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Analysis

7 reasons the UK’s post-Brexit trade vision is clear as mud

by Alan Wheatley | 25.08.2017

All the signs point to Britain’s proposals for future trading arrangements with the EU getting short shrift when Brexit talks resume in Brussels next week.

A “fairy-tale” plan was the verdict of one diplomatic official quoted by Politico. “Wishful thinking if not pure speculation … founded on fancy and fiction,” according to Jacques Pelkmans of the Centre for European Policy Studies, a Brussels think-tank.

The EU has ruled out addressing future relations until sufficient progress has been made on separation issues, including the UK’s divorce bill, citizens’ rights and the inter-Irish border.

But if Brexit Secretary David Davis does manage to steer the conversation around to trade, he should not be surprised if EU chief negotiator Michel Barnier is puzzled by last week’s UK position paper on post-2019 customs arrangements. Here are seven questions raised by the paper that Davis needs to answer.

1. Does “deep and special” just mean cherry-picking?

The “deep and special” relationship that the UK wants to forge with the EU is so deep and special that the paper envisages no need for any customs processes (para 40). Doesn’t this smack of wanting to retain a key benefit of EU membership without assuming any of the responsibilities? Isn’t this cherry-picking, to use Angela Merkel’s phrase, and a red line for the EU?

2. How will a transitional customs deal work?

The government is proposing a new, time-limited customs union as a transition to whatever new relationship is agreed (paras 48-50). Why should the EU go to the trouble of negotiating not one but two sets of post-Brexit trade deals? Why reward a country that is keen to leave the bloc with continued interim tariff-free access without getting something in return?

3. Won’t keeping trade tariff-free be more complicated?

What form will the ultimate “deep and special” relationship take? Apart from a puzzling reference (para 41) to whether tariff rates would be higher in the UK or the EU, the paper implies that we will seek a bilateral free trade agreement (FTA) that keeps two-way goods trade tariff-free. If so, how does the UK propose to check that imports and exports meet mutually agreed health and safety standards and comply with rules of origin?

4. Will the EU agree to waive summary declarations for goods?

The UK wants to negotiate a continued waiver from the time-consuming requirement to submit summary declarations for goods being moved between the UK and the EU (para 32). As Pelkmans from CEPS says, the EU might object unless the UK promises to adhere to the rules of the EU Customs Code. But wouldn’t that run counter to the Brexiters’ aim of taking back control?

5. Doesn’t “innovative and untested” actually mean “impractical and unworkable”?

For goods from the rest of the world entering the EU via the UK, the paper moots an “innovative and untested” approach whereby the UK would precisely mirror the regime for imports at the EU’s common external border (paras 39-42). The aim is to obviate the need for customs clearing between the UK and EU. Robust enforcement, tracking and repayment mechanisms would be needed to police such a “challenging” arrangement. Are we expecting the EU to collect tariffs and track them on our behalf so they don’t accidentally end up in the UK? Will suspicious EU members really legislate to make such an “unprecedented” plan possible? Will Brussels happily create a new bureaucracy to handle the “practical complexities” of the scheme?

6. Isn’t this just a smugglers’ charter?

The UK wants to keep trade as seamless as possible, especially across the land border with Ireland. However, without intrusive checks to ensure tariffs have been paid and product standards met, smugglers will have a field day. Even the highly streamlined customs arrangement proposed in the paper would entail an “increase in administration” (para 29). Has the government estimated how much the extra red tape will cost business? Given the government’s dismal track record of executing complex new IT projects, will the new Customs Declaration Service (para 26) really be able to handle the avalanche of declarations coming its way?

7. Is there enough trust for any of this to work?

Continued frictionless trade will require a high level of trust between us and the EU. Will it be difficult to establish that trust given that the EU anti-fraud agency OLAF already thinks the UK has become a back door to fraudulent Chinese garment imports and wants us to pay 2 billion euros in lost duties?

The government’s publication of position papers on a variety of Brexit issues is a constructive step. But they are not detailed enough and are “far from reality”, according to one view in Brussels. That certainly applies to Davis’s magical thinking on trade.

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Edited by Luke Lythgoe

2 Responses to “7 reasons the UK’s post-Brexit trade vision is clear as mud”

  • I work with complex IT systems. I can say from experience (although it is really just Information Technology 101) two words you don’t want to see in the same sentence are ‘innovative’ and ‘untested’.