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British trade groups call for quick normalisation of UK-EU co-operation

British industry groups want Boris Johnson’s government to take quick steps to “normalise” the trading relationship with the EU after the European Parliament voted to ratify the post-Brexit trade deal, unlocking the door to deeper co-operation.

After a rocky start to the new relationship, including rows over Northern Ireland, the UK said in February it would not formally engage in the management of the EU-UK trade and co-operation agreement (TCA) until it was ratified by Brussels.

However, now that the last political hurdle to ratification has been cleared by MEPs in a vote announced on Wednesday, trade groups from across affected industries are urging the government to use the deal’s web of 20 management committees to address urgently the so-called “teething problems” that have been piling up in the four months since the Brexit trade deal came into force.

Tony Danker, director-general of the CBI, said that while this week’s ratification by the European Parliament was a step forward, it had to be just the beginning of the process. “The next phase is normalising relations between the UK and EU in order to smooth trade and maximise the benefits of the new economic partnership,” he said.

The British Chambers of Commerce said it was vital both sides worked to “alleviate the significant disruption” many firms continued to report, citing its first-quarter survey of 3,000 UK exporters in which more than 40 per cent reported a decrease in export sales.

“The UK and the EU must now get back around the table and continue talks so they can build upon the arrangements set out in the TCA to deliver long-term improvements to the flow of trade between them,” said Hannah Essex, the BCC’s joint executive director.

The Food and Drink Federation whose members have been hit hardest by some of the new rules, with exports to the EU in February down 40 per cent compared to a year earlier, said both sides had to “stop prevaricating” and put the committees to work. 

“The customs co-operation and rules of origin committee needs to be directed to find urgent solutions to ensure the TCA doesn’t shut out small businesses,” said Dominic Goudie, head of international trade at the FDF.

In a report, published early on Thursday, the environment, food and rural affairs select committee of MPs said it was “imperative that the government” takes steps to reduce barriers to trade for UK food exporters.

“It must be pragmatic in seeking an agreement with the EU to reduce the red tape that harms both sides,” said Neil Parish, the Tory MP who chairs the committee.

Among the key issues to address are how to smooth the passage of loads from multiple exporters on a single lorry — so-called “groupage” — and challenges with complex certificates needed for the export of animal products as well as speeding up the digitisation of burdensome paperwork.

‘Very low’ expectations

Despite industry demands, experts and traders warned that progress was likely to be limited by the political difficulties seen in the first four months — culminating with the EU launching a legal action against the UK over its implementation of the Northern Ireland protocol, part of the UK’s 2019 Brexit deal to avoid a hard border on the island of Ireland. 

Shane Brennan, chief executive of the Cold Chain Federation, said while the committees were in theory the “perfect place to take the heat out of the impasse” over technical disputes on issues such as shellfish and meat exports, he warned that the bodies “will only work if the politicians allow them to — and so far the indications on that are not good”.

The 20 committees and working groups that sit beneath a ministerial partnership council cover a broad range of issues from transport to competition, VAT, customs, aviation, technical barriers to trade, and fisheries.

David Henig, co-founder of the UK Trade Forum and a former UK trade negotiator, was also sceptical that significant progress would be made, citing the operation of committees from EU trade agreements with countries like South Korea or Canada, which focused narrowly on whether the agreement was being implemented according to the text.

He added: “My expectations are very low. These are nothing like summits or council meetings, they are very technical discussions.”

Lord David Frost, the UK minister in charge of relations with the EU, confirmed Britain would now engage with the deal’s partnership council and committees. He added in a statement that the UK was “committed to working to find solutions that work for both of us”, but hinted the UK would not be making concessions to the EU to smooth out trade issues.

“We will always aim to act in that positive spirit but we will also always stand up for our interests when we must — as a sovereign country in full control of our own destiny,” he said.

Managing future divergence

On the EU side, policymakers have been focused on implementing the TCA, rather than expanding or improving on its limitations.

 Business Europe, the EU employers’ federation, called on the two sides to urgently put in place the system of committees needed to oversee the deal, saying it would be vital to “smooth” life for companies as they grappled with new restrictions and border checks. 

Luisa Santos, the group’s deputy director-general, told the FT that one of the most important roles for the committees would be to manage the consequences of future divergences in EU and UK rules by giving clarity to companies about their obligations. 

It’s “important as we go forward that even as the UK diverges, that this divergence is kept to a minimum in the sense that it’s not creating an unnecessary administrative burden for businesses,” she said.

Santos said another concern was the complexity for companies of navigating the deal’s “rules of origin”, which determine whether a product is British or European and so eligible for tariff-free trade. 

“It’s not necessarily about seeking changes, it’s about [the committees] helping the process of adapting,” she said.

This article was first published at https://www.ft.com/content/e2440f04-2bfd-4f16-8437-0fb8490988c4

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The Markets Today