The UKs Commitment to Regulatory Divergence Could Complicate Functioning of ACP Triangular Supply Chain Exports to the UK Market
In an interview with the Financial Time the former UK chancellor, Sajid Javid, announced there would be no alignment with EU regulations after transition, stating ‘There will not be alignment, we will not be a rule taker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year’. According to the Guardian he went on to declare the UK Treasury will not be providing ‘support to manufacturers that favour EU rules as the sector had had three years to prepare for Britain’s transition’ (1).
EC representatives have made it clear that the greater the extent of UK regulatory divergence the less scope there will be for the maintenance of frictionless trade. Following remarks from European commission president, Ursula von der Leyen, chief Brexit negotiator Michel Barnier warned ‘the UK will not get a tariff-free, quota-free trade deal with the EU unless it accepts level-playing field rules on issues such as the environment’ (1). More fundamentally UK agri-food products will demonstrably need to be in compliance with EU market requirements for them to be placed on the EU27 market for sale.
Against this background the announcement by former Chancellor Javid caused alarm amongst business leaders, particularly in the agri-food sector. As Tim Rycroft, of the Food and Drink Federation has pointed out the fear is the chancellor’s comments represents ‘the death knell for frictionless trade’ with the EU, with the UK food and drink industry now needing to ‘adjust to costly new checks, processes and procedures, that will act as a barrier to frictionless trade with the EU’. It is felt this ‘may well result in price rises’ in the UK (1).
Richard Griffiths, the chief executive of The British Poultry Council. Photo courtesy https://meatmanagement.com/
Richard Griffiths, the chief executive of The British Poultry Council, was particularly critical of former Chancellor Javid’s stance, describing it as ‘another iteration of the government’s ‘give us what we want, or we’ll hurt ourselves’ negotiating position’. He maintained ‘alignment supports food production in this country, and without it we’ll be vulnerable to a two-tier food system’. (3)
While the fears of UK food and drink manufacturers are understandable, there are fundamental questions about what this policy announcement will mean in practice. This needs to be seen in the light of the commitments the UK government has been making in its communications with UK businesses through its Brexit preparations web-portals.
For example, in term of SPS controls the UK government has committed itself to adhering to the UK SPS control regime in the immediate post Brexit period for all concerned goods originating in the EU27. This suggests the maintenance of regulatory alignment even when new EU regulations on phytosanitary controls which came into force in December 2019 may have little to do with the phytosanitary challenges arising under purely UK-only agri-climatic conditions and production patterns (e.g. in regard to the control of the citrus specific fungal infection known as citrus black spot – see companion epamonitoring.net articles ‘Will 2018 Be The Last Time South Africa Calls An Early Halt to Citrus Exports to Europe?’, 1 October 2018 and ‘South Africa to Take EU to WTO Dispute Settlement over Citrus Black Spot Controls’, 8 April 2019).
In this context it is noteworthy that following the expressions of business concerns, former Chancellor Javid ‘has sought to reassure business that there will be no wholesale dumping of EU regulations’. He maintained in a question and answer session at the World Economic Forum in Davos that the UK would not ‘diverge just for the sake of it’. He said the UK would ‘maintain high standards – not because we are told to, but because we want to’.
Former Chancellor Javid appeared to be refining the UK governments approach by suggesting the UK government would ‘only use the freedom to diverge if it thinks the change is worthwhile, and after the pros and cons have weighed up’.
In terms of the process going forward the Guardian highlights how ‘negotiations on the future relationship are expected to begin formally after 25 February when the EU has formally agreed its negotiating goals’. This follows normal EU procedures for the conduct of trade negotiations with a third county, with the EU’s negotiating mandate then being published.
According to the Guardian ‘it is not clear whether the UK will publish detailed negotiating objectives, which is the convention in trade talks’ (1).
Comment and Analysis
While the UK is committed to avoiding checks on goods originating in the EU27 in the immediate post-Brexit period, it is unclear to what extent this will apply to ACP goods using triangular supply chains if the UK is committed to regulatory divergence in the post-Brexit period. The EU is unlikely to be happy with the UK ‘picking and choosing’ which EU rules it applies within any future EU/UK free trade area agreement.
While in statements aimed at the business community the UK government has nominally committed to recognising EU inspections of third country agri-food products, thereby removing any need for further SPS inspections at UK ports of entry (or dedicated inspection posts away from the main ports of entry), it is unclear whether this commitment would hold in a context of regulatory divergence.
Would the UK agri-food industry find it acceptable if competing EU producers were granted the right to sell goods on the UK market, while on regulatory grounds UK producers were denied the right to sell their equivalent goods on EU27 markets?
If differences emerged in the trade treatment accorded EU27 exports to the UK and UK exports to EU27 markets then it is difficult to see how, in any resulting trade disputes, ACP short shelf life products making use of triangular supply chains in serving the UK market could avoid getting caught up in any resulting trade disruptions.
Against this background there would appear to be a need to take steps to insulate the smooth functioning of existing ACP triangular supply chains from any potential EU/UK trade disputes which could emerge as a result of regulatory divergence.
This could build on former Chancellor Javid’s assertion in Davos that the UK government would ‘only use the freedom to diverge if it thinks the change is worthwhile, and after the pros and cons have
weighed up’. Clearly there are no benefits to be gained from the introduction of new controls on ACP short shelf life horticulture and floriculture products exported to the UK along supply routes shipping through EU27 countries if all existing checks are still being carried out.
Specifically there would appear to be a need for both the UK government and EU authorities to make a binding commitment to set in place the necessary logistical and administrative arrangements to ensure the continued smooth functioning of these triangular supply chains, with these commitments holding regardless of the outcome of wider EU/UK trade negotiations and disputes.
Specific areas where the parallel agreement of the UK and EU authorities are required to facilitate the continued smooth functioning of triangular supply chains include:
- Waiving any need for customs checks for good transiting EU27 member states where duty free-quota free access if enjoyed to both the UK and EU27 markets under parallel ‘rolled-over’ trade arrangements.
- Waiving any need for UK phytosanitary checks on the basis of an EU commitment to the continued conduct of phytosanitary checks on imports destined for the UK market and appropriate bilateral UK/EU arrangements for any reimbursement of costs incurred.
- Communicating these commitments to concerned supply chain stakeholders and supporting the establishment of logistical and administrative arrangements to ensure the continued smooth flow of short shelf life products along triangular supply chains used by ACP exporters in serving the UK market.
This needs to be done well in advance of the UK’s departure from the EU customs union and single market on 1st January 2021.
If such binding commitments are not forthcoming early enough then concerned stakeholders (traders, freight forwarding companies, port authorities and ferry operators) will be reluctant to make the required investments, while the concerned public services (customs control and phytosanitary inspection services) will not have set in place the required administrative arrangements to allow the continued smooth flow of ACP goods along these triangular supply chain to the UK market.
This issue needs to be taken up with the European Commission in the course of February 2020, as part of the preparation of its negotiating mandate for the conduct EU/UK trade negotiations in 2020. It will also need to be taken up bilaterally with the UK authorities to build on nominal commitments already made.
This would appear essential given the position the UK government is taking regarding the issue of the divergence of UK regulations from current EU standards (standards which are constantly evolving). This article was provided courtesy of epamonitoring.net.
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