Tag: Brexit

Northern Ireland Protocol Bill

On 13th June, the UK Government introduced the Northern Ireland (NI) Protocol Bill to the House of Commons. The highly controversial Bill, if enacted, would dis-apply large swathes of the NI Protocol which was agreed between the UK and the EU as part of the Withdrawal Agreement negotiations.  The Bill’s legal text which is highly complex and potentially far-reaching drew harsh criticism from multiple sources. It has been met with particular disdain by the EU which sees the Bill as a breach of international law and the Commission is set to respond in the near future. At a top-level, the Bill seeks to do three things;

  1. Disapplies large parts of the Protocol: relating to most provisions that apply EU rules on the movement of goods into NI.
  2. UK’s Protocol alternative: is outlined and the UK Government provides some guidance on how it would be implemented.
  3. European Court of Justice oversight: the Bill would remove the Court’s direct jurisdiction and the role for EU institutions

In essence, the Bill is effectively rewriting the Protocol, in a unilateral manner, outside of the structures agreed by the UK Government and the EU.  Whilst the political fall-out will continue to generate intense debate, it is the accompanying policy paper which provides practical insights on how the Bill would work and the implications for agri-food. The key points are;

  • Establish new ‘green channel’ arrangements for goods staying in the UK: it is claimed that this would fix the burdens and bureaucracy caused by the application of EU Customs and SPS rules.  This channel would only be available to firms registered as ‘trusted traders’ and this scheme would be overseen by UK Authorities.  Goods moving on to the EU or moved by firms not in the trusted traders’ scheme would use the ‘red lane’ and be subject to the full range of regulatory checks.  This would significantly reduce the sometimes complex certification requirements for agri-food produce.  Here, the UK proposals are not that far from the EU proposals published last October which suggested an ‘Express Lane’ for goods moved by trusted traders which would be consumed in Northern Ireland. 
  • Establish a new ‘dual regulatory’ model: this is intended to provide flexibility for NI firms to choose between UK or EU rules on product standards.  It is intended to remove barriers to trade within the UK internal market and the UK Government claims that it will encompass robust commitments to protect the EU Single Market.  For agri-food, goods could only move from GB to NI under the trusted trader scheme (otherwise they would be in the red lane and subject to checks).  There would be robust penalties for violations.  The EU strongly objects to this proposal on the grounds that it undermines the integrity of its Single Market.  There are also challenges around the bureaucratic complexities involved with dealing with two regulatory systems. Major NI agri-food businesses are also against these proposals as it would scare-off overseas customers from purchasing NI produce as they would be unsure on which standards the products are adhering to and would be deemed too complex and risky.
  • State Aid and VAT: the UK Government states that the Protocol restricts the UK from providing the same tax and spend policies in NI as the rest of the UK—with little room for flexibility.  This aspect of the Protocol was insisted upon by the EU so that there was a level playing field between NI and the EU Single Market and that NI firms, or GB firms with operations in NI, did not gain an unfair advantage.  The new Bill gives the UK freedom to disapply these rules so that NI can have the same tax rules as other parts of the UK.  Again, the EU strongly objects to these proposals.
  • Role of European Court of Justice (CJEU): would be removed in dispute settlement and would provide the means for UK Authorities and Courts to set out the arrangements which apply in Northern Ireland.  This is also highly controversial from an EU perspective as it would not have agreed the Trade and Cooperation Agreement (TCA) with the UK if the CJEU did not have ultimate oversight over the NI  Protocol.

Whilst the full EU response is awaited, it has confirmed on 15th June it is restarting the legal proceedings it had initiated last year against the UK Government for its unilateral extension of grace periods for checks on products such as sausages and mince.  These had been suspended for almost a year to facilitate negotiations on addressing the Protocol issues.  The EU response is also likely to state that it reserves the right to enact much more stringent measures if this NI Protocol Bill becomes law in the UK.  This would include suspending key aspects of the TCA or introducing some tariffs on UK exports to the EU.  That said, the EU will also be keen to get the UK back to the negotiating table and the Commission has set-out further proposals on how it thinks the outstanding issues on the NI Protocol should be dealt with.

From an agri-food perspective, it is important to note that the House of Lords will vote against this Bill, thus delaying its enactment for at least a year.  This gives time for further negotiations to take place.  However, additional negotiating time has been wasted in the past.  Breaching International Law (which legal experts almost entirely agree would happen if this Bill were to be enacted)) is not the way to build trust.  What is needed now is quiet and determined diplomacy to reach a deal that all parties can live with.

NI agri-food businesses are adamant that the Protocol delivers major benefits in enabling NI to access the EU Single Market whilst having unfettered access to GB.  As we have mentioned previously, a UK-EU veterinary agreement would help greatly to reduce the burden of checks, not just GB to NI but also GB to the EU.  On this, the EU needs to be more flexible.  The UK will not opt for a Swiss-style veterinary agreement as that would mean following EU rules for the whole of the UK.  A bespoke veterinary agreement should be a key part of the framework to resolve the remaining Protocol issues.

Northern Ireland Protocol Wrangling

On 17 May, the Foreign Secretary, Liz Truss, made a statement in the House of Commons on the Government’s intention to introduce legislation to make changes to the Northern Ireland (NI) Protocol.  During her statement, the Foreign Secretary stated that her preference remains a negotiated solution with the EU.  To this end, she invited European Commission Vice-President Maroš Šefčovič to a meeting of the Withdrawal Agreement Joint Committee.  However, she also said that various aspects of the Protocol are not working.  She stated that the new Bill would address these issues whilst claiming it would also uphold the provisions of the Good Friday Agreement and be consistent with international law – points that the EU, in particular, disagrees with.

The new Bill, due to come before Parliament in the coming weeks would focus on addressing issues around;

  • The movement of goods: particularly relevant to agri-food, where the Protocol is not yet fully functional in some areas as a result of the grace periods already put in place by the UK Government for products such as sausages and mince
  • Goods regulation: also of relevance to agri-food, and concerns NI having to follow EU rules for goods which has precedence in NI over rules that the UK might introduce in the future (which could diverge from the EU)
  • VAT: NI remains within the EU’s regulatory orbit for VAT on goods
  • Subsidy control: the EU’s State Aid rules are applicable to NI and, in some instances, British based companies that do business in NI.
  • Governance: this links with the oversight that the European Court of Justice has over the NI Protocol.

The Foreign Secretary stated that the Bill would include a Trusted Trader scheme, effectively a ‘green channel’ for goods imported from GB and staying in Northern Ireland.  It would also encompass the provision of real-time data to the EU with the intent of giving them confidence that goods intended for NI do not enter the EU Single Market, via the Republic of Ireland.

A dual regulatory regime is also suggested so that NI could follow UK rules for goods that would stay in Northern Ireland.  Effectively, businesses would choose between producing goods to UK or to EU standards in Northern Ireland.  Liz Truss also stated that robust penalties would be imposed for those seeking to abuse the proposed new system and promised further detail in the coming weeks.

Unilaterally disapplying key parts of the NI Protocol via UK legislation has the potential to place the whole post-Brexit trading arrangements between the UK and the EU in jeopardy.  Whilst the EU has been somewhat muted in its response, Maroš Šefčovič clearly stated that the EU would respond ‘with all measures at its disposal’ should the UK follow through and enact legislation to override the NI Protocol.  However, we remain several steps away from retaliatory action being taken.

If a Bill is brought before Parliament in the coming weeks, it needs to go through Parliamentary approval process.  Most believe that the House of Lords would almost certainly vote against the Bill.  This would mean a delay by one year to the Bill’s enactment.  Some suggest that 20th June 2023 to be a potential key date, if the Bill gets to the final House of Lords vote by 20th June this year.

This gives some time for the UK and the EU to reach a negotiated solution. For agri-food businesses, it is unlikely that much will change in the interim.

There is a delicate balancing act required between the UK seeking to rewrite large chunks of the Protocol on the one hand and the EU Commission not having the mandate from EU Member States to renegotiate the Protocol on the other.  That said, there is the scope for all parties to improve the Protocol and this must be the focus.

As we have stated in the past, a veterinary agreement between the UK and the EU would go a long way towards addressing the most problematic Protocol issues around the movement of agri-food goods between Britain and NI.  This could be along the lines of the veterinary agreements that New Zealand has with the UK and the EU.  This would still give the UK the ability to negotiate free trade deals with third countries.  It would mean that some checks would remain, but at greatly reduced levels (e.g., 1% physical checks versus the default 15% for red meat).  The DUP NI Agriculture Minister, Edwin Poots, has suggested a similar concept in the past. 

It is most likely that a way will, eventually, be found to muddle through the current issues as this is what has occurred with the Brexit process to date.  We are probably into the territory of having Protocol 2.0, 3.0 etc. in the coming years.  This will most likely align, to some degree, with the vote that the NI Assembly will have on the Protocol every 4 years.  In some ways, this would be akin to new versions of MS Windows that Microsoft brings to the market periodically – each new version is fundamentally the same operating system (Protocol) but with scope for improvements, even if certain aspects remain imperfect to some. 

Further detail on the Foreign Secretary’s Statement to the House of Commons is available via: https://www.gov.uk/government/speeches/northern-ireland-protocol-foreign-secretarys-statement-17-may-2022

UK/New Zealand Trade Deal Signed

On 28th February, the UK and New Zealand signed the UK-New Zealand Free Trade Agreement (FTA), formalising the agreement-in-principle which was announced in October 2021 (see https://abcbooks.co.uk/uk-new-zealand-trade-deal/).  The FTA is similar in nature to the UK-Australia FTA announced in December.  The deal is seen by the UK Government as another important step towards joining the Comprehensive and Progressive agreement for Trans-Pacific Partnership (CPTPP).  The agreement will now be laid before Parliament for scrutiny.

The key points are;

  • Tariffs: upon entry into force, 100% of tariffs on UK goods exports to NZ will be removed whilst tariffs on 99.5% of goods imports into the UK from NZ will immediately be removed.
  • Tariff Rate Quotas (TRQs): will remain for the most sensitive product being imported into the UK including:
    • Beef: access would be limited by tariff rate quota (TRQ) in the first 10 years. This would commence with access to a duty-free transitional quota of 12,000 tonnes in year 1, rising in equal instalments to 38,820 tonnes in year 10.  Any beef imports above the annual TRQ allowance would be subject to the UK Global Tariff (UKGT).  In the subsequent 5 years (year 11-15 after entry into force) a product-specific safeguard will be applied on any beef imports exceeding a further volume threshold rising in equal instalments from just over 40,000 tonnes in year 11 to 60,000 tonnes in year 15. All TRQ allowances are on a product weight basis. All tariffs would be eliminated from year 16 onwards. 
    • Lamb: access would operate in a similar manner to beef, although tariff-free TRQ access would be managed in a series of step-changes as opposed to annual incremental increases and the allowances are calculated on a carcase-weight basis which is somewhat more limited than a product weight basis.  In years 1-5, an additional 35,000 tonnes per year could be imported tariff-free.  This, of course, is in addition to the 114,000 tonnes of the WTO TRQ that New Zealand has historically had available.  During years 5-15, the tariff-free access will increase to 50,000 tonnes per annum followed by unlimited access in year 16.  Importantly, trade via the FTA TRQ can only commence once utilisation of the WTO TRQ has reached 90%.  Any imports exceeding the FTA TRQ will be subject to the UKGT tariff rate. 
    • Dairy: similar structures will also operate for dairy products with unlimited access being phased in over 5 years.
      • Butter: initial duty-free TRQ of 7,000 tonnes rising to 15,000 tonnes in year 5.
      • Cheese: there will be an initial duty-free TRQ of 24,000 tonnes in year 1, increasing incrementally to 48,000 tonnes in year 5.
    • Fresh Apples: given the seasonal nature of production in both countries, tariffs on imports into the UK from 1st January to 31st July would be eliminated as soon as the deal comes into force.  Imports during August to December will be liberalised over 3 years.  During this time, there will be a tariff-free TRQ of 20,000 tonnes per year.  All fresh apple imports from NZ would then be tariff-free and quota-free from year 4 onwards. 

Sources: UK Government and Andersons

  • Customs Procedures: the deal is ambitious with respect to minimising customs procedures and the promotion of e-certification.
  • Rules of Origin (RoO): are set to remain standard for agri-food – i.e. a threshold of 15% of products traded can be non-originating from the country of origin (i.e. UK or NZ) in order to gain tariff-free access.  The RoO for automotive vehicles (25% originating materials as opposed to the standard 55% threshold) will become much more liberalised.  This is seen as a big gain for the UK, given the extent of its integration with EU supply-chains. 
  • Sanitary and Phytosanitary (SPS) Measures: the The FTA seeks to minimise barriers in the area.  Both countries are to recognise equivalence where both countries have similar standards and the deal will function in parallel with the existing UK-NZ Sanitary (Veterinary) agreement.  The UK Government is also keen to emphasise that the deal “does not create any new permissions or authorisations for imports from New Zealand and does not compromise on our high environmental protection, animal welfare, plant health, and food standards.”
  • Animal Welfare: has a dedicated chapter in the agreement which includes non-regression and non-derogation clauses which the Government intends that neither country will lower its animal welfare requirements in a manner which impacts trade. There is also an ambition to work together internationally to encourage greater animal welfare standards and research cooperation on animal welfare issues. 

Overall, the main thrust of the UK-NZ FTA is very similar to the previous agreement-in-principle and is quite similar to the FTA that the UK has agreed with Australia.  As such, it creates another precedent for future trade deals.  It is clear that the UK has offered enhanced market access for NZ agri-food suppliers in return for greater access to the NZ automotive and services sectors.  The cumulative impact of these trade deals is also important.  Whilst there is a 15-year transition period for beef, by year 14, the combined Australian and NZ TRQs (~214Kt) access will have surpassed recent years’ annual imports from Ireland (204Kt).  That said, just because TRQ access is available, it does not mean that it will be fulfilled as Asia-Pacific will remain very important to Antipodean suppliers. 

Finally, in the case of NZ, it must be acknowledged that whilst there are some differences in its standards versus the UK, its standards are very closely aligned.  Something that the EU also acknowledges in its veterinary agreement with NZ.  Therefore, whilst the competitive pressure will increase, the playing field is quite level in this instance.  What UK farming needs needs to do is to focus much more on improving its market orientation (i.e. focus on satisfying consumer needs profitably and sustainably) and to improve its value proposition and marketing generally, both at home and abroad.  That is its best chance to successfully competing with the likes of NZ in the long-term.

More information on the UK-NZ FTA is available via: https://www.gov.uk/government/collections/uk-new-zealand-free-trade-agreement

Trade Update

In comparison with previous years, the negotiations relating to Brexit went relatively quiet over the Christmas period.  With the Foreign Secretary, Liz Truss, assuming the responsibilities of Chief Brexit negotiator, it is hoped that a breakthrough can be achieved on the remaining issues, particularly the Northern Ireland Protocol.  There have been lengthy lorry queues on the approach to Dover this month – a reminder, if one was needed, that Brexit is not yet done and we’re into the era of ongoing Brexit.

NI Protocol

In mid-January, Liz Truss met her EU counterpart Commission Vice-President Maroš Šefčovič at Chevening House (Kent) in what was described as a cordial atmosphere.  Whilst the tone between both parties has improved, significant issues relating to the NI Protocol remain.  Some of these such as the European Court of Justice (ECJ) oversight and the extent of the removal of regulatory checks on goods from GB destined for NI are well-known.  The EU was surprised by the extent to which the Foreign Secretary pushed for the removal of the approval system for State Aid under the Protocol (i.e. Government subsidies to companies with operations in NI that trade with the EU).  Whilst the EU are open to looking at ways of speeding up the notification and approval system for State Aid to NI-based companies, they are unlikely to agree to its removal.

Similarly, for regulatory checks, its (limited) proposals in October (see previous article) showed that the EU is willing to offer some flexibility on the extent of checks and it claimed that Sanitary and Phytosanitary (SPS) checks on meat and dairy could be reduced by half whilst customs checks could be reduced by 80%.  However, the EU will not countenance their removal as they are seen as vital to protecting the Single Market.

Both parties have agreed to intensify talks from late January with the ambition of concluding talks by the end of February to resolve the remaining issues.  With the NI Assembly elections taking place in May, both sides would be keen to have the lingering issues resolved by then.  Much will depend on the extent to which Liz Truss will be prepared to compromise to do a deal.    Ultimately, both sides will need to show some more flexibility if there is to be an agreement.

Dover Queues

On 21st January, there were 17-mile tailbacks on approach to Dover.  In normal circumstances, there is usually a rebuilding of trade volumes following the Christmas period and it would appear that this coupled with the impact of absences due to Covid and Brexit-related checks (which have been imposed on UK to EU trade since January 2021) have caused the delays.  The situation has improved somewhat since, although there is concern that with the introduction of biometric checks for entry into the EU from September will lead to more substantial delays.  Of course, significant delays at borders between countries is not uncommon.  Similar issues arise at the US-Canada border, despite there being a free-trade agreement between both countries.

That said, the UK-EU situation could be improved significantly if the Trade and Cooperation Agreement (TCA) was enhanced further.  From an agricultural perspective, a veterinary agreement between both parties would be helpful, even if it is more akin to a NZ-style agreement which only cuts the volume of checks at the border, but does not remove the need for health certificates.  It is also evident that some form of agreement on mobility provisions is required to make work activities in the EU less onerous and to pre-empt issues caused by the introduction of biometric checks.  Improvements to the rules of origin provisions of the TCA to help to make it easier for goods with inputs from multiple sources to qualify for tariff-free trade would also help.

Overall, recurring queues at Dover will be an ongoing feature of UK-EU trade.  These can be mitigated to a large extent by a more pragmatic approach from both the UK and EU authorities but it may take some time before the political will is there to make such accommodations.

Chief Brexit Negotiator Resigns

On 18th December, Lord Frost, the UK Government’s Chief Brexit Negotiator, and co-architect of both the Trade and Cooperation Agreement (TCA) with the EU and the Northern Ireland (NI) Protocol, resigned with immediate effect.  In his resignation letter, he cited issues with the Government’s direction of travel on Covid policy and higher taxation as key reasons for his departure. However, many suspect that frustrations with how negotiations with the EU are progressing on the NI Protocol were also influential.  In recent weeks, some progress had been reported on medicines and the UK’s stance on the European Court of Justice had softened but negotiations will continue into 2022 with agri-food, particularly Sanitary and Phytosanitary (SPS) regulation continuing to be a key stumbling block.

Whilst some see Lord Frost’s resignation as a blow to the Prime Minister, others believe that the possibility of a deal on the NI Protocol in early 2022 has increased.  Particularly with the Foreign Secretary, Liz Truss, now taking on the responsibility of overseeing negotiations with the EU.  Ms Truss is popular with Conservative party grassroots and is viewed as more of a pragmatist than Lord Frost.  Her experience as Defra Secretary (2014-2016) and International Trade Secretary (2019-2021) should also be helpful in addressing remaining SPS and customs issues.  She will be deputised by Chris Heaton-Harris MP who has become Minister of State for Europe who will support the Foreign Secretary on EU Exit and NI Protocol issues.

UK Border Operating Model and Ireland

On 15th December, the Government announced that there will be delays to the implementation of the UK Border Operating Model as regards imports from the island of Ireland.  This is due to ongoing negotiations around the Northern Ireland Protocol which will continue into 2022 and associated legal complexities around maintaining unfettered access for NI traders to the GB market.  This means that exporters from the Republic of Ireland – an EU Member State – will continue to be able to export to Britain as they do now.  Meanwhile, exporters from other EU countries will have to complete a range of additional Customs and Sanitary & Phytosanitary (SPS) documentation (e.g. full import declarations) from 1st January.  The UK Border Operating Model will be updated accordingly shortly.

The Chief Brexit Negotiator, Lord Frost, claimed that the move was partly made as a “pragmatic act of good will” but that the continuation of such arrangements would be predicated by the quid-pro-quo that the EU shows in terms of allowing goods to circulate freely within the UK (including Northern Ireland, which although part of the UK, applies the EU Customs Code and other regulatory requirements).

UK / New Zealand Trade Deal

The UK and New Zealand have announced an agreement in principle on a Free Trade Deal (FTA).  The deal, announced on the 20th October, is similar in nature to the UK-Australia trade deal announced back in June.  Like the Australian FTA, the UK-NZ FTA agreement-in-principle is subject to further negotiations on the legal text.  Whilst there is an eventual aspiration to fully liberalise agri-food trade, there are adjustment periods for several agri-food products which the UK deems to be sensitive.  These include;

  • Beef: access would be limited by tariff rate quota (TRQ) in the first 10 years. This would commence with access to a duty-free transitional quota of 12,000 tonnes in year 1, rising in equal instalments to 38,820 tonnes in year 10.  Any beef imports above the annual TRQ allowance would be subject to the UK Global Tariff (UKGT).  In the subsequent 5 years (year 11-15 after entry into force) a product-specific safeguard will be applied on any beef imports exceeding a further volume threshold rising in equal instalments to 60,000 tonnes.  All tariffs would be eliminated from year 16 onwards. 
  • Lamb: access would operate in a similar manner to beef although tariff-free TRQ access would be managed in a series of step-changes as opposed to annual incremental increases.  In years 1-5, an additional 35,000 tonnes per year could be imported tariff-free.  This, of course, is in addition to the 114,000 tonnes of the WTO TRQ that New Zealand has historically had available.  During years 5-15, the tariff-free access will increase to 50,000 tonnes per annum followed by unlimited access in year 16.  Importantly, trade via the FTA TRQ can only commence once utilisation of the WTO TRQ has reached 90%.  Any imports exceeding the FTA TRQ will be subject to the UKGT tariff rate. 
  • Dairy: similar structures will also operate for dairy products with unlimited access being phased in over 5 years.
    • Butter: initial duty-free TRQ of 7,000 tonnes rising to 15,000 tonnes in year 5.
    • Cheese: there will be an initial duty-free TRQ of 24,000 tonnes in year 1, increasing incrementally to 48,000 tonnes in year 5.
  • Fresh Apples: given the seasonal nature of production in both countries, tariffs on imports into the UK from 1st January to 31st July would be eliminated as soon as the deal comes into force.  Imports during August to December will be liberalised over 3 years.  During this time, there will be a tariff-free TRQ of 20,000 tonnes per year.  All fresh apple imports from NZ would then be tariff-free and quota-free from year 4 onwards. 

Elsewhere, the deal is ambitious with respect to trade facilitation and the minimising of customs procedures in particular.  There are ambitions to promote e-certification where possible.  Whilst Rules of Origin (RoO) for agri-food remain quite standard (i.e. a threshold of 15% of products traded can be non-originating from the country of origin (i.e. UK or NZ) in order to gain tariff-free access, the RoO for automotive vehicles (25% originating materials as opposed to the standard 55% threshold) will become much more liberalised.  This is seen as a big gain for the UK, given the extent of its integration with EU supply-chains.  The agreement also seeks to reduce barriers in the Sanitary and Phytosanitary (SPS) area.  Both countries are to recognise equivalence where both countries have similar standards. 

Overall, it is evident that the market access offered to NZ suppliers is significant and that agri-food has been used by UK negotiators as a means to open up access in other areas (e.g. automotive and services).  It can also be seen that the Australian FTA announced has become an important precedent for future trade deals.  Taking both the NZ and Australian trade deals together, significant competitive pressure will be exerted on domestic British producers and traditional suppliers from the EU, particularly Ireland.  Looking at beef for example, in year 1 both countries could theoretically export 47,000 tonnes of beef to the UK, rising to 148,820 tonnes in year 10.  By year 15, their tariff-free access will have reached 230,000 tonnes, significantly surpassing recent year’s imports from Ireland into GB (just over 200,0000 tonnes).

That said, it must be acknowledged that both Australia and NZ are heavily focused on the Asia-Pacific market in recent years and imports of NZ lamb have been nowhere near their TRQ allowances of late.  Things could of course change in the future, particularly given the geopolitical tensions between Australia and China.  The UK will be seen by Antipodean suppliers as a high value and dependable market.  British agriculture needs to prepare for this increased competitive pressure which is likely to become more pronounced as future trade deals (e.g. an updated FTA with Canada) are agreed.  More information on the UK-NZ FTA is available via: https://www.gov.uk/government/publications/uk-new-zealand-free-trade-agreement-negotiations-agreement-in-principle/uk-new-zealand-fta-negotiations-agreement-in-principle

NI Protocol Proposals

Proposals to simplify the operation of the Northern Ireland Protocol would see checks on consumer goods arriving from Great Britain drop by an estimated 80% as well as a greater role for NI institutions in the operation of the Protocol.

The plans come from the European Commission and aim to address the difficulties that Northern Ireland has been experiencing as a result of the NI Protocol.  This is the arrangement put in place via the UK-EU Withdrawal Agreement to avert a hard border on the island of Ireland.  However, by keeping NI in the Single Market for goods it meant the introduction of customs and regulatory checks on products entering NI from GB.  This has angered Unionists who see a threat to the integrity of the UK and has also caused practical problems in the supply of goods – especially foodstuffs.

The Commission has published four ‘non-papers’ suggesting further flexibilities on key areas, as outlined below. These proposals are applicable to GB-NI trade only and don’t affect the significant trade friction on GB-EU trade. For agri-food, the proposals on SPS are the most important.

  • Food, Animal and Plant Health (Sanitary and Phytosanitary (SPS) regulations): proposes the following;
    1. ‘Simplified access’ (simplified certification and reduction of physical checks) for GB-NI movements of a significant range of retail goods (destined solely for sale to end consumers in NI retail shops).
      • Simplified certification: means that if a truck load of agri-food goods destined for an NI retail distribution centre contained 100 products subject to SPS regulations (but are not prohibited/restricted), just one simplified official certificate would be required stating that the goods meet EU standards, as opposed to the default of 100 health certificates. 
      • Reduced checks: documentary checks would remain compulsory and would be carried out remotely (electronically).  Identity and physical checks would need to be performed at Border Control Posts but could be reduced substantially with a focus on risk-based management principles.  The Commission claims that regulatory checks could reduce by approximately 80% although it is unclear how such an estimate was reached. 
      • Exemptions for ‘identity products’: such as Cumberland sausages and other chilled meats brought in from GB for final consumption in NI, provided such products remain aligned with the EU’s standards.
    2. Conditions for simplified access include;
      • Labelling: products packed for consumers need to be labelled accordingly and should be only permitted for sale in the UK.
      • Goods sold to other operators (e.g. farmers or food processors) would be excluded from these arrangements.
      • Origin: simplified access would only be applicable to goods originating in the UK as defined by the UK-EU Trade and Cooperation Agreement (TCA).
      • Monitoring: these facilitations would only be available to “authorised traders” and the EU would need to have access to NI databases for verification purposes and to monitor trade flows.
    3. Safeguards include a review clause as well as the following mechanisms;
      • Compliance verification mechanism: via audits and on-site inspections of traders by the EU Commission and Union representatives in NI.
      • Unilateral measures by the EU: to suspend or revoke facilitations in the case of the UK failing to react to or to remedy an identified problem.
      • Rapid reaction mechanism: to identified problems in relation to individual products or traders.
  • Customs: the EU proposals are aimed at dramatically reducing customs formalities and costs for goods deemed “not at risk of being subsequently moved into the (European) Union”.  These are essentially goods for final consumption in Northern Ireland, effectively creating an “express lane” upon arrival in NI for such goods.  Whilst further detail will be required on how these reduced formalities would operate in practice, the EU is again seeking access to ‘real-time’ data to ensure that the Single Market is protected. 
  • Medicines: focuses on ensuring undisrupted medical supplies from GB to NI for the benefit of patients in NI.  Whilst of limited relevance to agriculture, the EU is ready to continue discussions with the UK to help to ensure continuity of veterinary medicines supply to in Northern Ireland. 
  • Engagement with NI Stakeholders: sets out proposals for how NI stakeholders, including business groups and Assembly members, can play a more active role in how the Protocol is implemented to ensure greater transparency.  This would be done via the Joint Committee and Specialised Committee overseeing the Protocol’s implementation (e.g. on SPS rules) as well as via the EU-UK Parliamentary Partnership Assembly.  

Taken together, the Commission believes that these proposals represent a different model for implementing the NI Protocol, facilitating the highest degree of frictionless trade between Great Britain and Northern Ireland, whilst continuing to protect the Single Market.   The proposals do not propose any amendments to the role of the European Court of Justice (ECJ) which the EU sees as fundamental to the functioning of the Single Market and Northern Ireland’s unique position.  The UK Government is likely to take issue with this, as it sees the ECJ’s continued involvement in UK matters as a ‘red-line’.  However, one does have to question how important the ECJ’s role is in practical terms for most businesses and consumers?  In any case, there might be scope for an arrangement similar to the EU-Switzerland relationship where the ECJ has a more ‘arms length’ oversight of Swiss law. 

The EU Commission’s proposals represent a significant shift in position and whilst more detail is needed on the specifics, they provide a firm basis for substantive negotiations to address the key Protocol difficulties.  Attention now shifts towards how the UK Government will respond.  Initial indications are positive.  Further turbulence is expected in the coming weeks as both sides negotiate.  If implemented with careful consideration of both communities, the Protocol has the potential to offer Northern Ireland ‘the best of both worlds’ in terms of being an integral part of the UK and enjoying frictionless access to the EU Single Market for goods.  It could, therefore, be a major driver of economic growth across NI and within the agri-food sector in particular. 

Further detail on the EU Commission’s proposals is accessible via; https://ec.europa.eu/info/strategy/relations-non-eu-countries/relations-united-kingdom/eu-uk-withdrawal-agreement/protocol-ireland-and-northern-ireland_en#october-2021-package

UK Border Operating Model: Delayed Again

The UK Government has, once again, delayed the implementation of border controls on agri-food imports from the EU.  The postponement is blamed on the combined effects of the Covid-19 pandemic and food supply-chain issues, but it is equally a result of the Hard Brexit the Government negotiated.  This move was becoming increasingly inevitable in recent weeks as it is clear that the infrastructure required to deliver effective border controls for imports from the EU was not ready and businesses were becoming increasingly concerned about the lack of preparation time.  The key aspects of the revised timetable are;

  • Pre-notification of Sanitary and Phytosanitary (SPS) goods: requirements which were due to be introduced on 1st October 2021, will now be introduced on 1st January 2022.
  • Export Health Certificates: these requirements, which were due to be introduced on 1st October 2021, will now be introduced on 1st July 2022.
  • Phytosanitary Certificates and physical checks on SPS goods at Border Control Posts: were due to be introduced on 1st January 2022, but will now be introduced on 1st July 2022.
  • Safety and Security declarations on imports: will now be required as of 1st July 2022 as opposed to 1st January 2022.
  • Full customs declarations and controls: will be introduced on 1st January 2022 as previously announced.

Remember that this only applies to imports from the EU – exports from the UK to Europe have been subject to the full range of EU checks since the start of this year.  More checks and bureaucracy on imports would raise costs and could reduce the competitiveness of EU goods on our market.  For this reason the delays outlined above might not be welcomed by the farming sector.  Particularly as the rules are currently ‘lopsided’ with imports exempt from many checks, but our exports being fully subject to EU rules.    

The delay will be seen as a welcome move by most businesses in the wider food chain.  But the UK Border Operating Model has already been delayed before and there is still a lot of work to be done before the revised timetable can be achieved.  Of course, a comprehensive veterinary agreement with the EU would help greatly on multiple levels.  For example, it would reduce the requirements for physical checks quite considerably (for instance, the New Zealand veterinary agreement with the EU reduces physical checks for red meat from the default of 15% down to 1%).

A veterinary agreement would also help to make the implementation of the NI Protocol more sustainable, as it is the levels of regulatory checks at NI ports which are seen by some communities as being the most invasive.  Reducing these towards the levels currently in place for live animals (which were subject to physical checks even before Brexit) would help the implementation of the Protocol.  Coincidentally, the delays to the UK Border Operating Model will also mean delays to the announcement of rules covering NI-GB ‘qualifying goods’ (i.e. NI-produced goods which would qualify for unfettered access to the GB market). 

Thirdly, it would also help UK-GB exports to the EU.  In addition to the revenue lost on trade with the EU, this has also had a significant indirect impact on the food supply-chain shortages that the UK is currently witnessing.  Previously, haulage companies carrying imports into the UK would use ‘backloads’ of goods being exported from the UK to the EU to contribute to the overall cost of travelling to and from the UK.  With such shipments being significantly reduced, in addition to the pandemic impacts which have made drivers more reluctant to travel to the UK, the HGV driver shortage has been exacerbated. 

There were calls for a 2-3 year ‘Implementation Period’ after the UK formally left the EU; the latest delays to the UK Government’s Border Operating Model are creating this by default.  Whilst the latest move from the UK Government will help somewhat to address the current supply-chain situation, this additional time needs to be used wisely.  In its press release announcing the new timetable (see link below), the Government calls its approach ‘pragmatic’.  If it seeks to be truly pragmatic then implementing a veterinary agreement with the EU combined with addressing the agri-food industry’s labour issues would go some way to addressing the problems generated by Brexit.   

Further information on the UK Government announcement is accessible via: https://www.gov.uk/government/news/government-sets-out-pragmatic-new-timetable-for-introducing-border-controls

UK – Australia Trade Deal

The UK and Australia have agreed the outline terms of an historic free-trade agreement – the first all-new deal signed by the UK since it left the EU.  As such, it is seen by many as an important precedent for future trade deals, particularly concerning agriculture.  Whilst the deal has been announced, it is an agreement in principle and subject to further negotiations on the legal text. There is an eventual aspiration to fully liberalise Australian goods entering the UK market.  However, there are lengthy adjustment periods for several agricultural products in an attempt to take account of UK sensitivities.  These include;

  • Beef: access would be limited by tariff rate quota (TRQ) in the first 10 years.  This would commence with access to a duty-free transitional quota of 35,000 tonnes in year 1, rising in equal instalments to 110,000 tonnes in year 10.  Any beef imports above the annual TRQ allowance would be subject to the UK Global Tariff (UKGT).  In the subsequent 5 years (year 11-15 after entry into force) a product-specific safeguard will be applied on any beef imports exceeding a further volume threshold rising in equal instalments to 170,000 tonnes, levying a safeguard duty of 20% for the rest of the calendar year, thus replacing the UKGT rate which will be eliminated after year 10.  All tariffs would be eliminated from year 16 onwards.
  • Lamb: access would operate in a similar manner to beef with an initial duty-free TRQ allowance of 25,000 tonnes in year 1, rising in equal increments to 75,000 tonnes in year 10, with imports above this volume being subject to the UKGT.  Again, a safeguard mechanism will apply from years 11 to 15, permitting up to 125,000 tonnes to lamb to access the UK market duty-free with a 20% tariff applying thereafter for the remainder of the calendar year.  Again, all tariffs would be removed from year 16.
  • Sugar: is set to have a shorter transitional period with duty-free access in year 1 of 80,000 tonnes rising in increments to 220,000 tonnes by the end of year 8.  Again, unlimited duty-free access is planned from year 9.
  • Dairy: similar structures will also operate for dairy products with unlimited access being phased in over 5 years.
    • Cheese: there will be an initial duty-free TRQ of 24,000 tonnes in year 1, increasing incrementally to 48,000 tonnes in year 5.
    • Butter: initial duty-free TRQ of 5,500 tonnes rising to 11,500 tonnes in year 5.
    • Other dairy: a duty-free transitional TRQ of 20,000 tonnes will apply.
  • Rice: interestingly, there will be a permanent TRQ of 1,000 tonnes for long-grained milled rice. How the rice sector has managed to achieve this whilst other food sectors have failed is a bit of a mystery!

Based on the above summary, it would appear that the UK grazing livestock and sugar sectors in particular will be exposed to increased competition from Australia in the long-term and additional competitive pressure is likely to emerge when the likes of New Zealand others strike trade deals with the UK.  Of course, having generous quota access with eventual full liberalisation does not necessarily mean that Australian imports will reach these levels, particularly as there is plenty of demand in Asia-Pacific.  That said, beef imports from the Republic of Ireland are in the region of 200,000 tonnes per annum.  Viewed in that context, the access offered to Australia is sizeable and of concern to British farming, particularly as it is the first of several trade deals.

For more detail visit: https://www.gov.uk/government/publications/uk-australia-free-trade-agreement-negotiations-agreement-in-principle/uk-australia-fta-negotiations-agreement-in-principle