Why Brexit nightmare for UK exporters won’t be fixed by treaty talks
Optimists and Brexiteers say the current problems for people trading with the EU, from mussels sellers to Marks & Spencer, are mere teething problems.
They will, they say, be ironed out by the UK and EU as weeks and months go on.
The Christmas Eve trade deal was but the start-point of the future relationship, and will be finessed and improved upon for the good of all.
Lawyers who actually know about this stuff aren’t so sure.
Alex Altmann, partner and head of Blick Rothenberg’s Brexit advisory group, says: “The root problem here is that they tried to agree a trade deal that would normally take five, six, seven years in 11 months.”
The rush meant only the most basic provisions for tariff free access was agreed, and even then, only on goods. Services, particularly financial services, are not included at all. Despite them being the mainstay of the UK economy.
“We are waking up to the fact that for 80% of the economy, we do not have access to the EU any more,” he says.
Many businesses are in a state of disbelief that this is the situation and are hoping it will be cleared up, but they may be mistaken, he adds. “The British government is telling businesses to just go and set up subsidiaries in the EU. That is their answer to these problems.”
From goods exporters to accountants, that, he says, is the government’s solution. Not renegotiating with the EU.
“It’s a complete disaster for SMEs. They do not have the skills to do what their government is telling them to do. It is costing them a lot of money.”
Some have said Britain could go back and renegotiate better terms on trade alongside talks to iron out the many problems around Northern Ireland.
Unfortunately, it’s not as simple as that.
The Northern Ireland problems are controlled by the Northern Ireland protocol, which is completely separate from the main issues of trade that are hurting the rest of the UK.
Eric White, EU and international trade lawyer at Herbert Smith Freehills, explains, the Trade and Cooperation Agreement (TCA) can only be changed by the Partnership Council. They have nothing to do with Northern Ireland.
And, while the Partnership Council consists of representatives from the UK and the EU, getting them to change the TCA is not a simple process.
White says: “People don’t just knock on the door of the Partnership Council and say: ‘I’ve got a problem here, can you fix it?’ That’s not how international trade works. The other side will respond: ‘Well, I have a whole load of problems, too. Let’s negotiate.’”
That can be tricky and time consuming, says White, albeit not impossible.
One of the biggest headaches for exporters of goods is that Rules of Origin mean tariffs are set on a huge range of goods going from the UK to Europe.
But in the relevant part of the TCA, White points out, it declares: “The Partnership Council may amend this chapter and its annexes.”
That’s unusually flexible, he says. “A very high degree of evolution is built into it. Usually they’re fairly tight but in the issue of Origin, there is this provision. So if it is decided there is a problem it can be changed fairly easily.”
He adds that the agreement is “full of renegotiation possibilities”
In theory, perhaps. But in practice, maybe not.
As one close to the government’s thinking puts it, on condition of anonymity: “I can’t see a renegotiation happening, even though a lot of people would love to see it. Even though it would create better outcomes, people in government say the current situation is worth the price for winning back sovereignty and greater independence.”
For the short, medium, and possibly long term, UK exporters may just have to get used to it.
That means trying to fathom what these seriously complex rules mean, and how to comply with them: obtaining origin details of every ingredient of your product, getting health certificates if you’re in the food business, figuring out which tariffs might apply to every item in your lorry load.
Says Altmann: “This is seriously complicated stuff, particularly if you’re a small business. You really need to get advice from a professional, and that costs money.”
The UK, lawyers say, will need to hire and train thousands of customs agents, who specialise in getting freight paperwork together, to help exporters out of the hole they’re in.
Britain doesn’t have an efficient market for customs agents because we’ve never needed so many. A quick Google search for "customs agents jobs" comes up with dozens of new postings just in the past five days. It looks like a growth industry, indeed.
Altmann adds: “The government could have done a better job by providing better practical information on their website but in the time they had to negotiate the agreement, it was just not possible.”
They have to address that quickly, he says.
“To help SMEs to trade with Europe, they should help them comply with the new rules. Help with information that tells the truth about the complex documentation they now need to fill in. The Gov.UK website is completely ineffectual. It’s not telling the actual facts.”
This, he says, is particularly the case with the Trader Support Service supposedly helping people move goods to Northern Ireland.
The government disputes that it is leaving UK exporters hanging.
It says it has implemented a host of ways for businesses to get advice, including a £20 million Brexit support fund for SMEs to get practical support, particularly ahead of April and July, when the UK implements its own import controls.
A government spokesman says: “We know that some businesses are facing challenges with specific aspects of our new trading relationship, and that’s why we are operating export helplines, running webinars with experts and offering businesses support via our network of 300 international trade advisers.
"We have also published clear step by step guides on gov.uk which set out practical advice on exporting and importing.”
For Altmann, the problems outweigh any such advice.
Not all his clients are suffering, however.
His German service sector customers are doing well because the UK has continued with tariff free imports as before, unlike the EU.
“They tell me: ‘It works out well for us because we can still sell tariff free into your market but our British rivals can’t do the same into ours.”
It seems there is a silver lining to the Brexit cloud. As long as you’re German.
