Customs admin and delays a serious concern for firms after brexit, say Lords EU committee

These are among the findings and recommendations of a House of Lords EU External Affairs Sub-Committee report, published today, on the implications of Brexit for the UK’s trade in goods with the EU.

Commenting on the report, Baroness Verma, Chairman of the EU External Affairs Sub-Committee, said:

“Goods dominate UK trade, and the EU is by far its largest trading partner. Trade in goods between the two is worth almost £357 billion each year. It is therefore imperative that a trade deal with the EU seeks to avoid the imposition of tariffs on trade in both directions.

“Non-tariff barriers can pose as significant or greater a barrier to trade as tariffs, and would be more difficult to resolve in a free trade agreement. Witnesses from industry said this is a pressing concern.

“The Government will need to make a trade-off between mitigating barriers to trade, and the exercise of regulatory sovereignty.

“Agreeing a free trade agreement within two years is inherently ambitious, so the Government must try to agree a transitional arrangement with the EU.

“The Government will also need to increase Whitehall’s preparedness for administering UK-EU tariffs and non-tariff barriers to UK-EU trade.”

Findings and recommendations from the report, Brexit: trade in goods, include:

• Value of the goods sector
  The manufacturing and primary commodities sectors are important employers, particularly outside the south east of England, and goods make up the bulk of the UK’s trade. Ensuring that these industries do not face additional barriers to trade will be essential to driving growth across the UK, as envisaged in the Government’s industrial strategy.
   
• Supply chain efficiency and tariffs
  The manufacturing and primary commodities sectors are integrated into efficient EU-wide supply chains. Supplies and components may cross the Channel multiple times during production, and tariffs on UK-EU trade in goods could be imposed every time, increasing costs. Many UK businesses cannot easily substitute their imports from the EU, or find alternative export destinations.
   
• Non-tariff barriers
  Witnesses were concerned about the imposition of rules of origin and future divergence of regulatory standards between the UK and the EU. Rules of origin would apply both under a free trade agreement (FTA) with the EU and to trade under WTO rules. This barrier to trade would be difficult to mitigate outside the EU customs union.
   
• Exiting the EU customs union
  Leaving the EU customs union would be likely to result in a significant additional administrative burden for companies and delays to consignments of goods, incurring additional costs. The customs agreement proposed by the Prime Minister would be unprecedented and it is unclear whether it will be possible outside a formal customs union.
   
• Participation in some EU agencies
  There may be significant benefits in the UK continuing to participate, where possible, in EU agencies such as the European Medicines Agency. The Government should clarify whether it would accept being subject to some form of oversight and dispute resolution to so do.