LONDON: More than a year has passed since the UK voted to withdraw from the European Union without much clarity ever given to businesses on what the terms of the intra-EU trade with the remaining EU27 would look like post-March 2019. This has led to many of our clients planning for the worst possible option, i.e. anticipating that at midnight on March 2019, the UK would formally have withdrawn from the EU without an arrangement in place. However, on 15 August 2017 – a bank holiday for a large part of Europe − the UK government released its most-anticipated “Future customs arrangements paper”: the first of a series of papers setting out the UK government’s thinking on its future relationship with the EU. We took advantage of a relatively calm week to propose a few thoughts, our immediate reactions to the key issues and questions arising out of the UK government’s strategy. As you will see, the debate is just beginning.
The legal and practical considerations of the UK leaving the EU Customs Union in a post-Brexit world was not much discussed during the referendum campaign and it took time for the government to formally address the issue and start engaging with UK businesses regarding this. This has led us lawyers, and our clients, to prepare for all eventualities, including a possible “no deal” situation where the UK would leave the EU Customs Union without any arrangement in place. This is a solution feared by many in the UK, as it would mean very cumbersome procedures and controls with the EU27, without facilitation. In any event, there is insufficient time before March 2019 to install the customs clearance facilities that would be necessary. This would be particularly damaging for companies that operate on a “just in time” basis and who do not have the capacity and budget to carry those additional tasks and the inevitable delays that would result.
In this respect, the publication of the customs proposal by the UK government can only be welcomed. Presumably, it is intended to address the concerns at home and in Brussels that the UK government did not have much of a customs plan at all. In an early statement, the European Commission confirmed the optimism by stating that it will study the content of the customs proposal, before releasing its own proposal in the next few weeks. “The clock is ticking and this will allow us to make progress” − a few rays of sunshine in an otherwise grey August. Nonetheless, the position paper is principally a statement of broad aspirations rather than a concrete plan for borders that are as seamless and frictionless as possible. The improvement of IT systems for customs clearance remains an objective of countries the world over, but the practical, political and legal issues are not dealt with in the paper.
The first and obvious hurdle lies in the ability for the UK to push these discussions at the next round of talks with the EU, scheduled for the end of August. On this point, the EU27 always made it clear that the trade negotiations would progress if and when sufficient progress was made on the terms of the UK’s withdrawal (also known as “first we withdraw, then we negotiate”). And the budget settlement and citizen’s right proposals are not finalised as yet. What about Ireland? Interestingly, paragraphs 43-45 of the proposal look at the land border with Ireland, an issue that the EU considers to form part of the withdrawal negotiations. By conditioning the customs proposals described in this paper as “first steps” to meet the UK government’s objectives to “trade across that land border” as seamless and frictionless as possible, it is clear that the UK government intends to address it only in the wider context of a wider EU/UK customs discussion. In other words, the government does not intend to talk about Ireland if the customs transition and future partnership is not addressed. Note that this was swiftly contradicted by Michel Barnier, who tweeted shortly after the publication: “the quicker #UK & EU27 agree on citizens, settling accounts and #Ireland, the quicker we can discuss customs & future relationship” − a bon entendeur, but Michel ignores the fact that the Irish border issue is about customs clearance (as well as immigration controls) so that the two cannot logically be considered separately.