It’s been almost a year since Prime Minister Boris Johnson won the election by vowing to “get Brexit done.” But with only 9 weeks left until the end of the transition period, time is running out for him to keep his campaign promise. With or without a deal, the UK will leave the European Union’s customs union and single market for goods and services on January 1, 2021.
The Prime Minister recently told the country to “get ready” for a No-Deal exit from the EU. The announcement came the day after the Johnson’s self-imposed deadline for reaching a deal at the Summit had passed. He said the UK should prepare for “arrangements that are more like Australia’s.” Since the EU does not have a trade agreement with Australia, this means that the U.K. would trade with the EU according to the very basic and costlier rules of the World Trade Organization.
London told businesses to prepare for extra paperwork or face huge backups at its borders when the UK leaves the EU in January. Cabinet Minister Michael Gove told importers and exporters that extra paperwork would have to be completed whether or not a deal is reached with the EU. “The consequences of a lack of business preparedness will be not just economic opportunities missed for those companies who don’t prepare, but potentially much wider disruption,” he said.
According to Britain’s “reasonable worst case scenario” report, up to 70% of trucks traveling to the EU might not be ready for new border controls, leading to trucking queues at the border as long as 100 km (62 miles), with wait times of at least two days. The disruption is expected to peak in January, with a return to normalcy dependent upon how quickly businesses are able to adapt.
In addition to the extra paperwork, trucks entering the country would be required to obtain Kent Access Permits, known as KAP. Any trucker attempting to cross the border without the right KAP would be fined £300. But how the process will work is anyone’s guess. How are truckers supposed to apply for a KAP? Will one KAP suffice for all shipments or will a new KAP be required for each journey?
The country’s logistics and freight industry has long complained of a lack of detail from government to prepare. British International Freight Association’s (BIFA) Director General Robert Keen said “The government has received repeated warnings from all sides of the supply chain that neither businesses involved in trade between the EU and the UK, nor the freight and logistics sector that physically handles and manages that trade, is ready for the new procedures that will be in place from January 1st 2021. Traders and logistics providers are still waiting for so much information and clarity from the government and are shocked by the lack of consistency in government policy, systems planning and procedures.”
“Mr. Gove says it is essential that traders act now and get ready for new formalities. BIFA says, give our members all the information they need, the resources they require and systems that actually work, and they will be more than able to do what is necessary.”
But according to a recent survey conducted by cross-border eCommerce specialist Hurricane Commerce, the discrepancy between those who have put robust plans in place for Brexit Day and those who haven’t is huge. Carriers, merchants, marketplaces and post authorities that are not able to provide complete and valid data on shipments will face severe impacts to their businesses come January 1.
Key Sticking Points
It’s been more than 4 years since the Britain voted to leave the EU, so what’s the holdup in reaching a deal? Turns out, untangling the 45-year marriage was not as easy as the hardline Brexiters claimed it would be. Since then, as in any divorce, it’s been bickering, finger-pointing, and threats by both sides. The fear of creating unintended economic consequences scares the living daylight out of businesspeople in Britain and all across Europe. There are many hurdles that have yet to be overcome, and both sides have continued to dig in their heels. The key sticking points include:
- Fishing rights. The UK wants to keep full access to the EU market to sell its fish, and in return the EU wants to retain full access to fish in British waters, which stretches 200 nautical miles from the coast of Britain.
- Level playing field. The EU is adamant that it will not agree to a meaningful trade deal unless the UK guarantees that businesses in the EU will not face unfair competition, which Britain insists is a sovereign matter. Other matters yet to be settled include environmental standards and labor laws
- State aid. The two sides have not been able to reach agreement on limiting subsidies, with the UK sticking steadfastly to its principle of not bailing out unsustainable companies or “returning to the 1970’s approach of trying to run the economy.”
- The EU has accused Britain of wanting to “have its cake and eat it” – retaining its access to the lucrative EU markets without agreeing to follow its rules – and is demanding strict legal guarantees for the governance of any trade deal above and beyond WTO dispute-settlement arrangements. It is pushing for the possibility of rapid retaliation, including the imposition of tariffs, if it finds the UK has violated any part of the partnership agreement, while the UK remains committed to limiting the potential for cross-retaliation.
Talks have also turned sour by a lack of trust. Last month, Prime Minister Boris Johnson plunged Brexit into further chaos by unveiling draft legislation that would disregard part of the legally binding withdrawal agreement that he himself made with the bloc just a year ago.
Michael Roth, German chairman of the EU’s Ministers for European Affairs said that Johnson’s plan was “extremely” worrisome as it “violates the guiding principles of the withdrawal agreement” and pleaded with the UK, “Please dear friends in London, stop the games – time is running out. What we really need is a fair basis for further negotiations and we are ready for that.”
The EU said it could not trust Britain if it could so easily break international law and has given Johnson until the end of the month to withdraw the bill or face EU action, although it has not explicitly said what action it would take.
The bill has not only angered the EU but has also stoked divisions within British politics. Even with lawmakers from his own Conservative Party opposing the legislation, Johnson continues to push ahead with plans to pass the bill into law over the coming weeks.
At this point, it’s difficult to tell whether the negotiations are indeed doomed. While it looks unlikely the two sides will reach an agreement, Johnson and European Commission President Ursula von der Leyen agreed that the negotiations should continue daily, including weekends, until mid-November as some progress had been made.
About Brexit
Brexit, a combination of ‘Britain’ and ‘exit,’ is the name given to the, once unthinkable, idea of the UK leaving the European Union. After a bitterly fought referendum, the UK voted to leave the ‘bloc’ in June 2016, with 51.89% of voters opting to leave the EU. The UK formally left the EU on January 31, 2020. A transition period to allow for negotiations on a new relationship between the UK and the EU is in place until December 31, 2020. During that time nothing will change – the UK will continue to benefit from free trade with the member nations of the EU and will still comply with all EU laws and regulations. After the transition period, different rules may apply, and just how the UK leaves the EU will have implications that ripple around the world.
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Sources:
- The LOADSTAR, Brexit: deal or no-deal, businesses must prepare for a mountain of paperwork
- Reuters, ‘It’ll be carnage’: British companies dread a Brexit border breakdown
- Financial Times, Brexit talks: what are the main obstacles to a deal?
- Post & Parcel, HURRICANE COMMERCE: TIME IS RUNNING OUT TO GET BREXIT-READY
- The Washington Post, AP Explains: Why are UK and EU still arguing over Brexit?
