Customs

Motion to Take Note: Trade and Customs Policy

5th December 2017– Contribution by Lord Waverley 

My Lords, parallel preparations in advance of final Brexit implementation are essential, even though the end product is yet to be determined. As a reluctant but optimistic Brexiteer, I have no difficulty with a paper entitled Preparing for our Future UK Trade Policy. The principle of free trade and the goal of enabling continuity, boosting global trade relationships, supporting developing countries in reducing poverty and a rules-based framework for trade remedies and trade disputes are objectives that allow the UK to hold its head high.

I have spoken on multiple occasions over the months on such matters and will not repeat what is already on public record. The covering note on the cross-border trade Bill, however, presents a Rubik’s cube of complex legal and technical issues within equally complex political constraints. It is that lack of clarity around political constraints that makes the technical analysis a testing exercise, such that businesses have no alternative but to prepare for the contingency scenario of no agreed customs arrangement.

It is hoped that this month will shed light on the probable Brexit end game. While a hard Brexit is still on the cards, given the continuing uncertainty, renewed focus on delivering the ideal scenario of frictionless trade, with an interim implementation period, would appear more sensible. Brexiteers should understand, and accept, that frictionless trade will be perceived by some as though we are still in—but surely this is a small price to pay to ensure overall readiness. I have also come to accept, albeit reluctantly, that addressing detail through secondary legislation is acceptable in the circumstances.

In essence, this is about an orderly withdrawal of the UK from the EU. Questions arise, however. Excise and VAT regimes must function effectively on exit day, so what is the Treasury’s preferred option? Is it a continued waiver from entry and exit summary declarations? Is it to remain a member of the Common Transit Convention, so that goods will not need to complete import and export declarations at each new border crossing? Is it to seek mutual recognition of authorised economic operators and press for bilateral implementation of a technology-based solution for roll-on roll-off ports? Will the Government be supporting the adoption of these simplified procedures, including presentation waivers, the use of the CTC and self-assessment? Or would the Treasury prefer an option of a virtual border, where the UK, in partnership with the EU, operates a regime for imports that will remain in the EU market even if they are part of a supply chain in the UK first?

Leaving the EU without a negotiated agreement will necessitate other EU countries having infrastructure in place for the two-way process of importing and exporting to work effectively. Is there any evidence  that such preparations are under way? To achieve frictionless trade, the Government must ensure that all departments and related agencies operating at the frontier are joined up. The main cross-channel port countries of Belgium, France and the Netherlands will need to alter their systems to accommodate UK imports and exports. Beyond budgetary issues, this will require co-operation and direction from the Commission. Preventing disruption will require both sides to be prepared for changes.

I spent a large part of yesterday evening scouring public-source EU documents. It is a given that, as of the withdrawal date, the United Kingdom will no longer be part of the customs and VAT territory of the Union. However, in one of those documents, in the subsection, “Modes of Transport”, in each of the sections pertaining to “Maritime”, “Air”, “Road and Rail”, “Postal Shipments” and “E-commerce”, the following words appear:

“These changes will be implemented when all the … IT systems will be available”.

Would the Minister care to comment on this prospect? What is being anticipated, by whom, and at what cost over what period? From what I understand from the excellent briefing this morning, the EU is not expected to have its systems ready until 2025—a point made by the noble Lord, Lord Whitty. So even if we were to enjoy a transition period of two years, it would take us to March 2021. What is the process that would be enacted during the period 2021 to 2025?

We are at a critical juncture in the Brexit journey today. The Irish frontier complexities loom over the negotiations. The question of no divergence on regulatory alignment remains the bogey. I have not been to the large logistics centre on the Chinese side of the Kazakh frontier, but it might be that relevant lessons could be learned given the long-haul shipments that eventually reach Europe.

I have previously raised the possibilities and benefits of an integrated digital economy platform in relation to cross-border challenges. Given that 60% of global B2B trade currently runs through the systems of the leading 12 technology companies, signing up 150 of their leading customers would be sufficient to ensure that the digital economic platform captures around 60% of global trade by 2030. I understand that the Global Coalition for Efficient Logistics—GCEL—stands ready to demonstrate the potential of its digital technology in respect of trade between Northern Ireland and the Republic, in order to enable trade to take place between the two in a manner satisfactory to all parties and without the need for a physical border. I am aware that principals will be in the UK Friday and Saturday, and I have little doubt that a meeting of interest to the Minister and her department could be arranged.

Very briefly, and as a concluding thought, I will flag the concerns of SMEs, many of which have never prepared documents for a customs exit or entry clearance—again, a point made by the noble Lord, Lord Whitty. It stands to reason that a lack of experience, staff and resources for dealing with significant changes, procedures and paperwork will become a challenge. Would the Minister consider placing this issue in her in-tray for consideration? What possible training exercise might be readily entered into?

The greater the divergence between EU and UK regulations and product standards, the more customs capacity the UK will need to develop. The Minister should recognise constraints at the physical border and consider moving checks inland. The UK currently has access to more than 20 EU systems used to track the movement of goods and vehicles. Although an FTA could grant the UK permission to continue to use at least some of these, no deal could require the UK to build and integrate new systems from scratch.

Finally, I have two quick observations. I listened very carefully to the noble Lords, Lord Whitty and Lord Kerr, as I have done to all noble Lords. Two thoughts emerged. Will the Government draw up a comprehensive list of FAQs—frequently asked questions —to address the issues as we move along this journey? That would be very helpful for all our good friends around the country to understand where and what the game is, what they must do, how they should do it, and so on.

Secondly, the noble Lord, Lord Kerr, referred to his Article 50. As no one can judge the political future environment, there may well be a need to consult the people. In anticipation of this, could we jettison the term “second referendum” and instead vote on the “final outcome”—a point raised at a joint meeting that the noble Lord and I attended?

Many other challenges remain. However, I will leave it there for the moment.

Link to full contribution: http://bit.ly/2P5CKyI