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30 October 2020

78: Brexit – Tunnel negotiations – going underground?

Brexit negotiations continue, with both sides seeking to keep outside commentary to a minimum – a sign that the talks have effectively entered a so-called ‘tunnel’ phase. Meanwhile, while the government’s preparations for Brexit continue apace, it remains unclear whether it, or the UK’s businesses, will be ready.

Negotiations – in a rut?

Charles Michel, the European Council president, has said that Brexit negotiations have hit their most difficult stage, with Brussels still unsure whether a deal with Boris Johnson is possible. The outstanding issues in the trade and security talks remain the level of access to British waters provided to foreign fishing fleets, fair competition rules for business, including rules on domestic subsidies (ie state aid), and mechanisms in the final treaty for resolving future disputes. EU officials previously downplayed hopes that the parties were closing in on solutions to the most contentious issues.

The two sides are locked in intensive negotiations in London, with both sides targeting mid-November – now that a number of earlier deadlines and ultimatums have passed – to get the trade deal agreed and blessed by EU leaders at a summit. But no-one knows if there’s going to be a deal. Even Michel Barnier, the EU’s chief negotiator, said this week:

‘You know what are the most difficult topics, and we are working to try to find solutions on the most difficult topics. It’s not possible for me to assess what will happen in the next days or in the next two weeks.’

The extent to which the government compromises in the EU trade talks may, perhaps surprisingly, turn on the outcome of the US Presidential election: if Donald Trump is re-elected, Boris Johnson may be confident of striking a US trade deal quickly; but if Joe Biden wins, the new Democratic administration will prioritise re-enforcing trade links with the EU. Johnson may also feel the tide of populism – which has so shaped politics in recent years – beginning to turn.

Legal action over Internal Market Bill

Meanwhile, the EU has launched legal action against the UK after the UK government failed to remove contentious clauses from the Internal Markets Bill, which would allow the government to overwrite the certain elements of the Withdrawal Agreement’s Northern Ireland Protocol (discussed last time). Ursula von der Leyen, the European Commission president, said the UK had failed to live up to its obligations to act in good faith:

‘We had invited our British friends to remove the problematic parts of their draft internal market bill by the end of September. This draft bill is, by its very nature, a breach of the obligation of good faith laid down in the withdrawal agreement. Moreover, if adopted as is, it will be in full contradiction to the protocol on Ireland and Northern Ireland … The problematic provisions have not been removed. Therefore this morning the commission has decided to send a letter of formal notice to the UK government. This is the first step in an infringement procedure.’

The UK government agreed the Northern Ireland protocol last October, in order to avoid a hard border on the island of Ireland. Under the Bill (now in its House of Lords’ Committee stage), UK ministers would decide whether to notify the Commission of UK government subsidy decisions affecting goods trade in Northern Ireland and whether to waive the need for export summary declarations when sending goods from Northern Ireland to the rest of the UK. The UK government has said it needs the legislation as a safety net should the EU act unreasonably. Action from the Commission may be no more than a show of strength in the negotiations.

The details of the Protocol are being thrashed out in parallel talks chaired by the UK’s Cabinet Office minister, Michael Gove, and the European Commission vice-president Maroš Šefčovič in a joint committee. The government states it is committed to finding a solution that is satisfactory to both sides.

New deals and processes

Notwithstanding the lack of apparent progress on a free trade agreement with the EU, the UK government has managed to conclude a number of new trade deals and agreements with other countries, although many of these appear only to replicate the benefits which the UK already derived as an EU member state under existing EU arrangements:

  • new free trade agreements, notably with Japan (the UK’s fourth largest non-EU export market) and also ‘roll over’ agreements of existing EU arrangements with a number of other countries and blocs;
  • mutual recognition agreements (under which countries agree to recognise each other’s testing, inspection and conformity assessments for products) that replicate the effect of existing EU arrangements with Australia, New Zealand and the United States of America, to take effect from 1 January 2021;
  • new fisheries agreements with Norway and the Faroe Islands, although not about the level of fishing allowed, but instead committing the UK and Norway to hold annual negotiations on access to waters and quotas (which were previously conducted by the European Commission on the UK’s behalf); and
  • the Government Procurement Agreement (GPA) Committee has confirmed the United Kingdom can join the GPA as an independent nation from 1 January 2021 (previously the UK participated through membership of the EU).

The government is also rolling out its new post-Brexit systems and processes, including its replacement for the EU’s protected designation of origin (PDO), protected geographical indication (PGI), and traditional specialities guaranteed (TSG) rules (which, for example, require champagne to actually come from Champagne) to ensure that Cornish clotted cream continues to come – exclusively – from Cornwall.

Significantly, the government has also published a new Border Operating Model (BOM), running to some 138 pages (replacing the first iteration published in July 2020).

The BOM sets out the core model that all importers and exporters will need to follow from January 2021 as well as the additional requirements for specific products such as live animals, plants, products of animal origin and high-risk food not of animal origin. It covers both the UK requirements and Member State requirements, which traders and the border industry will have to comply with. The update provides:

  • details of the new infrastructure requirements including locations;
  • updates in a number of agrifood and environmental policy areas including fish, chemicals, fluorinated greenhouse gases and ozone-depleting substances, high priority plants and plant products – government departments, particularly Defra, have also published pages of guidance on new regulations to apply to everything from eggs to chemicals to plants and plant products;
  • further detail on delayed customs declarations and the requirements of Entry in Declarants Records (EIDR);
  • further details regarding the approach to liabilities for intermediaries;
  • information on what ‘poor compliance history’ means;
  • clarity on guarantees and DDA requirements;
  • bulk import reduced data set details;
  • further clarity on level of checks applying to goods subject to sanitary and phytosanitary controls in July 2021;
  • the ‘Check an HGV is Ready to Cross the Border’ Service (formerly referred to as Smart Freight);
  • refreshed process maps to reflect where greater detail is now available;
  • a number of new annexes including passengers policies, requirements for aviation, rail and energy sectors; and
  • updated annexes regarding Member State requirements.

But concerns remain about how ready many of these new processes are for the end of the Brexit transition period. For example, the Treasury Committee recently took evidence from Lord Agnew, Minister of State at the Cabinet Office and HM Treasury, on the UK’s customs preparedness. The Committee was left with ‘serious concerns’. Mel Stride MP, Chair of the Committee, has since written to the Chancellor to raise these concerns as a matter of urgency, particularly raising concerns about the government’s new border IT services, and the lack of a Northern Ireland Border Operating Model.

Meanwhile, the government’s transition website shows a rather ominous ‘countdown calendar’ and tells us that ‘time is running out’. It encourages us to ‘Make sure you’re ready’ because ‘your business, family, and personal circumstances will be affected’ by Brexit. Perhaps it needs to heed its own warnings.

‘What you see is what you get. You’ve made your bed, you better lie in it.’ (The Jam, Going Underground)

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