Summary
Despite a Parliamentary vote approving in principle the revised Withdrawal Agreement concluded between the UK and EU, efforts to ram the Withdrawal Bill through Parliament with minimum discussion and no amendments failed. This means uncertainty over the outcome of the Brexit process remains. While an extension to the article 50 process no looks inevitable, a ‘hard Brexit’ or even a ‘no-deal Brexit’ still looks most likely, with a ‘soft Brexit’ requiring a general Election which would result in a new government being installed which was committed to remaining in the EU customs union and single market. Despite having secured continued DFQF access to the UK market in the event of a ‘no deal Brexit’ ACP exporters will still need to address a range of issues if exports to the UK are not to be disrupted under either a ‘hard Brexit’ or a ‘no-deal Brexit’. A further extension of the article 50 period could provide time for ACP exporters to prepare to deal with potentially trade disruptive challenges, but this will require pro-active engagement from the concerned ACP exporters during the breathing space a further extension will provide.
On Thursday 17th October after several abortive attempts to secure agreement the UK and EU negotiators finally reached agreement on a modified Withdrawal Agreement (1). The most politically significant change from a UK perspective was the removal of the backstop as a result of the UK government agreeing to de facto introduce checks on trade between mainland UK and Northern Ireland, while Northern Ireland continues to enjoy the free movement of goods in relations with the Republic of Ireland. According to the EU’s chief negotiator, Michel Barnier ‘all applicable procedures on goods will take place at the points of entry into Northern Ireland and not across the island’. Effectively this means ‘customs duties will be payable on goods imported from the UK’ into Northern Ireland if these good are for commercial purposes and do not remain in Northern Ireland. Significantly the UK authorities will administer customs arrangements for the EU for goods entering Northern Ireland but not staying in the province. How this system is to work in practice however is still to be elaborated (2).
According to EU Council President Donald Tusk ‘Prime Minister Johnson’s acceptance to have customs checks at the points of entry into Northern Ireland will allow us to avoid border checks between Ireland and Northern Ireland and will ensure the integrity of the single market (3). This effectively removed the need for the backstop (2).
The UK government however insists that Northern Ireland remains an integral part of the customs territory of the UK, with it be it being highlighted how a commitment has been included in the agreement which states ‘nothing in the protocol prevents the UK from ensuring unfettered market access for goods moving from Northern Ireland to the rest of the UK’s internal market’. In addition the UK will be able to sign its own free trade deals with these trade deals also applying to Northern Ireland (2).
The Northern Ireland Assembly will be required to give consent to a continuation of this arrangement after four years, but this will be done by a simple majority vote (2). This new arrangement has seen the DUP abandon its position of support for Prime Minister Johnson’s minority government, on the basis that the revised withdrawal agreement weakens the union between Northern Ireland and the United Kingdom, an issue central to the DUP’s political philosophy
In terms of future trade arrangements a commitment has been made that ‘the EU and the UK will aim for a zero-tariff deal with unlimited quotas’ (2). However, a commitment in the political declaration which stated ‘the United Kingdom will consider aligning with union rules in relevant areas’ has now been removed. This suggests the UK government will have more scope to diverge from EU rules and standards in the post Brexit period. This is likely to complicate future EU/UK trade negotiations but could open up opportunities for removal of unnecessarily strict SPS controls on imports to the UK (e.g. in regard to citrus black spot where the UK has no domestic citrus production and climatic conditions would not allow any such infection to take hold in the UK – see companion epamonitoring.net article ‘Will 2018 Be The Last Time South Africa Calls An Early Halt to Citrus Exports to Europe?’, 1 October 2018).
The UK government now faces the tricky task of securing Parliamentary approval for the newly concluded Withdrawal Agreement. Efforts by the government to secure agreement at a specially convened Saturday sitting of the UK Parliament when a backbench amendment was passed (the ‘Letwin amendment’) which withheld Parliamentary endorsement for the revised Withdrawal Agreement until all necessary legislation had been passed, with this being aimed at averting any prospect of a no-deal Brexit (4).
This compelled Prime Minister Johnson to comply with the Benn Act by forwarding a request for an extension of the Article 50 period to the EU. This was accomplished by the submission of an ‘unsigned photocopy of the request he was obliged to send under the act’, alongside an ‘explanatory letter from the UK’s ambassador to the EU, Sir Tim Barrow, and a personal letter from Boris Johnson explaining why Downing Street thought a further delay would be corrosive’ and indicating this was a request from the UK Parliament not the Prime Minister (5).
Despite the ungracious nature of this communication, EU Council President Donald Tusk indicated the EU would consider the UK’s request for an extension.
Having suspended the Saturday Parliamentary sitting following the passing of the ‘Letwin Amendment’ Prime Minister Johnson tabled the government Withdrawal Bill for Parliamentary consideration (6), with an initiative being launched to ram the Bill through the House of Commons within 3 days, before similar expedited process in the House of Lords. This was intended to ensure the UK leaves the EU on the 31st October in line with Prime Minister Johnson 5th September 2019 ‘rather be dead in a ditch’ statement in regard to seeking further extension to the Article 50 process.
However these efforts proved unsuccessful. While ‘MPs approved the prime minister’s Withdrawal Agreement Bill …by 329 votes to 299’, just minutes later MPs rejected ‘a fast-tracked timetable for the bill’ by 14 votes. This prompted Prime Minister Johnson to announce a pause in the consideration of the legislation and announce he was now waiting to hear from the EU on the extension issue (8).
Shortly after these votes in the UK Parliament Donald Tusk announced ‘he would recommend European leaders backed an extension to the Brexit deadline’ through ‘a written procedure’. The BBC’s Europe correspondent meanwhile reported a consensus emerging within EU member states on the granting of an extension of the article 50 period until the 31st January 2020 in line with the request contained in the ‘Benn Act’ (8).
Leader of the Commons, the hard Brexiteer, Jacob Rees-Mogg is now of the view aid it would be ‘very hard to see how it is possible’” for the bill to pass through the Commons and the Lords before 31 October (8). The only way in which the UK could no leave the EU on the 31st October would be via a no-deal Brexit triggered by an EU refusal to grant an extension to the article 50 period. However this is highly unlikely since this would lay the blame for a no-deal Brexit firmly in the lap of the EU.
If as expected the EU grants a ‘flextension’ with an end date of 31st January 2020, then it seems likely Prime Minister Johnson will seek to hold a General Election. However this is contingent upon the agreement of Parliament. The Liberal Democrats, Scottish Nationalists and increasingly the Labour Party look set to support a General Election once an extension to the article 50 process has been locked in. If a General Election were triggered before the end of October the earliest it could occur would be the 28th November 2019 (8), with this shifting to early December if it was called only after the 31st October.
It should be noted current EU/UK negotiations have been focussed solely on the Withdrawal Agreement, the negotiations on the future trade relationship will only get underway once the UK is no longer part of the EU. These negotiations are likely to be fraught if the UK government continues to insist on withdrawing from the EU customs union and single market, regulatory divergence, an unrestricted right to negotiate its own trade agreements and the continued free flow of goods across EU/UK borders. A number of these positions are mutually incompatible and will involve painful political trade-offs (9).
| Comment and Analysis
– The Options There are a number of distinct outcomes which could emerge from the Brexit process, with the most likely outcomes being either a hard Brexit involving the UK leaving both the EU customs union and single market or a no-deal Brexit, which would also see the UK leave the EU customs union and single market but on a disorganised basis which would maximise trade disruptions. However depending on the outcome of the forthcoming general election which most analysts expect before the end of 2019, the option of a ‘soft Brexit’ remains a possibility (with the UK remaining in the EU customs union and single market) with there being an outside chance that Brexit could be cancelled, with the UK remaining part of the EU. The two most likely options of a no-deal Brexit or a hard Brexit would carry important implications for ACP agro-food exports, despite all ACP LDCs and EPA signatories now having arrangements in place which will ensure their continued duty free-quota free access to the UK market at least until the second quarter of 2021. – Implications of the Hard Brexit Option Even if a negotiated transition period is agreed, during which the UK de facto remains part of the EU customs union and single market, given the commitments in the political declaration a hard Brexit now looks likely. The current UK government is firmly committed to leaving the EU customs union and single market. This would not only mean exports to the territory of the UK would no longer be covered by EU trade agreements but that the UK would de facto be third country with an autonomous trade policy quite separate from that of the EU. This would carry important implications in terms of the administration of ACP exports to both the UK and EU27 markets, including customs administration documentation, certifications and authorisations for the placing of goods on the market and even SPS import approvals. In future separate registrations and approval will be required to serve the UK and EU27 markets. ACP exporters will need to check whether their existing authorisations, registrations and approvals remain valid. This issue arises for the EU27 market if existing authorisations, registrations and approvals were issued by UK authorities since they will no longer be valid for trade into the EU27. Similarly if existing authorisations, registrations and approvals were issued by EU27 authorities they will no longer be valid for the UK market (see companion epamonitoring.net article, ‘Exploring New Cross Channel Ferry Routes for ACP Exporters Serving UK Market via EU27 Countries’, 21 October 2019). This is a particularly important issue for short shelf life agricultural products, since any delays in border clearance could lead to a substantial loss of value of delivered consignments. This is likely to prove particularly complicated along triangular supply chains where ACP agricultural products are delivered to the UK market via EU27 member states. Horticulture and floriculture exports would appear to be particularly vulnerable in this regard, with Eastern African LDCs and non-LDCs likely to be equally severely affected (see companion epamonitoring.net article ‘No-Deal’ Brexit Challenges in Cut Flower Sector Highlight Problems for ACP Triangular Supply Chains’, 1 March 2019). The cost implications of new administrative requirements along triangular supply chains alongside other practical difficulties which are likely to arise may be such as to require a fundamental adjustment as to how goods are routed to their final destination markets in the UK. Some ACP exporters have already initiated mitigating actions in this regard (see companion epamonitoring.net article ‘Hard Brexit Could Create Fruit and Vegetable Shortages in the UK’, 23 November 2017). In addition once free from the requirements of the EU customs union and single market the UK government will be free to pursue its’ own autonomous MFN tariff policy, which potentially could adversely impact on the tariff preferences enjoyed by ACP countries if the UK pursues a ‘zero production-zero tariff’ MFN policy in regard to its long term MFN tariff schedule. This would affect ACP exports to the UK market valued at some €845.5 million in 2018. The most severely affected ACP exports would be preserved tuna, bananas, and cane sugar exports. This would impact most severely on exporters of the concerned products in West African, the Caribbean, the Indian Ocean and Pacific ACP countries (see companion epamonitoring.net article ‘Continued Duty Free Quota Free Access to UK Market Secured but the MFN Issue Looms’, 24 October 2019). However if the UK were to maintain in place its temporary MFN no-deal Brexit tariff schedule and impose MFN duties on imports from EU27 countries of products such as cocoa paste and cocoa butter this could open up opportunities for investment in and exports of value added cocoa products from West and Central African cocoa producers. These opportunities for structural development would be expanded if African countries were allowed to cumulate under the rules of origin applied under any bilateral UK only trade agreements. Such cumulation arrangements would allow African producers to use any good produced in African in products exported to the UK without any loss of duty free-quota free access. – Additional Implications of a No-Deal Brexit A ‘no-deal Brexit’ would carry the same implications as a ‘hard Brexit’ but with some additional serious effects being felt. In this context it should be borne in mind that despite the existence of an agreed revised Withdrawal Agreement and the sustained efforts of Parliament to avoid such an outcome, a ‘no-deal Brexit’ could still occur on 31st January 2020, 1st January 2021 or 1st January 2023, depending on the outcome of trade negotiations between the EU and the UK. These trade negotiations will only get underway once the post-Brexit transitional period commences. The consequences of a ‘no deal Brexit’ would be most severe if they took place in the short term (i.e. before the end of 2020), since this would expose the serious human, infrastructural and IT constraints faced by the UK border services responsible for clearing imports through UK ports of entry. This could compound and extend the period of disruption arising from changes to customs administration arrangements as a result of the UK’s departure from the EU customs union and single market. Indeed systemic challenges within the UK border service would spread trade disruptions to ports of entry handling direct ACP exports to the UK. A no-deal Brexit could also see severe shortages of freight lorries, HGC licenced drivers and even fuel shortages. This would then compound the existing problem of a shortage of warehousing and cold storage facilities which has seen cost increase of over 25% in the last year (see companion epamonitoring.net article ‘Shortages of Cold Storage Space Linked to Brexit Stockpiling Could Disrupt Some ACP Chilled and Frozen Exports’, 26 November 2018). This would spread the challenges facing ACP exporters’ of short shelf life agricultural products beyond the UK’s border to internal transportation routes. This would suggest a need to review the contractual arrangements for the delivery of goods to UK customers, with wherever possible the obligations of ACP exporters being limited to the delivery of goods to the first point of entry to the UK. This needs to form part of a wider structured dialogue on the distribution of costs arising from a no-deal Brexit along the supply chain. This could usefully build on recent commitments made by the UK government in the context of EU wide discussions on the elimination of unfair trading practices (UTPs) along agri-food sector supply chains (see companion epamonitoiring.net article, ‘Impact of Yellow Vest Protests on Cameroonian Pineapple Exports Highlights Importance of Tackling UTPs along ACP-EU Supply Chains in Context of Potential ‘No-Deal Brexit’, 13 May 2019). The more time ACP exporters had to prepare for a ’no-deal’ Brexit the more possibilities would exist for the adoption of effective mitigation measures. However this requires ACP exporters to be better informed on what mitigation measures are required and then make the necessary investments in taking the required steps. – Prospects for a ‘Soft Brexit’ Prospects for a ‘soft Brexit’ have diminished over the past year, with this effectively requiring a change in government following a general election. Only with a new government in power which is free from the internal Conservative Party civil war over Europe would there be a realistic option of the UK remaining in the EU customs union and single market. If a ‘soft Brexit’ were to emerge then this would mean existing EU trade agreements would continue to apply to the territory of the UK and the UK would continue to apply the EU’s standard MFN tariffs and GSP trade regime. There would then be no need for any mitigating actions on the part of the ACP governments and private sector exporters. However at the present time this remains only a remote possibility, with this being critically dependent on the outcome of the as yet unannounced general election. – The Remote Possibility of Abandoning Brexit There remains only a very remote possibility of the UK remaining formally part of the EU, with this being dependent on a leading role for the Liberal Democrats in any future UK government. However if this did occur this would mean no change in ACP members trade relationship with the UK. |
Sources
(1) EU and UK agree draft Brexit deal but obstacles remain’, 17 October 2019
https://www.politico.eu/article/eu-and-uk-say-they-have-brexit-deal/
(2) Guardian, ‘How is Boris Johnson’s Brexit deal different from Theresa May’s?’, 17 October 2019
https://www.theguardian.com/politics/2019/oct/17/how-is-boris-johnson-brexit-deal-different-from-theresa-may
(3) Guardian, ‘Donald Tusk indicates EU would grant Brexit extension’, 22 October 2019
https://www.theguardian.com/politics/2019/oct/22/donald-tusk-indicates-eu-would-grant-brexit-extension
(4) Guardian, ‘MPs put brakes on Boris Johnson’s Brexit deal with rebel amendment’, 19th October 2019
https://www.theguardian.com/politics/2019/oct/19/mps-put-brakes-on-boris-johnsons-brexit-deal-with-rebel-letwin-amendment
(5) Guardian, ‘EU would agree to Brexit delay, says German minister’, 21 October 2019
https://www.theguardian.com/politics/2019/oct/21/eu-would-agree-to-brexit-delay-says-german-minister
(6) gov.uk, ‘European Union (Withdrawal Agreement) Bill’
https://publications.parliament.uk/pa/bills/cbill/2019-2020/0007/20007.pdf
(7) Press Association, ‘Boris Johnson’, 5th September 2019
https://www.youtube.com/watch?v=Y9X6TEst2R8
(8) BBC, ‘PM to push for election if EU offers longer delay’, 23 October 2019
https://www.bbc.com/news/uk-politics-50148094
(9) BBC, ‘EU eyes Brexit flextension (again)’, 23 October 2019
https://www.bbc.com/news/world-europe-50148128