Richard North, 30/06/2020  
 


Possibly the best indicator to date that we're headed for a no-deal (or very limited deal) TransEnd is the news that the European Commission has taken upon itself to update its original "notices to stakeholders" on Brexit, and populating a new website.

This has the somewhat uninspiring title of "Getting ready for the end of the transition period", but then the Commission does seem to have recognised that calling it "Brexit" is inappropriate, and it hasn't cottoned on to TransEnd yet. It probably never will.

However, the text is sound enough. It tells us:
Even if the European Union and the United Kingdom conclude a highly ambitious partnership covering all areas agreed in the Political Declaration by the end of 2020, the United Kingdom's withdrawal from the EU acquis, the internal market and the Customs Union, at the end of the transition period will inevitably create barriers to trade and cross-border exchanges that do not exist today.
Delicately turning the screws, it then goes on to add: "There will be broad and far-reaching consequences for public administrations, businesses and citizens as of 1 January 2021, regardless of the outcome of negotiations. These changes are unavoidable and stakeholders must make sure they are ready for them".

Originally, there were over a hundred "notices to stakeholders", but these are now being reviewed and updated as necessary. So far, 51 (by my count) have undergone the treatment and been reissued as "notices for readiness".

Entering the first of these notices, on air transport, we see a similar admonition. "During the transition period", we are told:
… the EU and the United Kingdom will negotiate an agreement on a new partnership, providing notably for a free trade area. However, it is not certain whether such an agreement will be concluded and will enter into force at the end of the transition period. In any event, such an agreement would create a relationship which in terms of market access conditions will be very different from the United Kingdom’s participation in the internal market, in the EU Customs Union, and in the VAT and excise duty area.
Helpfully, this notice starts by telling readers that, since 1 February 2020, the United Kingdom has withdrawn from the European Union and has become a "third country". In a footnote, it then defines that controversial term for those who confuse it with "third world country". Simply, it is a country which is not a member of the EU.

Considering that prime minister Johnson is wittering on about "free trade areas", he might also benefit from one of the other footnotes, which warns that a free trade agreement does not provide for internal market concepts (in the area of goods and services) such as mutual recognition, the "country of origin principle", and harmonisation.

Nor, it says, does a free trade agreement remove customs formalities and controls, including those concerning the origin of goods and their input, as well as prohibitions and restrictions for imports and exports.

I am so pleased that this hits on the head the stupidity of Shanker Singham, who has been telling his idiot followers that we could do a deal with the EU on mutual agreement (of standards). He's wrong. You can't. It is an "internal market concept", which means you have to be in the internal market to get it. And since we're not (or won't be) we will not qualify.

But the air transport notice is fairly straightforward compared to the one on aviation safety rules. Here, there are six pages of dense prose which, if we do leave without a deal, amounts to a holy pile of grief. We really, really do need to conclude a deal with the EU.

The really interesting one, though, is on "Chemical Regulation under REACH", which coincides with the news that Defra has confirmed that it will implement its own version of the EU's system, from the end of the transition period.

Unsurprisingly, industry has been rather keen that the UK should align with the European regulatory system. But this is not to be. The UK Government will implement a "UK REACH" run by Defra and the Health and Safety Executive (HSE), replacing the European Chemicals Agency (ECHA).

There is no arguing that REACH is a highly bureaucratic and expensive regulatory system, but we do export an awful lot to the Continent and divergence could cost us dear.

Last time I looked (which was a little while ago), together with pharmaceuticals, with which chemicals are grouped, UK exports to the rest of the EU amount to some £50 billion annually (slightly more than half is attributable to chemicals). The combined value was nearly a quarter of our total exports to the EU (£223.3 billion in 2015). I doubt it has changed very much.

If we end up with two systems, even if they are quite close at the start, they are bound to diverge over time. Chemical firms exporting to the EU will thus have the worst of all possible worlds, having to comply with two separate regulatory systems.

It actually seems that the UK isn't even going to try to align with REACH, according to parliamentary under-secretary of state of Defra, Rebecca Pow. This woman actually asserts that "having control of our own laws outweighs the costs" – which is fine when you're not paying those costs (not directly, at any rate).

The other side of the coin is that some chemical manufacturers on the Continent may decide that the UK market is not big enough to support additional registration costs, in which case we could find ourselves short of chemicals vital to manufacturing industries, even to the extent that certain products will no longer be made in the UK.

The other problem is that there are other third countries which have adopted the REACH system – South Korea being one – and that may disrupt import and export trade with them. Non-conformity could be a very expensive deal.

Worse still, this seems to suggest that HMG is not taking the problem of non-tariff barriers at all seriously. We remain to be convinced that Johnson and his ministers even know what they are.

But the new notices do tend to point out the scope of the problem. We see categories ranging from audiovisual media services (such satellite TV) to biocides, cosmetic products, food law, industrial products, medicines and recreational craft (boats).

Each company seeking to export goods and services caught by EU rules, where UK rules are divergent, will have to make hard decisions as to whether it is worth dealing with dual regulatory systems. The bigger companies may find it economic (or not), but the smaller companies which only export to the EU might find it not worth their while.

Here it is not only additional production costs which may factor, but also conformity testing and approvals, where many firms will have to duplicate expensive and onerous procedures, for no commercial gain.

The trouble is, that for all the noise about current negotiations, drawing up agreements on non-tariff barriers and related matters is a complex and slow business. There simply isn't time, therefore, to carve out a deal which will satisfy the needs of industry. The chemical industry will not be the only victim.

Thus, when on 1 January 2021, as Michael Gove avers, "we will take back control and regain our political and economic independence", there will be a price to pay.

Also published on Turbulent Times.






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