Summary
The EC has issued a dedicated communication on Brexit preparedness urging all concerned stakeholders to ‘take the necessary preparedness actions and to take them now’. The EC has also published 68 notifications dealing with specific areas of impact of the UK’s withdrawal from the EU. However the EC has provided no clarifications to its developing country partners on the consequences Brexit will carry for bother their trade with the UK and the EU27. The issues faced in this context range from the impact on the functioning of triangular supply chains, through the rules of origin applied to ACP inputs used in goods packaged and further processed in the UK for onward sale in an EU27 member state to the future of the EU27s bilaterally negotiated TRQ obligations in product areas where the ACP have major export interests (e.g. bananas and sugar).
On 19th July the EC issued a communication on the preparation for the UK’s withdrawal from the EU on 29th March 2019. It highlighted how the repercussions of the UK’s withdrawal from the EU will carry real repercussions ranging ‘from new controls at the EU’s (new) outer border, to the validity of UK-issued licences, certificates and authorisations’. It noted how even if an EU27/UK agreement is reached ‘the United Kingdom’s relationship with the European Union will no longer be one of a Member State and thus, will be in a fundamentally different situation’ (1).
Against this background the EC is encouraging ‘all stakeholders that may be affected by the United Kingdom’s withdrawal to take the necessary preparedness actions and to take them now’ (1).
The EC has highlighted how irrespective of the scenarios envisaged significant disruptions to business will occur. The EC specifically highlights a number of issues which were outstanding in the Withdrawal Agreement negotiations process and which would need to be resolved if agreement was to be reached, including:
- ‘continued protection, in the United Kingdom, of the ʻstockʼ of geographical indications’;
- ‘the standards of the protection of personal data transmitted to the United Kingdom while it was a Member State’;
- ‘ongoing police and judicial cooperation in criminal matters’;
- ‘governance of the Withdrawal Agreement, including the role of the Court of Justice of the European Union’;
- ‘agreeing on a ʻbackstopʼ to avoid a hard border on the island of Ireland’ (1).
The Withdrawal Agreement should be concluded by October 2018 along with a political declaration on future relations (1).
The transition period envisaged in the Withdrawal Agreement would maintain the status quo until 1st January 2021, thereby allowing time for preparations to be undertaken which would minimise disruptions once EU law ceases to apply to the UK (1).
According to the EC stakeholders need to be prepared for two possible scenarios:
- ratification of the Withdrawal Agreement and a planned transition;
- ‘the absence of an agreement on a withdrawal agreement’ and hence there being no transition period with EU law ceasing to apply to and in the UK as of 30th March 2019 (referred to as the ʻno dealʼ or ʻcliff-edgeʼ scenario)
In addition it needs to be borne in mind that even if there is a Withdrawal Agreement in place changes in the EU/UK relationship will still occur, since a 3rd country can’t have the same rights as an EU member state. On this basis the EC argues preparing for the UK becoming a 3rd country ‘is of paramount importance, even in the least disruptive scenario’ (1).
The EC sets out the consequences in summary form of each scenario, highlighting how with a Withdrawal Agreement in place a transition period would be established which ensured:
- ‘EU law would continue to apply during’;
- the UK would ‘no longer participate in EU decision-making, EU institutions, governance of EU bodies and agencies’;
- ‘the role of EU institutions in the supervision and enforcement of EU law in the United Kingdom would continue’ throughout the transition period.
- Negotiations on a future relationship between the UK and EU27 would be launched to ideally be in place by 1 January 2021 (1).
This would ensure no changes occurred which adversely impacted on ACP agro-food exporters before 1st January 2021 (1).
Under the ‘no-deal’ or ‘cliff edge’ scenario the EC highlights how from the 30th April 2019:
- the UK will be 3rd country to which EU laws will no longer apply;
- there would be no specific arrangements in pace for EU27 and UK citizens in each other respective territories;
- the UK will face standards MFN import tariffs and standard 3rd country border controls (customs, and SPS and food safety standards and verification requirements);
- ‘in heavily regulated sectors, this would represent a significant drawback compared to the current level of market integration’;
- ‘UK entities would cease to be eligible as Union entities for the purpose of receiving EU grants and participating in EU procurement procedures (1).
The EC makes a distinction between ‘preparedness’ and ‘contingency planning’. It notes how preparedness cannot prevent the occurrence of the changes resulting from Brexit but it can ‘defend the interest of a Union of 27 Member States’. Preparedness should involve ‘envisaging all possible scenarios and assessing all relevant related risks, planning a response and reacting to potential outcomes’. This should then provide the basis for the necessary steps to be taken to mitigate identified risks. The EC see’s preparedness measures being necessary regardless of the outcome of the EU27/UK Withdrawal Agreement negotiations (1).
Contingency planning in contrast consists of measures which could mitigate the effects of the UK’s withdrawal on a temporary basis while a long term arrangement is being worked out or long term adjustments can be made. The EC notes contingency measures cannot replicate what could be achieved under a Withdrawal Agreement nor treat the UK as if it were an EU member state (1).
The EC see’s the adoption of contingency measures as a responsibility of the EU and national authorities and non-state stakeholders. For example member states may set in place measures to deal with long traffic tail backs resulting from the reintroduction of customs procedures on trade with the UK (1).
The EC highlights how the consequences of Brexit will not be abstract but ‘will be very real for… business operators’. In this context it calls on economic operators to take up their responsibilities now for preparing for the UK’s withdrawal from the EU (1).
The EC stresses how businesses need to ‘assess the potential impacts of a cliff-edge scenario on their business model, make the necessary economic decisions and take and conclude all required administrative steps before 30 March 2019’. It stresses how representatives of intermediate bodies have a responsibility for ‘relaying preparedness information to their members’ (1).
At the level of customs controls the EC highlights how once the UK leaves the EU, the UK will be a third country, with national EU customs authorities needing to enforce EU trade rules in dealing with the UK. ‘This means that the formalities that currently apply to trade with non-EU countries will apply, including the submission of customs declarations for goods shipments and the related controls to ensure compliance’. The EC highlights how ‘customs formalities have implications in terms of additional documentation and data requirements for businesses’ as well as having implications for the installation and operation of new border control systems. Against this background all stakeholders should ‘prepare for a situation where shipments of goods from and to the United Kingdom are subject to customs procedures and controls’ (1).
This situation will be compounded by the application of EU food safety and SPS controls to the UK as a 3rd country. This will be particularly onerous for agro-food products requiring checks and inspections at border posts, where existing infrastructure is likely to prove to be inadequate for the scale of the tasks faced (1).
In support of Brexit preparedness the EC had by July 2018 published no less than 68 Preparedness notes to guide stakeholders on the implications of the UK’s withdrawal from the EU (2).
| Comment and Analysis The EC advice that all affected stakeholders should take the necessary preparedness actions now appears equally relevant to ACP agro-food exporters. This includes assessing the potential impacts of different scenarios on their current trading arrangements into the EU, so necessary economic decisions can be made an administrative steps be taken to minimize disruptions. However from an ACP perspective it is noteworthy that the EC communication on preparing for the UK’s departure from the EU has nothing to say on the consequences for its developing country partners. Partners who negotiated and concluded in good faith reciprocal preferential trade agreements as recently as October 2016 in order to preserve their long standing preferential access to the markets of the 28 member states of the EU. While it is perhaps understandable that the EC said nothing to say on the impact on ACP access to the UK market (since this is an issue which will need to be taken up under the UK governments autonomous trade policy post-Brexit), the fact that the EC had nothing to say about the impact of Brexit on the future value of ACP preferences on the EU27 market and onward trade to the UK via EU27 member states is a matter of far greater concern. The EC notification says nothing about the preparedness actions which could be set in place to assist its developing countries partners in dealing with the profound changes which it acknowledges lie ahead as this affects the functioning of triangular supply chains which have been built up to serve EU28 markets. This include floriculture supply chains serving the UK market via Dutch flower auction houses and horticulture export supply chains built up on the back of increased tourist flights from the EU (e.g. horticulture exports from the Dominican Republic). It also doesn’t address the issue of the processing and packaging activities in the UK of ACP products which enjoy duty free-quota free access to the EU market, where these activities do not change the tariff heading of the products concerned (e.g. refining or bagging sugar or refining fully traceable certified palm oil). Equally the EC communication has nothing to say about the impact of the UK’s withdrawal on the value of ACP trade preferences on EU27 markets for bananas and sugar, where the UK’s withdrawal from the EU could serve to undermine the position of ACP exporters on EU27 markets, given the TRQ obligations the EU has taken on under various bilateral trade agreements with non-ACP countries. The notification also has nothing to say on how ACP countries should prepare for SPS and food safety inspections on exports to the UK and whether existing EU documentation will continue to be recognized for at least a transitional period until new UK only systems of documentation and certification can be set in place. These are all areas where ACP exporters remain in the dark in a context where the EC itself is urging all stakeholders to move ahead with Brexit preparedness activities now as a matter of urgency. Surely some level of official explanation and clarification of these issues could be made available by the EC for ACP agro-sector enterprises, beyond simply referring them to the 68 generic notifications which the EC has prepared. These deal with issues as diverse as customs requirements, food safety requirements, intellectual property, financial services, transport services, professions services, company law, energy, digital trade and information. The EC’s emphasis on the role of intermediate bodies in ‘relaying preparedness information’ raises the issue of the role the ACP Secretariat could be playing in assisting ACP countries with Brexit preparedness. |
Sources:
(1) EC, ‘Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019’, COM (2018) 556 final, 19 July 2018
https://ec.europa.eu/info/sites/info/files/communication-preparing-withdrawal-brexit-preparedness.pdf
(2) EC, ‘ANNEX: Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019’, COM (2018) 556 final, 19 July 2018
https://ec.europa.eu/info/sites/info/files/communication-preparing-withdrawal-brexit-preparedness-annex.pdf