Brexit Briefing: The Customs Are Always Right

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1) The UK’s Post-Brexit Customs Plans Involve A Lot More Hassle For Businesses That Export To The Continent.

It’s taken just over a year, but the Government is finally putting some flesh on the bones of life after Brexit.

We had the opening salvo of Theresa May’s Lancaster House speech in January, where it was confirmed Brexit means leaving the Single Market and the Customs Union, and this week the Government set out some proposals for a new customs arrangement after March 2019.

If the Government gets its way, April 2019 is set to look pretty similar to what we have now.

The Brexit Department wants the EU to agree to “a new and time-limited customs union between the UK and the EU Customs Union, based on a shared external tariff and without customs processes and duties between the UK and the EU.” In other words, the exact arrangement we currently have.

How does this marry up with Chancellor Philip Hammond and International Trade Secretary Liam Fox’s pledge on Sunday the UK would leave the Customs Union in March 2019? It turns out leaving ‘the’ customs union is different from being part of ‘a’ customs union – even if the two arrangements are virtually identical.

Once the interim period is up (the length of which is likely to be two years), a new customs arrangement will need to ready to go.

The Brexit Department littered its report with numerous references of a “frictionless” goods border with the EU, and set out two scenarios for how this could be achieved.

The first is a “highly streamlined customs arrangement”, involving simplifying customs process. Not simplified compared to what we have now though, of course.

This plan places great stock in the Government’s new Customs Declaration Service – due to be rolled out in January 2017. Just last month, the National Audit Office produced a damning report into the project, with the killer conclusion that even if the system was delivered on time, it would still not be able to expected the 255million customs declarations a year post-Brexit.

That’s right: the very system the Government wants to handle all customs declarations hasn’t got the capacity to handle all the customs declarations.

 The second option was for a new “customs partnership” with the EU. One aspect would see business which exporting goods into the UK before moving them into the EU paying the higher UK tariff and then claiming money back once the products had reached the continent.

Why would businesses do this? Surely, they would just export straight into the EU? This option is the real ‘have your cake and eat it too’ approach, and was described as a “fantasy” by the European Parliament’s Brexit coordinator Guy Verhofstadt.

Whichever option is pushed through, businesses trading with the EU will see a huge increase in red tape.

I’m sure the irony of that won’t be lost on those free-market Brexiteers who claimed leaving the EU was the only way to free businesses up from excessive bureaucracy.

2) Apparently You Don’t Need An Actual Border To Stop People Coming Into A Country.

After filling us on the customs plans, the Brexit department published a paper on the Northern Ireland border issue.

Essentially, they want an invisible border – as is there is now. No customs checks, no border posts, no immigration officials.

How does that marry up with ending freedom of movement, as surely EU nationals could land in a plane in Ireland and drive into the UK?

The paper claims that physically stopping people coming into the UK is not the only way to control immigration.

Refusing to give National Insurance numbers and other such bureaucratic tricks are held up in the report as ways of controlling migrant numbers. Of course, this could simply create a febrile black market for unscrupulous employers and landlords who would have access to a pool of migrants able to get into the UK but unable to legally work.

The Northern Ireland border is one of the few cards the UK has to play in the negotiations.

By vowing to keep an invisible border – and so clearly couching it in terms of its importance to the peace process – the onus is on the EU to agree follow suit.

If Brussels starts demanding extensive customs checks along the UK border, the EU can be painted as the ones willing to put peace at risk out of spite.

The Government is of course rejecting any notion it is playing politics with the peace process, but that’s another part of the trick: make the other side look like they are using it as a bargaining chip.

The EU met the reports with a cool response, insisting until progress is made on the divorce bill there was nothing to discuss. 

The silence on the customs could continue until December, with Sky reporting this week the phase one talks on money, citizens rights and Ireland might not be concluded until then. The German election in September, which could see Angela Merkel team up with the liberal Free Democrats in a new coalition, could change the tone of the talks, with the FDP seen as more business-like than Martin Schluz’s SDP.

3) Liam Fox Won’t Be Able To Feast On Chlorinated Chicken After All. 

With all the implications of Brexit bleeding into each other, it’s inevitable that some clues to Government plans in other areas of the negotiations were left in the customs and Northern Ireland document.

One affects International Trade Secretary Liam Fox.

In order to allow the unchecked movement of agricultural and food across the UK/Ireland border, Britain will mimic the EU’s health standards.

The document proposes “regulatory equivalence on agri-food measures, where the UK and the EU agree to achieve the same outcome and high standards, with scope for flexibility in relation to the method for achieving this.”

Government officials denied this would lead to identical regulations, but the paper states: “An agreement on regulatory equivalence for agri-food, including regulatory cooperation and dispute resolution mechanisms, would allow the UK and the EU to manage the process of ensuring ongoing equivalence in regulatory outcomes following the UK’s withdrawal from the EU.

“Providing the UK and the EU could reach a sufficiently deep agreement, this approach could ensure that there would be no requirement for any SPS [Sanitary and Phytosanitary] or related checks for agri-food products at the border between Northern Ireland and Ireland.”

Such an agreement could prevent the UK from allowing chlorine-washed chicken from the United States to be imported into Britain, as it could cross into Ireland - and the rest of the EU - unchecked.

It could also stop the relaxing of laws around allowing genetically-modified crops and chemically-enhanced meat into the UK. 

4) Unless The EU Wants To Start A Trade War With The US, Brussels Won’t Punish Us For Brexit.

The Government’s reports work on the basis the UK will be able to secure a trade deal with the EU. But what if that fails to materialise? The Institute of Economic Affairs believes that even if the talks break down, it would not be a “disaster” - which is setting the bar somewhat low.

A new report says the UK should not erect tariffs with the EU in order to lead by example when it comes to free trade.

The free-market think-tank also argued the EU would not be able to impose “punitive tariffs” against the UK in the event of no-deal, as World Trade Organisation rules mean if it did that, it would have to apply them to every country with which it did not have a free-trade deal.

“Such a protectionist lurch would then run into all sorts of problems, not least from disaffected trading partners, some of whom (e.g. the US) would be minded to retaliate,” says the report, adding: “The EU would then have a major trade war on its hands. The EU pursuing a punitive tariff policy specifically towards the UK is, thus, a non-starter.”

5) Old People And Ex-Cons Could Fill The Jobs Gap After Brexit. 

With concerns over a reduced post-Brexit workforce affecting the agricultural and construction industries, it is perhaps time to for employers to start thinking out of the box when it comes to recruitment. Business Insider reported this week that immigration lawyer George Koureas is suggesting companies look at hiring the elderly and ex-convicts to fill job vacancies. He described these groups as “neglected workforces”. Business Insider cited research from the charity Unlock, which claimed over 10 million people in the UK have a criminal record.

Of the 1.24 million offenders who received sentences in courts in 2016, more than half (54%) were for motoring offences, and 74% of all sentences were fines.

“Despite this, a YouGov poll of 1,849 companies found that half would not consider employing offenders or ex-offenders, and a further 12% were unsure. Only 7% said they currently employed either, although only 11% said they had received such applications and a further third were unsure,” Business Insider wrote.