Summary
The UK Trade Secretary has expressed concerns over plans for a phased implementation of UK border controls on imports from the EU27 regarding their WTO compatibility, the impact on smuggling operations and the credibility of UK trade policy. Concerns have also been raised over the practicality of implementing ‘light touch’ border control systems between the mainland UK and Northern Ireland. Problems in designing and implementing ‘light touch’ border control systems and concerns over smuggling could see more rigorous controls applied to ACP goods entering the UK market via EU27 member states. Unless special arrangements are set in place to facilitate the continued smooth functioning of ACP triangular supply chains, the functioning of important ACP export sectors could be seriously undermined (e.g. short shelf life horticulture products and cut flowers, value added cocoa products and even fisheries products).
Following on from the announcement on 12 June of the phasing in over a six month period of UK border controls on goods imported from the EU27, so as to facilitate the transition to the new regime, (see companion epamonitoring.net article, ‘Commitment to Phasing in of UK Controls on Goods Entering from the EU Provides a Framework for Addressing ACP Triangular Supply Chains Issues, 30 June 2020) the UK Secretary of State for International Trade has written to the Cabinet Minister responsible for overseeing the Brexit negotiations, Michael Gove, and the Chancellor Rishi Sunak, to express concerns in a number of key areas ‘on border policy and readiness for the end of the transition period’ and to seek assurances the concerns raised will be addressed (1).
These relate firstly to ‘staged approach’ to the phasing in of UK controls on goods imported from the EU27, which it is feared could ‘be vulnerable to legal challenge’ at the WTO, since it would involve treating imports from the EU27 ‘differently to goods coming in from elsewhere’ which are subject to tariffs, quotas and standard border controls. This which would be in contravention of core WTO non-discrimination provisions and hence could be subject to challenge by WTO members (1).
This raises issues regarding the UK’s ‘credibility with trading partners, the WTO, and businesses’, in a context where the UK is seeking to strike out on its own autonomous globally orientated trade policy.
Concerns were also expressed over the impact of the staged introduction of controls at EU27/UK border posts, on smuggling operations. It is feared the partial nature of import controls to be applied across EU/UK borders will encourage smugglers to redirect their goods shipments to the UK via EU27 crossing points, which are subject to less rigorous controls than goods directly exported to the UK. This it is felt could enable unscrupulous traders to get their goods into the UK without paying tariffs or being subject to checks. Intricately linked to this concern is the need to ensure effective control capacities will be in place to prevent such smuggling activities (1).
A further major area of concern relates to the control system to be applied to good traded between the mainland UK and Northern Ireland. In this area Secretary of State Truss expressed her concerns that ‘the digital application of the special tariff regime for Northern Ireland has been deemed high risk’ and that as a consequence ‘HMRC are planning to apply the EU tariff as a default to all imports in NI from 1 January 2021’. It was suggested this could ‘call into question NI’s place in the UK customs territory’, an issue of serious concern to Unionists within the Conservative Party (1).
The leaked 8 July letter appears to suggest the UK government may not be able to sustain its assurances to Northern Ireland businesses that tariffs would not be imposed on mainland UK-Northern Ireland trade. Previously, Northern Ireland businesses had been assured a ‘sophisticated system’ would be in place to regulate this trade with minimal friction and at minimal additional cost (see companion epamonitoring.net article, ‘Could Leaked Requirements for Movement of Goods to Northern Ireland Provide Basis for Special Arrangements for ACP Triangular Supply Chains’, 14 July 2020).
The leaked letter is fuelling concerns in Northern Ireland that businesses will face increased costs when trading with the mainland UK. It is felt that any plan to ‘implement EU tariffs as a default’ measure with Northern Ireland retailers and other businesses being required to reclaim the tariffs levied on goods which stay in Northern Ireland, would carry serious implications for the cash flow of the affected businesses which would need to wait for an unknown amount of time before refunds would arrive back in their bank accounts (2).
While the UK government refused to comment on the leaked letter, the opposition Labour Party claimed the letter showed UK government ministers were ‘making things up as they go with a lack of awareness of the real world consequences of border policies they’ve had four years to develop’ (2).
Some analysts see the letter from Secretary of State Truss as an expression of concern that ‘that the UK may not be as ready for Brexit on 1 January 2021 as it needs to be’ (3). She was seen as adding to the chorus of concerns from business groups and the Scottish and Welsh governments ‘who have argued Britain needs more time: either to seek an extension to the transition period, or to seek an adjustment period once transition ends to allow business to get ready’ (3).
However EU chief negotiator Barnier has argued that with the UK having rejected the option of submitting a request for an extension of the transition period the EU had no option but to ‘treat the UK as a third country with new checks, forms and bureaucracy’ (3). Addressing the House of Lords European Committee, chief negotiator was quite explicit, declaring ‘as of 1 January, all products coming into the single market – coming from any third country anywhere in the world, including yours, because you are a third country – will be checked’ (4). It was left implicit that to do otherwise would leave the EU in violation of WTO rules; a reality now implicitly acknowledged by Secretary of State Truss.
| Comment and Analysis The concerns expressed by the Secretary of State for International Trade, Liz Truss, have long been recognised by the EU, with WTO objections being the principal reason why the EU has always insisted on a clear legal framework for the extension of current market access arrangements in trade between the EU and UK. This would appear to reduce the prospects of a mutually agreed ‘adjustment period’ being put in place from 1st January 2021. This accounts for why initially, two years were allowed for negotiations so that as the parameters of an agreement began to emerge, the necessary systems could be set in place to operationalise these commitments. With no substantive progress in the negotiations to date, there is likely to be little time to set in place the required systems on an operationally effective basis, with stop gap measures needing to be set in place, which will carry costs and cause discontent in various quarters. This is the lesson emerging from the current debate on the controls to be implemented between the mainland UK and Northern Ireland. This has real implications for ACP triangular supply chains, suggesting time is rapidly running out for the effective establishment of special trade administration arrangements, designed to ensure the continued smooth functioning of long established ACP triangular supply chains, which serve the UK market via initial points of landing in the EU27. This needs to be seen in a context where the Covid-19 pandemic has generated substantial new challenges to the continued smooth functioning of these triangular supply chains. Indeed, addressing the issue of ensuring the continued smooth functioning of these triangular supply chains is likely to be complicated by the focus on the risk of increased use of EU27/UK border crossings by smugglers. This issue could see more rigorous controls applied on third country goods seeking to enter the UK market via the EU27 than area to be applied in practice to EU27/UK trade. This is precisely the opposite of what is needed if the functioning of longstanding established triangular supply chains are not to be profoundly disrupted. It now appears as if the window of opportunity for establishing special arrangements to ensure the continued smooth functioning of long-standing triangular supply chains is rapidly closing. An urgent ACP political initiative aimed at ensuring the continued smooth functioning of long-standing triangular supply chains is nor urgently needed. It should be noted that while some analysts have suggested the leaked letter from Secretary of State Truss demonstrates a recognition ‘the UK may not be as ready for Brexit on 1 January 2021 as it needs to be’, there is another potential interpretation. Rather than the letter indicating a growing awareness of the practical challenges faced in implementing border controls, the letter could equally be interpreted as highlighting the impossibility of effectively adopting a phased approach to the withdrawal process and that what is in fact required is a clean break, with the unity of the United Kingdom and the integrity of the UK’s new Global Britain trade policy being given primacy over any concerns in regard to the disruptions which such an abrupt change in border control arrangements with the EU could cause. It remains to be seen what impact the debate the letter has triggered will have on how, in the coming months, the UK manages its departure from the EU customs union, specifically in regard to how it establishes and implements the necessary new border controls on trade crossing the EU/UK border. |
Sources:
(1) The Guardian, ‘Liz Truss warns Boris Johnson over Brexit border plans’, 8 July 2020
https://www.theguardian.com/politics/2020/jul/08/liz-truss-warns-boris-johnson-over-brexit-border-plans
(2) Business Insider, ‘Leaked Liz Truss letter warns Boris Johnson over border plans’, July 10, 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/2020/07/10/Leaked-Liz-Truss-letter-warns-Boris-Johnson-over-border-plans
(3) The Guardian (Opinion), ‘Liz Truss is suddenly worried about a Brexit deal – but for the wrong reason’ 10 July 2020
https://www.theguardian.com/commentisfree/2020/jul/10/liz-truss-is-suddenly-worried-about-a-brexit-deal-but-for-the-wrong-reason
(4) The Guardian, ‘UK Brexit negotiator meets EU counterpart in bid to revive talks’, 7 July 2020
https://www.theguardian.com/politics/2020/jul/07/eu-citizens-being-used-as-guinea-pigs-for-brexit-digital-immigration-system-mps-told