Summary
According to UNCTAD trade costs linked to NTM are now higher than tariffs, with a need for cooperation and greater use of IT solutions to minimise such cost while meeting key public policy objectives. The non-tariff issues arising for ACP exporters within the process of the UK’s withdrawal from the EU, particularly under a ‘No-Deal’ Brexit scenario need to be fully addressed is substantial new costs are not to be generated for ACP agro-food exporters. Key areas where clear UK and EU policy commitments are needed include: removing the need for customs checks where DFQF access is enjoyed to the EU and UK markets; allowing continued use of trade facilitating IT systems until alternatives are in place; continuing with phytosanitary checks in the EU for goods destined for the UK; -establishing mechanisms for a review of ‘UK-Only’ phytosanitary controls in Continuity Agreements concluded with the UK.
Analysis from UNCTAD has highlighted concerns of both traders and policy makers over the growing importance of non-tariff barriers in inhibiting trade. While the latest study focused on the Asia-Pacific region it raises some important general issues. For example it found ‘trade costs associated with NTMs are estimated to be more than double that of tariffs’. UNCTAD highlighted how many of these NTMs ‘are technical regulations, such as sanitary and phytosanitary requirements on food’ which it was recognised served ‘important public policy objective’ (1).
Against this background it was argued a way needed to be found to ‘address trade costs while maintaining the benefits of NTMs’. For UNCTAD the key to this was ‘enhanced cooperation at all levels’ (1).
Significantly UNCTAD highlighted how the ‘trade costs of NTMs can be significantly reduced by moving to paperless trade and cross-border electronic exchange of information’. In the study under review it was suggested that the use of paperless electronic forms of cross border trade administration could lower trade administration s costs by 25% (1).
These observations would appear to carry particular resonance for ACP exports to the UK under a ‘No-Deal’ or ‘Hard’ Brexit outcome to the still resolved process of the UK’s withdrawal from the EU.
A recent analysis from the UK Revenue Service (HMRC) found that the extra costs of administration the UK’s withdrawal from the EU customs union would generate will amount to £15 billion which would be shared equally by UK and EU exporters. It was estimated that ‘large companies importing and exporting in high volumes would face a cost of £28 for filling in the forms for each load imported’, with this increasing to £56 for each consignment if the services of freight forwarders were used (2).
ACP exporters serving initial the UK market via initial ports of landing in EU27 member states will be unable to avoid become embroiled in these extra costs, with a similar situation being aced by ACP exporters who serve markets in the Republic of Ireland via the UK
This situation will be compounded in the agro-food sector under a ‘No-Deal’ scenario by the UK no longer having ‘access to the EU’s import system TRACES (Trade Control and Expert System)’, with ACP exporters needing to ‘use the UK’s new Import of Products, Animals, Food and Feed System (IPAFFS)’ (3). This duplication of administrative requirements will raise costs to exporters.
In addition after an initial transition period of up to a year the UK will no longer have access to the EU’s Registered Exporter System (the REX system) which uses IT solutions to certify the origin of goods so they can validly claim any tariff preferences they may enjoy under trade agreements. The newly introduced REX system aims to ‘replace the current system of origin certification based on certificates of origin issued by governmental authorities and on invoice declarations made out under certain conditions by economic operators’ (4).
While the REX system uses a self-certification approach whereby economic operators make out their own statements on origin, the EU has proprietary rights over the IT system used. This means ACP exporters where the transition to the REX system has already taken place will need to go back to a paper based system or origin verification.
This is likely to increase costs and generate delays in the processing of imports to the UK, particularly along triangular supply chains where two system of verification of origin will be in operation.
This could prove particularly problematic for ACP exporters of short shelf life horticultural products. ACP horticultural exporters which have already made the transition to the REX system include: Ethiopia and Kenya (where the transition was completed at the end of 2017); Eswatini and Tanzania (where the transition was completed at the end of 2018); Zambia (where the transition was completed by July 2018) and Mozambique, Senegal and Uganda (where the transition is scheduled to be completed at the end of 2019) (5).
It should be noted the estimated £15 billion in additional administrative costs does not include the additional costs arising from any need for UK specific SPS controls (2). Once again this could be a particular issue for ACP exporters using triangular supply chains. According to a Brexit preparations note from the Department for Environment, Food and Rural Affairs, if the EU authorities ‘have not performed plant health checks’ on products destined for onward shipment to the UK then ACP plant and plant products entering through the current RORO terminals then under a ‘No-Deal’ Brexit the UK will need to conduct checks at authorised inland facilities in the UK called a ‘Place of First Arrival (PoFA)’ (6).
This will involve both additional costs (7) and delays to the delivery of goods, potentially resulting in a loss of value prior to delivery to customers.
Alternatively onward shipping routes from the EU will need to be restructured to ensure the goods arrive at a UK non-Roll on/Roll off ports where plant health check inspection facilities are already in place (7).
In the longer term the issues a potential issue arises in regard to phytosanitary controls, linked to a possible divergence of UK and EU phytosanitary control requirements. It is possible that the UK may seek to develop its own phytosanitary related import requirements based solely on the agro-climatic conditions and production concerns of the UK rather than phytosanitary control requirements based on pan-EU agro-climatic conditions and production concerns.
A key driving factor behind this would be the desire to conclude a FTA with the USA in a context where the Office of the US Trade Representative has made it clear that it wishes to see unnecessarily restrictive EU SPS requirements removed under any future trade agreement with the UK, with this being a precondition for the conclusion of any such agreement (see companion epamonitoring.net article ‘SPS and Food Safety Issues Likely to be Central to US/UK Trade Negotiations’, 25 July 2019
A preliminary review and comparison of UK plant health risk assessments and pan-EU phytosanitary control suggests agro-climatic conditions and production patterns in the UK give rise to a far lower risk assessment for a range of plant diseases, infections and pests than for the EU as a whole. This creates scope for reducing phytosanitary import inspection requirements without compromising plant health in the UK.
This needs to be seen in the context of the EU’s more rigorous phytosanitary import control requirements which are likely to progressively squeeze smaller ACP horticultural product exporters out of the EU market see companion epamonitoring.net article, ‘COLEACP Warning Highlights New EU Requirements for Retaining Access to EU Market for Chilli and Pepper Exports’, 4 July 2019
| Comment and Analysis
– Addressing the Non-Tariff Effects of Brexit on ACP Exporters – Removing the Need for Checks Where DFQF Access is Enjoyed to the While it can be argued this is consistent with both EU and UK objectives to minimise negative fall-out from the Brexit process for other trade partners, particularly developing countries, currently the UK has no plans for ‘separate lanes for different types of traffic in UK ports’(8). This means that currently the necessary infrastructure planning for such trade facilitating arrangements is not in place in the UK and the UK has no plans to make such arrangements. There is therefore a need for a political engagement with the UK government to make a clear policy commitment in this area, so the necessary infrastructure can be set in place at RORO ports handling the receipt of ACP agro-food products shipped to the UK market via EU27 ports of landing. This is an important issue for all ACP horticulture and floriculture exporters who serve the UK market through initial ports of landing in the Netherlands, Belgium or France. – Allowing Continued Use of Trade Facilitating IT Systems Until – Continuing With Phytosanitary Checks in the EU for Goods Destined for In addition a firm commitment needs to be secured from the concerned EU member states national phytosanitary inspection authorities that they will continue to conduct checks on agro-food products destined for the UK market. A political initiative in this regard from the governments of the concerned ACP exporting countries is needed both at the EU level to resolve the policy issue and at the national level to make sure that all the necessary arrangements are made for continued inspections of ACP agro-food products destined for the UK market. – Establishing Mechanisms for the Review of ‘UK-Only’ Phytosanitary |
Sources
(1)UNCTAD, ‘Trade costs of non-tariff measures now more than double that of tariffs’, 4 October 2019
https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2212&Sitemap_x0020_Taxonomy=UNCTAD%20Home;#2030;#Trade%20and%20Non-Tariff%20Measures
(2) Financial Times, ‘Red tape bill for EU-UK trade in no-deal Brexit to hit £15bn’, 7 October 2019
https://www.ft.com/content/30c58758-e91e-11e9-a240-3b065ef5fc55
(3) UKWA, ‘Plants, animal and forest products’, Get Ready For Brexit Factsheet
https://www.ukwa.org.uk/wp-content/uploads/2019/10/A4-GET-READY-FOR-BREXIT-PLANTS-ANIMAL-AND-FOREST-PRODUCTS-.pdf
(4) EC, ‘REX – Registered Exporter system’
https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/general-aspects-preferential-origin/arrangements-list/generalised-system-preferences/the_register_exporter_system_en
(5) EC, ‘Application of the REX system as from 1 January 2017’
https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/general-aspects-preferential-origin/arrangements-list/generalised-system-preferences/the_register_exporter_system_en#heading_5
(6) uk.gov, Border Delivery Group Industry Day, presentation from Anna Wardell, EU Exit Department for Environment, Food and Rural Affairs
https://www.fevia.be/sites/fevia/files/media/bdg_defra.pdf
(7) gov.uk, ‘Importing and exporting plants and plant products if there’s a no-deal Brexit’, 23 October 2019
https://www.gov.uk/guidance/importing-and-exporting-plants-and-plant-products-if-theres-no-withdrawal-deal
(8) gov.uk, Border Delivery Group EU Industry Engagement – ‘Roll on/Roll off (RoRo) locations Pre-notified & plenary questions & answers’, 1 March 2019
https://www.getreadyforbrexit.eu/wp-content/uploads/2019/04/EU-Industry-Days-Questions-and-Answers-from-Delegates-010319.pdf