Britain’s struggling exporters were given a sticking plaster last week to help recover from the battering they have taken trying to surmount the government’s newly created trade barriers with the EU.
It came in the form of a 12 point ‘plan’ in a policy paper: ‘Made in the UK, Sold to the World’, (sub-titled, Build Back Better). The document, published by the Department of Trade and Industry, sets out the government’s “new world-leading export strategy” over 66 pages, but only serves to demonstrate how Brexit continues to work in opposition to policy aims.
The hyper-ventilating foreword came from the prime minister, sounding as he often does like a slick double-glazing salesman on speed, which said it was about giving UK PLC a “shot in the arm” and exploiting “the UK’s new competitive edge” so we can “share cutting-edge carbon-free technology”. He looked forward to making Britain once again, “a nation that does business with the world”. In a florid reference, the prime minister said he would “deploy a cornucopia of trade outposts in distant lands”.
It was typically Johnsonesque, but did nothing to explain to mystified exporters where this ‘new competitive edge’ had suddenly come from or what the imaginary impediments were that had prevented us doing business with the world up to now.
New export plan is a deflection from the border reality
UK exports in 2020 were about £600bn and forecast to reach £1 trillion by the mid-2030s. Trade secretary Anne-Marie Trevelyan wants to bring that date forward. However, credible research by Loughborough University’s School of Business and Economics, claims that UK exports to the EU, accounting for nearly half the total, actually fell by 25 percent between 2015 and 2018 “due to the Brexit shock”.
All of which suggests Trevelyan’s target can only be delayed by Brexit.
Before anyone had the chance to properly browse the new plan, the border and protocol delivery group released the latest iteration of the border operating model. This is the complex and convoluted guidance for importing and exporting goods across Britain’s new border with the EU.
This, remember, is the border created almost by accident (apparently) by the same prime minister responsible for the gushing foreword published the previous day.
The border operating model’s 158 jargon-filled pages, replete with dozens of additional hyperlinks to yet more pages of turgid official ‘advice’ about which multi-field forms are required for which goods, seems a deliberate attempt to blunt our ‘new competitive edge’. Some of the graphics are a wonder to behold:
Brexit has created huge non-tariff barriers
Before Brexit there were neither tariff nor non-tariff trade barriers to about half of the UK’s overseas trade – both exports and imports. The part of our external trade that took place inside the single market was as friction-free as internal trade. Now, there are non-tariff barriers on all of it. Tariffs apply to about a third, mainly trade with China, India and the USA, the same as it was inside the EU.
In exchange, so far we have made some very minor adjustments to our global tariff schedule compared to the EU, none that anyone has noticed, and we are in the process of eliminating some minor tariffs on future trade with Australia and New Zealand, which accounts for around 1 percent of UK goods exports.
Companies which only exported to the EU may not even have thought of themselves as exporters. They simply had to worry about preparing goods for shipment; delivering them to European customers was the least of their problems. Just a simple call to a local haulier.
Johnson’s Brexit has reversed the position. Sourcing materials, manufacturing, assembling, packaging, growing or rearing the goods has become the easy bit.
Exporters must now comply with a thick guide just to explain the complex tangle of rules involved in shipping things across the EU border, with the constant risk that a tiny mistake could result in long delays with goods being held in customs sheds while your hard-won European customer looks for a more reliable and cheaper supplier – inside the single market.
The 12-point plan looks more like a sticking plaster
None of the measures proposed in the plan relieves UK exporters of complying with the newly created red tape and it appears that all of them could have been introduced while we were members of the EU. Most do not seem that innovative and some are completely at odds with the border operating model itself (how does that make exporting to the EU easier). They are:
- The creation on an export support service
- Supporting exporters across all parts of the UK
- Financial support for exporters through the European Regional Development Fund
- UK export finance via the UK export credit agency
- Government-to-government partnerships
- Creating an export academy
- Extending our community of export champions
- Export campaign – Made in the UK, Sold to the World
- Piloting a new UK tradeshow programme
- Making exporting easier
- Utilising the UK government’s international teams
- Opening markets worldwide
Anything intended to help Britain’s exporters overcome trade barriers, would at any other time be seen as a laudable aim. But having erected new barriers to half our exports, without lowering barriers elsewhere, it does not seem entirely rational.
Moreover, ‘supporting’ exporters to the EU wasn’t even necessary at all before we exited the single market and the customs union.
More export barriers are on the way
The EU was ready on 1 January to apply third party status to UK exports, but has taken a relaxed attitude to rules of origin so far. These are the rules that determine if goods face tariffs or not. Only goods that meet the required minimum percentage of UK originating content can enter the EU tariff-free.
Anna Jerzewska, a trade consultant, told the Financial Times that many British exporters are simply attaching declarations stating their products meet the rules of origin automatically to their invoices.
“It’s a known fact that many companies are providing ‘statements of origin’ when they have no idea if the product is originating or not”, she said. The FT also claimed other trade consultants have come across some UK companies that believe they are complying with the rules of origin simply by placing a union jack on products that were entirely manufactured and packaged in China.
This unofficial ‘grace’ period will end in January 2022, when goods will be subject to audit and exporters may need to show clear evidence that goods comply with the rules.
The Federation of Small Businesses has said its members are not ready to deal with the additional paperwork from January, adding that 20 percent have already temporarily or permanently halted sales to the EU since Brexit.
Import barriers are also being readied
Importers have so far escaped UK import formalities, but will be subject to wide ranging new rules starting in 2022 and phased in over six months.
The latest border operating model sets out all the new imports checks coming down the track.
Margaret Whitby, the head of border industry engagement at the UK border and protocol delivery group, based in the Cabinet Office, told delegates to the Multimodal 2021 exhibition in Birmingham in October, that from 1 January 2022, “customs declarations will be due”.
From January, import declarations will no longer be deferred, customs checks begin on imports from the EU, the goods vehicle movement system goes live for imports into GB, and pre-notification and documentary checks for agri-foods including products of animal origin, certain by-products and high-risk food not of animal origin, will be required.
There are fears that EU companies exporting to Britain will not be ready, with many having a “false sense of security” about the impending GB border controls.
David Wells, CEO of Logistics UK, said he did not think EU companies “realise [the UK government] is serious about imposing border controls in January 2022”.
By 1 July 2022, entry safety and security declarations, export health certificates from EU suppliers, and pre-notification and SPS checks on animal and animal products, plants and plant products will all be required at UK border control posts.
Retailers will be affected and many British manufacturers and exporters who rely on imported EU parts and raw materials and may also be impacted.
Government efforts to boost exports are of course welcome, but alongside the damage inflicted by Brexit, particularly the hardest possible version apparently unwittingly chosen by the prime minister, they are no more than a sticking plaster.