaving the EU customs union and single market on 1st January 2021 (4). If such an explicit commitment is not included in the EC negotiating mandate the danger is these ACP concerns will be lost sight of in the wider, more urgent concerns which the EC needs to address in the interests of EU producers and traders. This is a particularly important issue for cut flower, fruit and vegetable exporters in Eastern Africa, whose principal supply routes to UK markets lie through initial ports of landing in the Netherlands and Belgium. A political initiative towards the President of the European Commission will be required from the governments of concerned ACP exporting countries if the EC is to have a mandate for prioritising the establishment of arrangements to ensure the continued smooth flow of short shelf life cut flowers, fruit and vegetable products to the UK market along triangular supply chains. This could potentially be supported by traders in the Netherlands and Belgium involved in these triangular supply chains taking up contacts with their national governments to ensure they urge the EC to address these triangular supply chain issues within the forthcoming trade negotiations between the EU and UK. |
Sources
(1) Guardian, ‘MPs pass withdrawal agreement bill by 124 majority’, 20 December 2019
https://www.theguardian.com/politics/2019/dec/20/brexit-pm-asks-britons-to-move-on-as-mps-debate-withdrawal-bill
(2) Skynews.com, ‘Extremely challenging’ timetable for UK trade deal, warns European Commission president’, 19 December 2019
https://news.sky.com/story/extremely-challenging-timetable-for-uk-trade-deal-warns-european-commission-president-11889726
(3) Guardian, ‘Boris Johnson’s Brexit extension block ‘will limit UK options’, 17 December 2019
https://www.theguardian.com/politics/2019/dec/17/eu-says-boris-johnson-outlawing-brexit-extension-will-restrict-uk-options
(4) COLEACP, ‘Triangular Supply Chains Serving the UK Market via Initial Points of Landing in EU27 Member States’
https://eservices.coleacp.org/en/triangular-supply-chains-serving-the-uk-market-via-initial-points-of-landing-in-eu27-member-states