Brexit: Government proposes cross border trade model
25 July 2018
The Government’s latest proposal for a post-Brexit UK/EU trading relationship has been published, but remains subject to EU approval. Cross border traders should maintain their Brexit planning activities unless and until a trade model is agreed.
The white paper
The UK Government has published a white paper setting out its proposal for the UK’s future trading relationship with the EU, in which it puts forward the concept of a ‘Facilitated Customs Arrangement’ (FCA) to preserve the current ‘frictionless trade’ in goods between the EU and UK. The Government says the FCA will create a ‘combined customs territory’ (but not a customs union) for goods, while at the same time allowing the UK to form its own Free Trade Agreements with third countries outside the EU.
Under the FCA, the UK would apply the EU’s tariffs and trade policy for goods intended for the EU, and apply its own tariffs and trade policy for goods intended for consumption in the UK. The Government hopes that mirroring the EU’s customs approach at its external border would ensure that goods entering the EU via the UK have complied with EU customs processes and the correct EU duties have been paid, thus removing the need for customs processes between the UK and the EU, including customs declarations.
While the proposed FCA is intended to be beneficial for businesses, particularly those with cross border supply chains, the white paper is already drawing criticism from both sides of the Brexit debate, as well as from a number of trade bodies. The Government has already accepted some minor amendments from pro-Brexit MPs.
It is also important to note that the white paper is a proposal and has not yet been agreed with the EU. Any proposals on the future EU-UK trade relationship agreed at negotiator level must also be approved by the UK and EU Parliaments. While the EU’s reaction to these proposals has been muted so far, we can expect more commentary from Brussels as the white paper is studied in detail during the current round of negotiations - the EU’s response will be of critical importance.
With the Brexit deadline of March 2019 looming, businesses should not lose sight of the fact that no firm agreement has yet been settled between the EU and UK in respect of the cross border trade in goods. From a risk perspective, businesses should continue to consider all potential scenarios, including a hard Brexit.