Brexit: still failing to catch up

30/10/2017

It is difficult to find the exact point at which I started pointing out the problems that might arise after Brexit as a result of inadequate customs facilities on the other side of the Channel.

However, it is certainly the case that I was in full flow September 2016 - over a year ago. Then, I was writing that France "as we know" has limited infrastructure to deal with the extra customs requirements arising out of Brexit. And European officials, I said, "admit they are only just beginning to understand the scale of the Brexit challenge".

Earlier this week, we then had Sir Ivan Rogers warn that the crucial issue in post-Brexit trade with the EU was, in his words, " What's the other side of the Channel going to do?" Now, trailing our wake comes the Financial Times, self-importantly telling us that it has carried out "an analysis", telling us that "Britain's EU trade partners are lagging behind on preparing for a possible hard Brexit".

Under the headline, "Customs teams in EU27 unprepared for hard Brexit", we are informed that some member states are likely to have no extra customs inspectors in place for at least a year after Brexit. Finally recognising the point we've been making for so long, the paper is at last reporting that "Britain’s preparations rely on the EU27 also being ready", and that "there are few signs that some leading trading partners are implementing contingency plans".

In some continental administrations, such as Germany, it actually takes three years to train customs officials, so it is already too late to meet increased demand by the end of March 2019, and even France's two-year programme means that those who applied in this year’s recruitment round for the next course in 2018 will not start to enter service until mid-2020.

So far, the intentions of cross-Channel authorities on increasing staff levels have not been declared, leading the FT to hazard a guess that one reason for any delays is "uncertainty over the final shape of Brexit amid fractious negotiations between London and Brussels".

It cites a spokesman for the FNV, the Dutch trade union federation, who says the government "know they may need more people, but they don't know how many until the final deal is clear". A Swedish official said: "I think we will first have to wait and see what the Brexit negotiations lead to".

What the Financial Times and the continental authorities don't seem to have realised, though, is that commercial shipping staff do the brunt of the work in customs processing. They too will need to recruit and train extra staff, with the appropriate facilities provided. This may well be as big a problem as that confronting the private sector.

And then, there is the minor issue that the staffing problem arises regardless of whether we have a deal or not. The moment Mrs May decided that the UK was going to leave the Single Market and become a third country, there were going to be border checks, and such remains the case to this day.

Some relief could come with an agreement on interim measures, where the application of the EU acquis is extended past 2019. But that will only delay the inevitable for two years or so, which would seem to suggest that action must still be taken more or less immediately for some countries.

The situation gets worse, of course, when one takes into account the "official controls" which require products of animal origin to be submitted to Border Inspection Posts (BIP), and most other foods to Designated Points of Entry (DPE) – a provision also applying to live plants, some materials of plant origin, plus timber and some wood products.

While it may take up to three years to recruit and train customs officials, it might take five years or more to provide BIP and DPE facilities, which are in addition to the customs requirement. And it will take as long to recruit and train the necessary professional staff.

By coincidence, a report produced by the European Parliament this month brings up the critical shortfall in infrastructure, observing that "there is very limited capacity to handle all of the additional inspections that would be required if trade between the UK and the EU27 also had to be inspected". For example, it says, "neither Calais nor Coquelles, the two main points of entry into France, has a Border Inspection Post for animal products".

The report is written by Alan Matthews, Professor Emeritus of European Agricultural Policy at Trinity College, Dublin, Ireland. Yet, it would seem, these strong academic credentials do not prevent Matthews repeating an error perpetrated by Legatum and others, to the effect that official controls can under certain circumstances be waived. They can't.

In this case, Matthews seems to be relying on the precedent set by the EU concluding "equivalence" agreements with New Zealand and Canada, where food imports from these countries are subject to a lower frequency of physical checks. It is assumed that, because UK and EU sanitary and phytosanitary are currently aligned, regulatory checks at borders could avoided, thereby facilitating the trade in goods and removing the need for inspection posts and their specialist staff.

However, it should be noted that, while the agreements with New Zealand and Canada reduce the frequency of inspections, they do not eliminate them entirely nor remove the requirement for consignments to be presented to BIP/DPE for documentation checks and such physical checks as are required.

Currently, the official requirements specify 100 percent documentation checks while fresh meat, fish products, whole eggs and certain other products require a 20 percent physical inspection rate. For poultry meat and poultry meat products, milk and milk products, egg products and certain other products – including, for some strange reason, honey (or perhaps not) – the inspection rate increases to 50 percent. One out of every two consignments must be inspected.

It should be appreciated that the documentary checks include "identity checks", which means physically reconciling container or vehicle contents with the manifest. This can even require the opening of packaging and carrying out tests to confirm the products are as described - detecting horsemeat labelled as beef, for instance. 

Nevertheless, the concessions made to New Zealand are substantial. Although 100 percent checks are still required, in most cases the physical inspection rate drops to two percent, and in some cases it is down to one. However, as can be seen from the copious documentation (here, here, here and here), this is no free pass. In fact, the "high purity" regimes adopted in the country's abattoirs are so stringent that no more than a handful of UK abattoirs (if that many) could meet the standard.

In these circumstances, probably the best that could be achieved would be an equivalence along lines similar to that of Canada, where inspection rates drop to between 10 and 15 percent for most products. And that is on the basis of conformity with a 62-page technical agreement plus amendments.

So detailed are the technical requirements that – as the Matthews report correctly points out – it affords little policy or regulatory autonomy to the UK. Dreams of deregulation will be precisely that. To all intents and purposes, the UK food industry will have to maintain full EU regulatory requirements, just to achieve the marginal concessions to the level afforded to Canada.

This, of course, will be the best-case scenario assuming a negotiated settlement and recognition of the UK as an approved exporter. Oddly, in the worst case scenario where there is "no deal", after the immediate chaos has died down there will be nothing for officials to do. UK export of animals and foods of animal origin to the EU (including Ireland) will not be permitted.

And what this points to is that the newspapers and even the so-called experts – to say nothing of the politicians – are still failing to catch up.

In fact, so far behind the curve is much of the media that we get stories such as this from Sky News, with presenter Niall Peterson writing that: "The Port of Dover is something of a gift for lazy journalists looking to do a report on the progress towards Brexit (or lack thereof)", and then proceeds to demonstrate his almost total lack of grip of the subject.

But it is perhaps unfair to single out the media. None of these groups are beginning to come to terms with the implications of Brexit and, in particular, of the consequences of leaving the Single Market. The whole debate is so driven by ignorance that reality is going to come as a huge shock.

It is becoming clear that Davis and his crew are convinced that "equivalence" is a free pass, allowing UK produce to be exempted from border controls. They think this will be conceded to the UK as part of the "deep and special partnership" simply on the basis that we currently comply with the EU regime.

They do not understand that, in the Single Market, the EU (Commission and ECJ) have direct jurisdiction over enforcement and can intervene directly to direct enforcement activity in the event of default. It is that process, in addition to regulatory conformity, which gives Member States their free passes at the borders.

But when we leave the Regulatory Union (aka Single Market), all that gets kicked into touch. Thus, there is no way the EU is going to allow access to its markets without border inspection, otherwise the UK would be exporting to the EU under less stringent conditions than intra-Union trade undertaken by Member States.

Right from the earliest days of Brexit, though, the Union has made it abundantly clear that the UK cannot have a better deal outside the EU than in. Concessions on border inspection, are not on the agenda. The doctrine of "equal misery" will prevail, where UK exporters will have to to additional controls to make up for those they relinquish when the UK leaves the EU.

This simple principle seems constantly to evade Davis and his advisers, to the extent that they are blundering in the dark - the media and the "experts" with them. In the next few years, there are going to be some very expensive lessons learned about how the European Union really works.