16th August 2017
The first paper focuses on future customs arrangements and proposes two potential models to meet the Government’s objective of achieving “the freest and most frictionless trade possible in goods between the UK and the EU”. It is hoped that this will provide a strong basis on which new trade relationships will be made, both with the EU and worldwide. The paper also notes another strategic objective to avoid a “hard border” between Ireland and Northern Ireland.
One option is to introduce a “highly streamlined customs arrangement” between the UK and the EU which would aim to simplify requirements and use technology to enable businesses to comply with customs procedures more easily. This option would require the EU to implement equivalent arrangements at its borders with the UK.
The second option is to remove the need for a UK/EU customs border possibly by mirroring the EU’s requirements for imports from the rest of the world where their final destination is the EU. This would negate the need for the UK and the EU to implement a customs process between them. The UK would remain free to apply its own tariffs and trade policy to UK exports and imports from the other countries destined for the UK market. The paper notes that goods would need to be traceable through the supply chain and that this is an innovative and untested approach.
Both approaches will take significant time to implement should they be agreed. The Government has clearly listened to the concerns of the business community, expressed by many, that the Brexit cliff edge should be avoided, and the paper proposes a time-limited interim period of "close association" with the EU Customs Union during which the arrangements would be substantially the same as now. The Government has stated that it wishes to agree the principle early on in the negotiation process so as to minimise disruption and provide certainty for business. Importantly, the paper mentions that the interim period should not prevent the UK from pursuing new trade relationships with other countries.
The Government’s focus on the UK businesses and its desire to pursue seamless and frictionless trade with a clear transitional phase is welcome, however, the paper has received a somewhat muted response from the EU. The EU's chief Brexit negotiator, Michael Barnier, re-stated the need for the UK and the EU 27 to agree on the rights of citizens, the UK’s “bill” and Ireland before discussing customs arrangements and future relationship. We are, again, reminded that these incredibly complex negotiations will take time and, until deals are struck, UK business will need to deal with, and plan around, the uncertainty.