WhyWTOoffersasaferhaventhantheBackstop

AjointpublicationfromGlobalBritainandLabourLeavebyRtHontheLordLilley&CllrBrendanChilton

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Abouttheauthors…TheRtHontheLordLilleyTheRtHonPeterLilleywasaConservativeMPfor34yearsbeingelectedatthegeneralelectionof1983.HeservedasaCabinetministerinthegovernmentsofMargaretThatcherandJohnMajor,asTradeandIndustrySecretaryandasSocialSecuritySecretary.HeretiredfromParliamentatthe2017generalelectionandbecameapeerin2018.CllrBrendanChiltonBrendanChiltonistheGeneralSecretaryofLabourLeaveandisaLabourCouncillorinKent.PreviouslyaLabourParliamentaryCandidate,Brendanwasco-founderofLabourLeaveandhasservedasheadofthecampaignsince2015.BrendanalsoheadsLabourFuture,oneofthelargestonlinesupporternetworksoftheLabourPartycommittedtodevelopingpoliciestowinbackworkingclasssupportintraditionalLabourheartlands.Aboutthepublishers…GlobalBritain

Across-partyandnon-partyresearchbody,GlobalBritainwasfoundedovertwentyyearsagotoprovidethepositivebusinesscasefortheUKtoleavetheEuropeanUnionandpublishedawealthofresearchbriefsandpaperstothatend.Nowthattheargumentforanoutward-facing,sovereign,democraticUKhasbeenwonGlobalBritainiscommittedtoensuringthatourpoliticiansdonotbetraythe17.4millionBritonsthatvotedforchange,throughthepublicationofpapersthatshowhowBrexitcanbedelivered.

LabourLeaveLabourLeavewasformedin2015andplayedanintegralroleinsecuringaleavevoteduringthe2016EUReferendum.LabourLeaveisacampaignmadeupofParliamentarians,TradeUnions,PartymembersandsupporterscommittedtoensuringtheUnitedKingdomleavestheEuropeanUnion.LabourLeavewasfoundedbyJohnMills,theLabourdonorandbusinessman.LabourLeavebelievesinanindependentUnitedKingdomtradinggloballyandcooperatingwithallnationsoftheworldforthebettermentofhumanexistenceanddevelopment.

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WhyWTOoffersasaferhaventhantheBackstop

byRtHontheLordLilley&CllrBrendanChilton

CONTENTSIntroduction 4TheimmediatebenefitsofWTO+++ 5ExercisingourrightsasaWTOmember 7Leavingwithoutawithdrawalagreementby29Marchneednotcausedisruption 12Conclusion:ArmageddonortheMillenniumBug? 25AnnexA:DoestheUKowetheEU£39billion? 29

7thJanuary2019

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INTRODUCTIONThebestwayoutofthecurrentimpasseoverthedraftWithdrawalAgreementwiththeEUwouldbetoacceptPresidentTusk’soffer,madeinMarch1andrepeatedasrecentlyasOctober,ofaFreeTradeAgreementinvolvingzerotariffsandincludingservices–extendedtothewholeUK.ThatwouldinvolvereplacingtheIrishProtocolinthedraftagreementbyacommitmentbyIreland,theEUandUKthattheywillretainaninvisibleborderbetweenNorthernIrelandandtheIrishRepublic,asallhavepledgedtodoifthereisnoWithdrawalAgreement.AsDonaldTuskrightlystated2,thisistheonlypotentialagreementwiththeEUcompatiblewiththeUKleavingtheSingleMarketandCustomsUnion–aspromisedduringthereferendumandintheConservativemanifestopledge.Suchanagreementshouldberelativelysimpletonegotiatesincewestartevenmorecloselyaligned–withzerotariffsandidenticalregulations–thanCanadaandtheEUwerewhentheyfinishednegotiatingtheirComprehensiveEconomicandTradeAgreement.However,incasetheEUrefuseanysubstantiverenegotiationofthedraftagreement,thegovernmentshouldsimultaneouslycompletepreparationsforleavingwithoutawithdrawalagreementonWTOterms.EversincethereferendumtheBrexit-opposingmediahavebeendemonisingwhattheycall“NoDeal”butshouldbecalledWTO+++.TheplusesofmovingtoWTOtermsafter29thMarchareexplainedinthefollowingchapters:1On7thMarch2018DonaldTusk,PresidentoftheEuropeanCouncilissuedastatement1:“Iproposethatweaimforatradeagreementcoveringallsectorsandwithzerotariffsongoods.Likeotherfreetradeagreements,itshouldaddressservices.Andinfisheries,reciprocalaccesstofishingwatersandresourcesshouldbemaintained.”Headded:“Iproposeclosecooperationwithinthefollowingareas.Firstly,…terrorismandinternationalcrime…Secondly,weinvitetheUKtoparticipateinEUprogrammesinthefieldsofresearchandinnovation,aswellasineducationandculture…Thirdly,IamdeterminedtoavoidthatparticularlyabsurdconsequenceofBrexitthatisthedisruptionofflightsbetweentheUKandtheEU.Todoso,wemuststartdiscussionsonthisissueassoonaspossible.”StatementbyPresidentDonaldTuskonthedraftguidelinesontheframeworkforthefuturerelationshipwiththeUK.CounciloftheEU.109/1807/03/2018.2Ibid“inherspeechlastFriday,PrimeMinisterTheresaMayconfirmedthattheUKwillleavetheSingleMarket,leavethecustomsunionandleavethejurisdictionoftheECJ.Therefore,itshouldcomeasnosurprisethattheonlyremainingpossiblemodelisafreetradeagreement.Ihopethatitwillbeambitiousandadvanced–andwewilldoourbest,aswedidwithotherpartners,suchasCanadarecently–butanywayitwillonlybeatradeagreement.”

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THEIMMEDIATEBENEFITSOFWTO+++1. Farfrom‘crashingout’wewillbe‘cashingin’.

• Wewillkeepupwardsof£39billion–whichwill:

o BoostourGDPbyupto2%overthenextcoupleofyears.

o Itwillimproveourbalanceofpaymentssignificantly.

o Bespentonourownpriorities–beittheNHS,training,defence,lowertaxes

onthe‘justaboutmanaging’oronbusiness.

• TheLords’(heavilypro-Remain)EUFinancialAffairsSub-Committeeconcludedthat“Article50allowstheUKtoleavetheEUwithoutbeingliableforoutstandingfinancialobligationsundertheEUbudget”3.

• IftheEUdisputesthis,wecanconfidentlysubmittheissuetoasuitableinternationalarbitrator.(SeeAnnexAforanalysisof£39billionclaim).

2. Wewillenduncertainty–economicandpolitical.

• Underthegovernment’sdraftWithdrawalAgreement,corrosiveuncertaintywill

continuefortwoyears–orevenlonger–aboutthebasisofourfuturetradingandotherlinkstotheEU.

• WhethercompaniesfindleavingwithnoWithdrawalAgreementwelcomeora

challenge,theywillknowwheretheystandandstartinvestingagaintotakeadvantageofopportunitiesortocopewithproblems.

• ItwillalsoputanendtoBritain’sdisproportionatepoliticalfocusontheBrexit

processandwecanconcentrateonotherprioritiesandonmakingpositiveuseofthepowersweregainfromtheEU.

3. TheIrishborderissuewillbesolvedbyadministrativemeasureswithoutneedfora

backstop–asallpartieshavepromisedintheeventof‘nodeal’.

• TheUK,IrelandandEUhaveallgivenassurancesthatiftheUKleaveswithoutaWithdrawalAgreementtheywillnotintroduceinfrastructureorchecksontheborderbetweenIrelandandNorthernIreland4.

o LeoVaradkar:“I’vemadeitverycleartomycounterpartintheUKandalsotoalltheotherEUprimeministersthatundernocircumstanceswilltherebeaborder–fullstop.”

3BrexitandtheEUbudget:TheHouseofLordsEuropeanUnionCommitteeMarch20174https://order-order.com/2018/10/18/will-not-hard-border/

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“Intermsofanodealscenario…wewon’tbeinstallingaborderbetweenNorthernIrelandandIreland,andeveryoneknowsthat.”

o WhenanIrishMPaskedJuncker:“IfnegotiationsfailwiththeTorygovernmentontheexitagreement…willyougiveusaclearcommitmentthattheEuropeanUnionwillnotimposeaborder,customspostsoranyotherkindofinfrastructureonthefrontierinordertoprotecttheEuropeanborders?“Junckerreplied:“Yes”.

o JonThompson,CEOofHMRC:“Ourconsistentadvicetoministershasbeen,wedonot…requireanyinfrastructureattheborderbetweenNorthernIrelandandIrelandunderanycircumstances”5.

• Wealreadyhaveaninvisibleborderdespitedifferentdutylevels,differentVATratesandzeroratesontradeacrosstheborder.Wetacklesmugglingoftobacco,alcohol,reddiesel,drugs,armsetc.withoutborderpostsorchecksattheborder.IfEUandUKproductstandardsin,say,vacuumcleanersdiverge,tradingstandardsofficersatsalesoutlets–notcustomsofficials–willenforcetherules.

• Forafullexplanationofhowaninvisiblebordercanbeimplemented,seeTheBorderbetweenNorthernIrelandandtheRepublicofIreland6.Aninvisibleborderdoesnotrequirenewtechnologybutisbasedonbringingtogetheradministrativeprocessesthatareallalreadyinpracticaluseinvariouscountries.ItisdesignedtobecompatiblewithsimplificationsintheEUUnionCustomsCode.

4. WecanthentakeupTusk’sofferofaCanada+++stylefreetradedeal(FTA)–forthewholeUK,(oncetheIrishborderissuehasbeenresolvedadministratively).

• WecancontinuetotradewiththeEUonzerotariffswhilenegotiatingaCanada

+++deal.ThisispermittedbyArticle24oftheWTOtreaty7.

• So,WTO+++andCanada+++arenotmutuallyexclusive.Indeed,leavingonWTOtermswillmakeiteasiertonegotiateanEU/UKfreetradeagreement,fromamoreequalposition.

5DEXEUSelectCommitteeon29thNovember20176TheBorderbetweenNorthernIrelandandtheRepublicofIreland,ERG,12thSeptember20187Article245chttps://www.wto.org/english/tratop_e/region_e/region_art24_e.htm

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EXERCISINGOURRIGHTSASAWTOMEMBER

5. TheWTOisasafehavennotahardoption.

• TheWTOwassetuptoprovidethebasicframeworkforcountriestotradewitheachother.

• SixoutoftheEU’stoptentradingpartnerstradeunderWTOrulesincludingourbiggestnationalexportmarket,theUSA–withwhichwehaveasurplus,unlikethehugedeficitinourtradewiththeEU.OthersareChina,Russia,India,BrazilandJapan.

• TheWTOguarantees:

o Nodiscrimination.So,theEUcouldnotimposepunitivetariffsorbarrierstoUKtrade.

o MostFavouredNationterms.So,theEUandallothercountriesmustgrantusthebesttermstheygivetoothercountrieswithwhomtheyhavenopreferentialagreement.

o Disputeresolutionmechanism.

• PresidentTrump’sdisregardforWTO8andotherinternationaltradeagreementsis

regrettablebutmorelikelytobeaimedattheEUthanatanindependentUK.Moreover,oncetheUKtakesupitsroleintheWTOitwill,asthe5thlargesteconomyintheworld,beabletotaketheleadinrevivingsupportforinternationaltradeliberalisationthathaslackedachampion9.

6. UKexportsonWTOtermshavegrownfarfasterthantotheSingleMarket.

• UKexportstocountrieswetradewithonWTOtermshavegrown3timesfaster

thanourexportstotheSingleMarketsinceitwasestablished10.

• DespiteallthehypeabouttheSingleMarket,membershiphasprovedoflittlebenefittoUKexporters.Indeed,countriessimilartotheUK,whoareoutsidetheEU,haveincreasedtheirexportstotheSingleMarketfarfasterthanwehave11.

8Inparticular,theUShasrefusedtonominatenewmembersoftheAppellateBodywhichthreatenstohamperthehearingofappeals.Hehasalsoquestionablyinvoked‘securityconsiderations’tojustifysteelandothertariffs.9PlanA+Creatingaprosperouspost-BrexitUK-ShankerSinghametal24thSept201810ItisQuiteOKtoWalkAwaybyMichaelBurrage,CivitasApril201711ItisQuiteOKtoWalkAwaybyMichaelBurrage,CivitasApril2017

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7. EUtariffswouldamounttolessthanhalftheUK’snetcontributiontotheEUbudget.

• TariffsonUKexportstotheEUwillamountto£5-6billion.ThisishalftheUK’snet

contributiontotheEUof£10-12billion.Paying£10billiontoavoid£5billionhasnotbeenagooddeal!

• OurexporterstotheEUwillfaceanaveragetariffof4%–faroutweighedbythe15%improvementincompetitivenessduetotheexchangeratemovementtriggeredbythereferendum.

• AlthoughUKexportstotheEUwouldincurtariffsof£5-6billion,EUexportstotheUKwouldbeartariffsof£13billion(ifweretainedtheEUexternaltariff)12.Thatisbecauseinadditiontoexportingfarmoretousthanwedotothem,EUexportstotheUKtendtobethemosthighlyprotected–i.e.wecouldobtainthemmorecheaplyelsewhereifwereduceorabolishsomeofthosetariffs.

• Evenifweslashmanyofthosetariffs–asweshould–orusetherevenuestocutVATtopreventthecostoflivingrising–wewillbeabletousesometohelpthosesectorsfacingthehighesttariffs.

• Inparticular,ifanyfarmingsectorsarerendereduneconomicbyEUtariffstheycan–andshould–behelpedgenerouslytoadjust.OveralltheUKisanetimporterofagriculturalproducefromtheEUsofarmersasawhole(thoughnotconsumers)wouldbenetbeneficiariesiftheUKappliedtheCommonExternalTarifftofoodimportsfromtheEUaswellastherestoftheworld.TobalancetheinterestsoffarmersandconsumerswecouldabolishtariffsonfoodstuffsthattheUKdoesnotproduceandscalebackotherfoodtariffstoalevelthatstillprovidesfarmerswithareasonableoveralllevelofprotectionwhiletheyarebeinghelpedtoadjusttothediversionofexportsawayfromtheEUmarket.

• Wecanalso,withinWTOrules,helpcarmanufacturers,forexample,byremovingtariffsoncomponentsandofferingfinancialhelpwithR&D,marketingefforts,trainingbudgetsandreducingindustryspecificandmoregeneraltaxes.

8. TheUKisaWTOmembersodoesnot“needtore-joinit”.

• TheUKisamemberinitsownright(asareallfoundermembersofGATT,theprecursoroftheWTO).

• Indeed,theUKhasbeenpayingitsownindividualsubscriptiontotheWTOdespite

theEUexercisingmostofourfunctions.

12Potentialpost-BrexittariffcostsforEU-UKtradebyJustinProtts,CivitasOctober2016

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• TheoneimportantagreementundertheWTOtowhichtheUKbelongsviatheEUandnotinitsownrightistheGeneralProcurementAgreementwhichgivesaccessto$1trillionofpublicprocurementprojectsinothersignatorystates.TheWTOhas,however,nowagreedtotheUKcontinuingasamemberinitsownright.13

9. WecanstarttotradeonourchosentariffschedulesbeforetheyareagreedbyallWTO

members.

• WecanstarttradingonourchosentariffschedulesimmediatelyweleaveevenifwehavenotreachedfullagreementwithallotherWTOmembersonthem.

• Itisquitenormaltodoso-–indeedtheEUitselfhasfailedtoupdateitstariff

schedulestotakeaccountofthelasttwoincreasesinmembership.ButthishasnotcausedanyproblemsinpracticefortheEU(includingourselves).

10. TheUKismakinggoodprogressinreplicatingtheEU’smostimportantpreferential

tradearrangements.

• Switzerland,whichaccountsforoveraquarterofallourexportstocountrieswithwhichtheEUhasFTAs,hasagreedtocarryoverallexistingpreferencesifweleavewithoutaWithdrawalAgreementon29thMarch14.

• Thereiseveryprospectofdeepeningthatagreementsubsequently,particularlyas

farasservicesareconcerned.

• AsimilaragreementwithCanadaisreportedlyimminentandSouthAfricaanditspartnersintheSouthernAfricanCustomsUnionhaveagreedtoreplicatetotheUKthetermsoftheiragreementwiththeUK15.

• Justfivecountries–Switzerland,Canada,Korea,NorwayandTurkey–accountfor

threequartersofUKexportstothenearly70countries(manyofthemmicro-states)withwhichtheEUhaspreferentialtradeagreements.

• Nocountryhasrefusedtonegotiaterolloverdealswhenweleave.

• Onesignificantcountrysaiditseesnopointinstartingtalksuntilitknowswhether

theUKisgoingtoleavetheEUcustomsunion.LeavingwithoutaWithdrawalAgreementwillunlockthedoortonegotiationswiththem.

• Othercountrieshaveagreedinprinciple,thattheywillinitiallyreplicatetheexisting

dealwiththeEUthen,inacoupleofyears’time,discussdeepeningitbeyondwhat

13https://www.wto.org/english/news_e/news18_e/gpro_28nov18_e.htm14https://www.gov.uk/government/news/uk-and-switzerland-agree-to-transition-trade-agreement-after-brexit15https://www.express.co.uk/news/politics/1009722/Brexit-news-latest-theresa-may-trade-deal-africa

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theEU(becauseitcanonlymoveatthepaceoftheslowestof27members)wasabletoconsider.

11. WecantakeupJapan’sinvitationtojointheTransPacificPartnership.

• Wewouldbetheonlynon-Pacificcountrywithpreferentialaccesstothathuge

market.

• TheEUhasnotbeeninvitedtojoin.

• WewillbelinkedthroughittoourCommonwealthpartners–Canada,Australia,NewZealand,Singapore,MalaysiaandBrunei–mostofwhomhaveindicatedadesiretodevelopevendeepereconomiclinksalongsidethat.

12. NewBilateraltradedealsneednottakealongtimetonegotiate.

• Theaveragetimetakentonegotiateatradedealis28months–forallthedeals

worldwidenegotiatedinthelasttwodecades16.

• That,however,includesmultilateraldealswhichcantakelonger,especiallythosewiththeEUbecauseall28memberstateshaveaveto.Bilateraldealsaremuchquicker.

• Australianegotiatedthreeagreements–withKorea,JapanandChina–within13months17.

13. Themany‘micro-agreements’betweentheEUandothercountrieswillnotbeamajor

issue.

• Somearguethat‘nocountrytradesjustonWTOterms–therearemanylittleknownside-dealswhichtheUKwillnothave’.Thisisadebatingpointusuallymadebypeoplewhohavenoideawhattheseside-dealsconsistof.Theyarelittleknownbecausemostareoflittleimportance.Themajorityarenotabouttrade,mostofthosewhichrelatetotradeareusefulbutnotessential,overhalfareinternationalagreementstowhichtheUKmayalreadybepartyorabletoaccedetoinourownright.

• Forexample,theEUhas147microarrangementswiththeUSA18:

16WhyDoTradeNegotiationsTakeSoLong?ChristophMoserandAndrewRose,JournalofEconomicIntegrationJune201217“WithinsixmonthsAustraliahadsignedatradedealwithSouthKorea.Japantookeightmonths,China13.”MattRidley,Times17thMarch201718http://ec.europa.eu/world/agreements/searchByCountryAndContinent.do?countryId=6063&countryName=United%20States%20of%20America&countryFlag=treaties

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o 85ofthesearemulti-lateralagreements.Forexample–theParisClimateAgreement(towhichtheUKisaparty),anAirTransportAgreement(towhichtheUKisaparty),aConventionontheInternationalRecoveryofChildSupport.

o Ofthe62bilateralagreements,halfdonotrelatetotrade.

o Only31havesomerelevancetotrade,forexample:- CoordinationofEnergy-EfficientLabellingProgrammesforOffice

Equipment;- AgreementintheformofanexchangeoflettersbetweentheEUand

theUSonmattersrelatedtotradeinwine;- AgreementbetweentheEUandtheUSoncustomscooperationand

mutualassistanceincustomsmatters.

o DoubtlessmanyifnotmostoftheseagreementsareworthreplicatingifrelevanttoproductsthattheUKtrades.Eachgovernmentdepartmentisreviewingrelevantagreementsandwherenecessaryinitiatingdiscussionsaboutrollingthemover.

o Ahandfulofthesesidedealswithanumberofothercountriesareof

particularvalueandworthreplicatingasapriority–particularlythoseinvolvingmutualrecognitionofcompliancetesting.ThiswouldenableourtestingbodiestobeabletotestthatUKgoodsconformtoEU,USorothercountries’standards.

o ItisworthnotingthattheEUhas97side-dealswithRussiaacountryagainst

whomitoperatessanctions.ItissurelyinconceivablethatitwouldbelesswillingtoreplicatesimilardealswiththeUK.

o More fundamentally,WTO Agreements impose obligations on countries to

agreemutualrecognitionwhereit isobjectivelyjustified.RefusalbytheEU(or theUK) toagreeMutual recognitionAgreements for theirmutual tradewould be treated under WTO Rules as arbitrary and discriminatory, sinceeachwouldbeofferingMRAstoothercountries forthesameproductsandservicesandwouldalsobepermittingdomesticproducerstosellthesesameproductsorsupplytheseservicesintheirhomemarket.

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LEAVINGWITHOUTAWITHDRAWALAGREEMENTBY29thMARCHNEEDNOTCAUSEDISRUPTIONWhyscarestoriesaboutleavingwithoutaWithdrawalAgreementtookhold.

• Initialforecastsweremadebeforeanypreparationswereannounced.Clearlywithoutpreparations,therecouldbeseriousdisruption.Butmostproblemscanbemitigatedorpreventedbytimelyaction.

• Scarestoriesattractviewersorreaders.So,evenjournalistswhoknewthatthesescarescanbeavertedhadtocarrythestory.Subsequentmeasurestoavertthemgetlittlecoverage.

• Remaindominatedmedia–especiallywithinbroadcasting–havebeeneagerto

hypeupfearsbutreluctanttoreportmeasurestakentoavertthem.

• ThegovernmentitselfishypingupsuchstoriestotrytopersuadeMPstovoteforthedraftWithdrawalAgreementdealon14thJanuary19.Thesestoriesshouldbetreatedwithscepticism.

Thescaresrelatetoa)potentialdelaystoimports(throughDover),b)delaystoexports(viaCalais)andc)variousotherstoriese.g.aboutplanes,hauliers,productcompliance,financialtransactionsetc.MostofthescarestoriesfocusonprojecteddifficultiesofBritainimportingeverythingfrommedicinestofood.14. ScaresaboutimportdelaysareparticularlyludicroussinceBritainwillcontrolitsown

borders.Whyonearthwouldwepreventthingsweneedfromenteringourcountry?

• HMRCandDEFRAsaytheywillnotneedtocarryoutanyadditionalchecksattheborder.

o Theyonlycarryoutphysicalchecksifthereisaperceivedrisk(ofdrugs,dutiablegoodsliketobaccoandalcohol,illegalimmigrants,ordiseaseinfood,animalsandplants)20.

19AcivilservantrevealedthatthegovernmenthascompletedfarmorepreparationforleavingwithoutaWithdrawalAgreementthanitiswillingtoreveal,atleastuntilParliamenthasvotedonthedeal.https://www.telegraph.co.uk/politics/2018/12/28/course-no-deal-has-planned-does-government-want-think-otherwise/20EvidencetoDEXEUSelectCommittee29thJan2017.Q237JonThompson:Thefundamentalquestionhereiswhetherwhatiscurrentlyintra-EUtrafficwillbeanymoreriskypostleavingtheEuropeanUnionthanitisnow?Whatweinterveneonnowisriskandintelligence-based.Thatisasystemwewillcontinuetoapplyinthefuture.Wemaynotinterveneanymorethanwedonow”.Q237JohnBourne:Fromourpointofview,weabsolutelyagreewithyou:wedonotthinktherearesignificantreasonstoalterourriskassessmentsondayone.Wehavebeendoingthisforalongtimeandnothinghasreallychanged;hopefully,wehavegotrelativelyappropriateriskmanagementprocessesinplacenow.

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o TheydonotseeanyincreaseinriskonconsignmentsfromthecontinentafterBrexit21.

o Customsdeclarationsarenotcheckedattheborder.TheyarefiledelectronicallyviatheCHIEF(CustomsHandlingImportandExportFreight)computerinSalford.

o Thecomputeridentifiesonlyabout1%ofconsignmentsfromoutsidetheEU

asneedinginvestigation.

o Butphysicalchecksareusuallycarriedoutawayfromtheborderatthedestinationorwarehouse.

o Noraretaxesanddutiescollectedattheport.AstheCEOofHMRCsaid:

“Thereisaslightmisconceptionthatsomehowtaxiscollectedattheactualborder.Itisvery,verylargelynotcollectedattheactualborder;infact,notaxesareactuallycollectedinDover.Itisalldoneelectronically,machinetomachine,throughthenationalcustomshubinManchester.”

• Moreover,HMRCsaysitwill“prioritiseflowovercompliance”-i.e.itwillwavevehiclesthroughtoavoidqueuesevenifinitiallycustomsdeclarationshavenotbeenproperlycompleted.

• DoverPortAuthorityconfirmsitdoesnotexpectproblemswithhandlingimports22.

• TheUKMajorPortsGroup(whichhandles75%ofUKseabornetradeasagainst6%viaDover)confirmedthatitalreadyhas“thecapacityandinfrastructuretohandlelargevolumesofbothEUandnon-EUtradetodaywithout‘logjam’”23.

• IftheEUagreestostartnegotiatingthefreetradeagreementofferedbyPresidentTusk,UK/EUtradecancontinuewithnotariffsorquotas.Thoughcustomsdeclarationswouldbeintroducedtheywouldbea(largelypointless)bureaucraticrequirement.Untilwealteredanyexternaltariffs(eitherunilaterallyoraspartofafreetradedealwithathirdcountry)declarationsoforiginwouldalsohavenofinancialconsequences.So,noseriousnewcheckswouldberequired.

• IftheEUrefusestonegotiateandtariffsthereforecomeintoeffectonEU/UKtrade,theUKcouldsuspendcollectionofalltariffs(onnon-EUaswellasEUgoods)forthe

21EvidencetoPublicAccountsCommittee5thSeptember2018.Q148JonThompson:“youcanexamineonlyfourlorriesthatcomeoffanyferry.BecauseweareleavingtheEuropeanUnion,wearenotsuddenlygoingtosay,‘We’llcheck20.’Wehavetobepracticalandworkbackwards.Youcancheckfour.Isthereanygenuine,significantrevenueriskintheother76?Wearemanagingthatsystemnowandweneedtocontinuetomanagethatsystem.”22EvidencetoDEXEUSelectCommittee29thJan2017.23TimMorris,CEO,BritishMajorPortsGroupLettertoTelegraph8thDecember2018

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firstfewmonthsafterBrexit24.Companiescouldthenbecomefamiliarwithmakingcustomsdeclarationsbeforetheyhaveanyfinancialimplications(otherthanVAT).Thiswouldmakeiteasierforcustomsofficerstowavethroughpotentiallynon-compliantvehicleswithoutconcernaboutlostrevenue.Itwouldalsoremoveimporters’concernsaboutpossiblefuturecomplianceinvestigations.25

15. Therewillnotbeshortagesofmedicines.

• StoriesaboutpotentialshortagesofmedicinesseemtohaveoriginatedinthebeliefthattherewouldbedifficultyinauthorisingdrugswhentheEuropeanMedicalAgencylefttheUK.OncetheUKgovernmentmadeclearthatwewouldcontinuetorecognisedrugsauthorisedbytheEMAtheoriginalbasisevaporated.

• Thestorythenmorphedintofearsofunspecifiedsupplyproblems26,notablyofInsulin–givencredencebythePMwithoutanyexplanationofwhytheremightbeproblems.InsulinissuppliedbyaDanishcompany–NovoNordisk27.Itisnotgoingtowithholdit.TheEUisnotgoingtobanitsexport28.TheUKisnotgoingtoimpedeitsimport.Thecompanyiskeepingfourmonth’ssupplyintheUK.

• TheWTO’sPharmaceuticalTariffEliminationAgreementautomaticallymeansthattariffsdonotapplytofinishedmedicines.TheAgreementcovers10,000medicinalproductsacrosstheEuropeanUnion,Canada,UnitedStates,JapanandNorway29.Itcoversalmost90%oftheworld’spharmaceuticaltrade30.

24Thiswouldinvolveforegoingrevenuerunningatabout£3bnpafromtariffscurrentlyleviedongoodsimportedfromoutsidetheEU(80%ofwhichiscurrentlyhandedovertoBrusselsasitwouldbeduringtheproposedtransitionalperiod).25UnderexistinglegislationHMRCcancarryoutadministrativechecksofatrader’srecordsforuptothreeyearspostentry.Atemporarysuspensionoftariffswillmeanthatthatriskwouldnothangovertraderswhothroughunfamiliaritymaynothavecorrectlycompletedtheirdeclarationsinthisinitialperiod.26Guardian:Takeaprescriptiondrug?Here’showBrexitcouldputyouatrisk31/07/18(accessedvia:https://www.theguardian.com/commentisfree/2018/jul/31/prescription-drug-brexit-pharmacy-supply-chains-shortages).27Pharmaphorum:NovoNordiskCEOreassuresUKpatientsoverBrexitinsulinsupplies17thSeptember2018(accessedvia:https://pharmaphorum.com/news/novo-nordisk-doubles-uk-insulin-stockpile-in-case-of-no-deal-brexit/)28TheUKrunsasurpluswiththeEUinpharmaceuticalproducts.InevidencetotheDEXEUSelectCommittee,theAssociationoftheBritishPharmaceuticalIndustry(ABPI)said:“45millionpacksofmedicinesleavetheUKeverymonthandgotoEurope,and37millionpacksofmedicinesleavethecontinentandcometotheUK”.17thMay2018.29UKParliament,6thDecember2018,(accessedvia:https://publications.parliament.uk/pa/cm201719/cmselect/cmbeis/382/38205.htm#footnote-178).30USTradeRepresentative,6thDecember2018,(accessedvia:https://ustr.gov/issue-areas/industry-manufacturing/industry-initiatives/pharmaceuticals).

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• TheMedicinesstorynowdependsonthesupposedriskoftailbacksoflorriestryingtogettoandthroughCalaisimpedingimportstotheUK–see19below.

16. Therewillbenoshortagesoffoodorsandwiches.

• StoriesthattheUKwillrunoutoffood31andsandwiches32seemtohaveoriginated

inthebeliefthattheUKwouldhavetocheck100%ofanimal,plantandfoodproductsenteringtheUK.ThisassumedthattheUKwouldstilloperatetheEUCustomsCode(misinterpretedandrigidlyapplied)–whereaswewillbefreetosetourownrulesonimports.

• DEFRAmadeclearthatitwouldcontinuetobaseSanitaryandPhyto-Sanitarychecksonrisk,thattheriskinessofconsignmentsfromtheEUwouldnotchangepostBrexit,soitwouldnotcarryoutanymorephysicalchecksafterBrexitthanbefore.

• So,thisstory,too,nowdependsonthesupposedriskoftailbacksoflorriestryingtogettoandthroughCalais,impedingimportstotheUK–see19below.

17. Just-In-Timedeliverieswillcontinuedespitetheneedforcustomsdeclarations.

• Just-in-TimeandJust-in-Sequencesupplychainscananddooperateacross

customsfrontiersintheUKandworldwide.

• 21%ofautomanufacturers’bought-insupplychaincomesfromoutsidetheEUagainst36%fromtheEUand43%fromwithintheUK33.Thereliableoperationofproductionlinesisasdependentonthesenon-EUimportedJIT/JISsupplychainsasthosefromtheEU.CustomsproceduresatUKportshaveneverbeencitedasaproblemforthesesupplychains.

• FordandGeneralMotorsdependonsupplychainsthatoperateacrossthe

Canadian/US/Mexicoborderswhere,becauseNAFTAisafreetradeareanotacustomsunion,thereisacustomsborder34.

• Freshcutflowers(whichareverytimesensitive)traveldailyfromtheNetherlands

acrossthecustomsbordertoSwitzerland.(BecausesinglemarketrulesapplybothsidesoftheSwissborder,flowersdonotfaceSPScheckstherebuttheexample

31Guardian:UKcouldrunoutoffoodayearfromnowwithno-dealBrexit,NFUwarns7thSeptember2018(accessedvia:https://www.theguardian.com/politics/2018/aug/07/uk-run-out-of-food-no-deal-brexit-national-farmers-union)32BBC:Brexitthreattosandwiches26thJuly2018(accessedvia:https://www.bbc.co.uk/news/business-44960293)33TradePostBrexitBostonConsultingGroup,HerbertSmithFreehillsandGlobalCounsel34ThiswashighlightedbytherecentagreementonrevisionstotheNorthAmericanFreeTradeAgreement.https://www.cnbc.com/2018/10/01/ford-general-motors-rally.html

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illustratesthatordinarycustomsdeclarations,whichapplytoflowersastoallgoods,donotresultindelays.)

• Althoughdelaysindeliveriesareundesirable,UKmotormanufacturersalreadyhave

tocopewiththesometimesprolongeddelaysatChannelports(resultinginOperationStack–see20below),delaysonmotorwayssuchastheM25andacrossEuropebetweenEUsuppliersandUKplants,causedbybadweatherandotherincidents.

18. TheUKwillnotrunoutofcleanwater.

• ThestorythattheUKwouldbeunabletoimport,produceorstorethechemicalsrequiredtoensurepurewatersuppliesappearstoemanatefromleakedversionsofabriefingdesignedtofrightenCabinetministersintosupportingtheChequersdeal.Describedbythesourceas“ProjectFearonsteroids”35,itwasproducedbyagovernmentunitthathasnotactuallybeeninvolvedinpreparationforBrexit.

• TheUKwillbeabletoimportchemicalsneededtopurifydrinkingwater.Asthelaws

regulatingwaterpurificationwillbesetbytheUK,thereisnoreasonthatleavingtheEUwillaffectthelegalframeworkneededtoimportchemicals.

19. HMRC’scomputersystemswillbeabletohandletheextradeclarationsevenifthe

newsystemisnotfullyonline.• Theexistingcustomscomputer(CHIEF)hasbeenexpandedtohandleupto300

milliondeclarations36.

• ThenewCustomsDeclarationSystem(CDSwhichisessentiallytheexistingDutchsystem)isbeingphasedinsinceAugust2018forimportsandshouldstartbeingintroducedforexportsinMarch2019attheearliest.However,thetwosystemscanruninparallel.37

• Problemswithnewcomputersystemscanneverberuledout.Butthatriskwould

haveexistedwithoutBrexit.AfterBelgiumintroduceditsnewcustomssystemitexperiencedperiodsofdisruptionresultingincongestion.

35MailonSunday25thOctober2018https://www.dailymail.co.uk/news/article-6425479/Michael-Gove-backed-hearing-UK-run-drinking-water-DAYS-No-Deal.html36Q145PublicAccountsCommitteeOralEvidenceHMRCStandardReportandAccounts5thSeptember201837“IntheeventthatCDSisnotfullyready[forexports]by29March2019,HMRCintendstousetheexistingCHIEFsystemasacontingency.”TheUKBorder:PreparednessforEUExitNAO24October2018

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ExportsthroughCalaisAlmostallthescarestoriesaboutshortagesofmedicines,food,wateretcintheUKassumethatCalaiswill–eitherthroughlackofpreparationordeliberately–slowdownthetransitoflorriesfromtheUK;thiswillmeanferriescannotunload;whichmeansferrieswillbeunabletoreturntotheUKtoreload;solorrieswillbackupfromDoverandFolkestoneuptheM20.TheresultingcongestiononKentishroadsisassumedtoaffectnotjustoutboundlorriesbutalsoincominglorries.However:20. FranceisactivelydeterminedtopreventdelaysatCalaisforfearoflosingtradeto

BelgianandDutchports.• TheNational,RegionalandLocalauthoritiesinFrancehaveexpressedtheir

determinationtomaintainasmoothflowofcommerceonwhichtheprosperityofthisdepressedareaofFrancedepends.

o ThePrefecturesays:“ThesoleobjectiveistoguaranteethefreeflowofcrosschanneltradeandtopreservethecompetitivenessoftheportsoftheregionagainstcompetitionfromtheportsofRotterdam,AntwerpandZeebrugge”38.

o TheMayorofCalaissaysdelayswouldbe“economicsuicide”39.

• Adeliberatego-slowatCalaiswouldbeabreachofthreetreatyobligations:

o TheoriginalWTOTreatyforbidsdiscriminationagainstgoodsfromanycountry.

o TheTradeFacilitationAgreement,whichcameintoforceinFebruary2017,requiressignatories(includingallEUmemberstates)tofacilitate–nothinder–trade.Borderchecksshouldbeproportionatetorisk;

o TheEU’sownConstitution40requiresthemtoco-operatewithadjacent

countriestoestablishanareaofgoodneighbourliness.

• TheFrenchauthoritiesaretakingtangiblestepstoeliminatepotentialdelays:

o AddingthreeextralorrylanesatCalaistooffsetthe2mincheckstheyexpectperlorry.

38«Toutl’objectifestdegarantirlafluiditédesliaisonstransmancheetdepréserverlacompétitivitédesportsdelarégionfaceàlaconcurrencedesportsdeRotterdam,AnversetZeebruges.Lapréfectureetlesservicesdel’ÉtatenrégionHauts-de-France18thJuly201839BBC:“FrenchofficialsdismissUKfearsofCalais'go-slow'”https://www.bbc.com/news/uk-politics-4599024326thOctober201840TreatyforEuropeanUnionArticle8.1.“TheUnionshalldevelopaspecialrelationshipwithneighbouringcountries,aimingtoestablishanareaofprosperityandgoodneighbourliness,foundedonthevaluesoftheUnionandcharacterisedbycloseandpeacefulrelationsbasedoncooperation”.

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o CreatingaBorderInspectionPost(BIP)toinspectliveanimalsandfood

12kmsfromCalaistoavoidcongestion.(HaulierswillneedtoopenaTransitdocumenttocoverthejourneyfromporttoBIP.Ferryterminalswillprobablydemandthatvehiclescarryinganimalsandrelevantfoodproductshavetheseformalitiesorganisedbeforetheyembark).

o AcquiringascannerthatcaninspectfreighttrainsdestinedfortheChanneltunnelat30kmanhour.41

o TheFrenchgovernmenthasintroducedalawbeforetheAssemblée

Nationale42givingitallnecessarypowerstoensurethesmoothflowofgoodsintheeventofanodealBrexit.

o TheFrenchMinsterresponsibleforBrexitpreparedness:“Weabsolutelyhavetopreparefortheworst,thatistosaythatinMarchthereisnolegalrelationshipwithourBritishfriends.Wedonotknowwhatisgoingtohappen,whichiswhythePrimeMinisterhasaskedustoprepareforano-dealBrexit–fortheworst-casescenario.”43

o “Recruitment[of700staff]inthecustomssectorhasbegunbecauseevenwithadeal,wedon’tknowexactlywhattypeoffuturerelationswe’llhavewiththeUK,socontrolsmaybeneeded.Thatmeanscustomsofficers,infrastructureandparkingareas.Italsomeansmodernizingourcontrolstomakesurethey’reassmoothaspossibleanddon’tcausetrafficjamsonarrivalinFrance.”44

• OnethirdoflorriesgoingfromDovertoCalaisarereturningempty(reflectingthe

EU’shugetradesurpluswiththeUK).So,theCalaisauthoritieswillhaveathirdfewerdeclarationstoclearthanDover.

• TheFrenchareacutelyawarethatotherchannelports–especiallyZeebrugge,AntwerpandRotterdam–areeagertowintradeawayfromCalais.Itisestimatedthatotherroll-off-roll-onportscouldhandle40%ofDover/Calaistrade.

• TheEUCommission,too,recognisestheneedtofacilitatetradethroughtheShort

Straitsandauthorised:“CustomsauthoritiesmayissueauthorisationsfortheuseoffacilitationmeasuresprovidedforintheUnionCustomsCode,wheneconomicoperatorsrequestthem,andsubjecttorelevantrequirementsbeingmet.Ensuringalevel-playingfieldandsmoothtradeflowswillbeparticularlychallengingintheareaswiththedensestgoodstrafficwiththeUnitedKingdom.TheCommissionisworking

41LesEchos4thOctober2018.42ProjetDeLoi,habilitantleGouvernementàprendreparordonnanceslesmesuresdepréparationauretraitduRoyaume-Unidel’Unioneuropéenne,(Procédureaccélérée)8thNov2018.43GérardDarmanin,alsoinchargeofcustoms,toldFranceBleuNordradio..DailyExpress3rdOctober2018.44MmeNathalieLoiseau,MinisterforEuropeanAffairs.FrenchEmbassy,London4thDecember2018.

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withMemberStatestohelpfindsolutionsinfullrespectofthecurrentlegalframework.”45

21. OperationBrockcouldhandletailbacksintheunlikelyeventthattheyoccur,so

incominglorrieswillnotbeseriouslydelayed.• OperationBrock,withenhancedcapacityandimprovedtrafficrouting,willreplace

OperationStackaheadofBrexit(thoughpermanentlorryparksmayalsobeneededinfuture,regardlessofBrexit,incasepastproblemsatCalaisrecur).

• OperationStack46hasbeenactivatedon211daysbetween1998-2015asaresultof:o BlockadesofCalaisbyfishingboatso Industrialdisputesonferrieso Immigrantsbesiegingsecurityfenceso FiresandbreakdownsintheChannelTunnelo SevereweatherintheEnglishChannelo SnowblockingroadsaroundCalais

• Insummer2015OperationStackwasinforcealmostcontinuouslyformorethan

threeweeks;

• Atthepeak,7,000HeavyGoodsVehicles(HGVs)werequeuedontheM20,taking36hourstoworktheirwaythrough;

• ThereisnorecordofanyJITmanufacturingplantshavingtohaltproductioninthe

UKasaresultofthesedelays.

• PreparationsforOperationBrockhaveclosedofftwolanesofthirtymilesoftheM20forseveralweekswhilehardshouldershavebeenstrengthened.

o Thishaseffectivelyprovidedatrialrunofwhatitwouldbelikeifthesetwo

laneswereusedtoparktwothirty-mile-longslowmovingqueuesoflorries.o Trafficintheremaininglaneswaslimitedto50mphandliabletocongestion

whenaccidentsoccurred.

o Althoughthishascausedinconvenience(notleasttoanauthorofthisdocument!)ithasnotattractedthenoticeofthenationalmedialetalonebroughtthenationtoitsknees.

45PreparingforthewithdrawaloftheUnitedKingdomfromtheEuropeanUnionon30thMarch2019:AContingencyActionPlan13/11/2018COM(2108)88046OperationStackHouseofCommonsTransportCommittee23rdMay2016

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MiscellaneousScareStories

22. PlanesWILLcontinuetoflytoandfromtheEU.

• TheEUhasannounced47thatitwillallowUKairlinestoflyover,landinandreturnfromEUairportsevenifthereisnoWithdrawalAgreement,subjecttotheUKreciprocating.

• SeveralUKairlineshadalreadyestablishedEUbasestoenablethemtoflytoandwithintheEUevenintheabsenceofthisdecision.

• TheonlyrestrictiononUKbasedflightsison‘cabotage’–i.e.UKplaneswillnotbe

abletoflytooneEUdestination,pickuppassengersandflyontoanotherdestination48.

• Inpractice,thisisofminorimportanceasallbutafewUKroutestotheEUare

returnflightstoasingledestination.

• ThesamerestrictionappliestoUKandothernon-USairlinesflyingtotheUS.

23. BritishplanesWILLcontinuetoflytotheUSandotherdestinations.

AtpresentUKflightstotheUSaremadeunderanEU/USagreement.

• However,theUKhassuccessfullynegotiatedan‘open-skies’agreementwiththeUStoallowflightstocontinueafterBrexit49.Thedealisoneofninebilateralservicesagreements.TheothersarewithAlbania,Georgia,Iceland,Israel,Kosovo,Montenegro,MoroccoandSwitzerland.DiscussionswithCanadaareatan"advancedstage".

24. AircraftmanufacturerswillbeabletoexportproductslikeAirbuswingsBeforetheChequersmeetinganumberofcompaniesissuedstatementsaboutpotentialproblemswhentheUKleavestheCustomsUnionandSingleMarket(somesuspectedtheywerepromptedbytheDept.ofBusiness,EnergyandIndustrialStrategy(BEIS)).AmongthemwasAirbuswhichwarnedthat“IntheabsenceofaBrexitagreement,UKaerospacecompanieswillnotbecoveredanymoreunderexistingregulatoryapprovalsincludingEuropeanAviationSafetyAgencyapprovals.AllUKcompanies[includingallAirbus

47TheEUannouncedthisinprincipleon13thNovember2018butthiswasbarelyreportedbytheMainStreamMediaallowingthe‘planeswon’tfly’scaretorununtil19thDecember.48ThetwoairlinesmostaffectedbythisareIberiaandAerLingus.TheirUKshareholdingwillnolongercounttowardstherequisite50%EUownership.So,theywillbeunabletoflybetweendestinationswithintheEU(orevenwithinSpainandIreland)unlesstheyadjusttheirownershipstructure–whichtheypresumablywilldo.https://www.euractiv.com/section/uk-europe/news/brussels-cuts-iberia-and-aer-linguss-wings-to-fly-in-eu-after-brexit/49https://www.bbc.co.uk/news/business-4638046329thNovember2018.

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componentsuppliers]willneedtotransfertheirDesign,ProductionandMaintenanceOrganisationApprovalsintotheEU.”50Ithas,however,nowbeenannouncedthat:

• TheCommissionislegislatingtoextendthevalidityofexistingaviationsafetylicencestemporarily–soAirbusandotherUKaeronauticalproducersshouldbeabletoexportwingsandotheraviationproductstotheEU.

• Thistemporarymeasuregivestimeforapermanentsolution:EASAwillbeabletorecognisetheUK’ssafetysystemssothattheUK(likeothernon-EUcountries)willbeabletoissuesafetylicencesrecognisedbyEASA51.

25. BritishhaulagecompaniesWILLbeabletooperatebetweentheUKandEU.

• TheEUhasnowagreed52thattheUKroadhaulierswillcontinuetobelicensedto

operateintheEU(providedthattheUKreciprocates).

• Thisextensionisfor9months–totheendof2019–togivetime“toensurethatanadequatenumberofpermitsbeavailablewithintheECMTsystem,soastoensurebasicconnectivity.”TheECMT(EuropeanConferenceofMinistersofTransport)of43statesissueslicencescoveringhaulageacross43memberstatesincludingallEUmembersexceptCyprus.Ithasalreadysetthenumberoflicencesfor2019whichisnotsufficienttocopewiththeextranumberswhichwillberequiredafterBrexit.

• TheUKhasnegotiatedcontinuedmembershipoftheCommonTransitConvention

(EU,EFTAplusTurkey,MacedoniaandSerbia).“MembershipoftheCTCwillhelpensurethattrademovesfreelybetweentheUKandCTCmembersaftertheUKleavestheEU.ItwillprovidecashflowbenefitstotradersandaidtradeflowatkeypointsofentryintotheUK,astraderswillonlyhavetomakecustomsdeclarationsandpayimportdutieswhentheyarriveattheirfinaldestination.”53

• TheUK’smembershipoftheCTCwassupportedbytheEU.“Intheinterestofthe

Union,theCommissionisalsosupportingtheUnitedKingdominsecuringitsaccessiontotheCommonTransitConventionasanon-EUtransitcountry,…aswellasitsaccessiontotheConventiononthesimplificationofformalitiesintradeingoods54.”

50http://www.airbus.com/company/worldwide-presence/uk.html#Economy51InNovembertheCommissionstartedtheprocessofgrantingapprovalstonewUKapplicationswhenit“invitedtheEuropeanAviationSafetyAgency(EASA)tostartprocessingcertainapplicationsfromUKentitiesinpreparationforthetimewhentheUnitedKingdomwillnotbeaMemberState.”52RegulationoftheEuropeanParliamentandoftheCounciloncommonrulesensuringbasicroadfreightconnectivitywithregardtothewithdrawaloftheUnitedKingdomofGreatBritainandNorthernIrelandfromtheUnion.Brussels,19thDecember2018COM(2018)895.53https://www.gov.uk/government/news/uk-to-remain-in-common-transit-convention-after-brexit54PreparingforthewithdrawaloftheUnitedKingdomfromtheEuropeanUnionon30thMarch2019:AContingencyActionPlan13thNovember2018COM(2108)880

22

• AlthoughtheCommissionseekstodiscourageMemberStatesfrommakingbilateralaccordswiththeUKonfreighttransport,itconcedesthat:“therespectivecompetentauthoritieswillbeabletocooperateasnecessaryforthegoodimplementationoftheRegulation…sothattheleastpossibledisturbanceisbroughttothemanagementoftheroadfreighttransportservices…aftertheUnitedKingdom'swithdrawal”55.

26. Tradeinanimals,plantsandfoodproductsWILLcontinueafterBrexit.• TheEUrecognisedthat:“Inanodealscenario,asofthewithdrawaldate,theentry

ofmanygoodsandanimalssubjecttosanitaryandphytosanitary(SPS)ruleswillbeprohibitedunlesstheUnitedKingdomislistedinEUlawasanauthorisedthirdcountry”56.

• However,theCommissionthereforeannouncedthat:“theCommissionwill–ifjustified–swiftlylisttheUnitedKingdom,ifallapplicableconditionsarefulfilled,soastoallowtheentryofliveanimalsandanimalproductsfromtheUnitedKingdomintotheEuropeanUnion”.57

• AveterinaryBorderInspectionPost(BIP)istobecreated12kilometresfromCalais

soitwillnotbenecessarytoreroutethetradeinanimalstootherportswhichalreadyhaveBIPs,thoughthatalternativewillbeavailabletoo.

• ItwassuggestedthattherewillbeinsufficientvetstocertifyallanimalexportstotheEU.ButatpresentallexportsoflivevertebratestootherEUcountriesrequire“eitheranExportHealthCertificate(EHC)or,moregenerally,anEU-specificversionofanEHCknownasanIntraTradeAnimalHealthCertificate(ITAHC)”58whichinvolveveterinarycertification.AfterBrexitanEHCwillberequiredfortradewiththeEUalsorequiringveterinarycertificationsotherewillbelittledifference.59

27. UKcitizenswillnotfacehighroamingchargeswhentravellingintheEU.60

• Phonecompanieshavestatedtheywillnotchargeroamingfees.DaveDyson,the

CEOofThree,said“myambitionistofreeourcustomersandoffer100percentroamingworldwideatnoextracost...”Vodafonehasalsoconfirmedthis.

55ibid56Brexitpreparedness:EuropeanCommissionproposesvisa-freetraveltotheEUforUKnationalsinanodealscenario–iftheUKalsograntsreciprocalvisa-freetraveltoallEUcitizensStrasbourg,PressRelease13thNovember201857ibid58Nonetheless,“workisunderwaytomaketheapplicationprocesssimplerandensurethereisenoughcapacityamongappropriatelytrainedveterinarians“P64PartnershipPack:preparingforchangesattheUKborderaftera‘nodeal’EUexit.Thirdedition21stDecember201859AllanimalmovementswithintheEUaremadeundertheTradeControlandExpertSystem(TRACES).TheUKisproducingitsownversionofthatsystemtobeusedafterBrexit.60BBC:EUnetworkchangescouldreviveroamingfees29thNovember2018(accessedviahttps://www.bbc.co.uk/news/technology-45509370)

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• TheGovernmenthasconfirmeditwouldlegislateto“applyafinanciallimitonmobiledatausagewhileabroad”.61

28. UKCarmanufacturershaveobtainedtypeapprovaloftheirmodelstosellintoEU.• AlthoughtheEUwillceasetorecogniseexistingtypeapprovalcertificationafter

Brexit,carmanufacturershaverenewedtheircertificationwiththerecognisedSwedishcertifier.

• ManufacturersofotherproductsaretakingsimilarstepstoobtaincertificationifitisrequiredtoensuretheirproductscontinuetoberecognisedascompliantwithEUlaw–justastheydotoexporttotheUSAandothercountries.

29. ImporterswillNOTfaceadversecashflowimpactsbecauseofearlierpaymentofVAT.

• Atpresent,importsfromoutsidetheEUhavetopayVATimmediatelywhereasVATonimportsfromtheEUispostponeduntiltheimporter’snextVATreturn.ItwasfearedthatwhenEUstatesbecomethirdcountriesVATwouldberequiredupfrontwhichwouldhaveabigimpactoncompanies’cash-flow.HMTreasuryannounced,however,62thattoavoidimportsfromtheEUhavingtopayVATearlieritwillpostponeitonimportsfromallthirdcountries.TheTreasury,andnotbusiness63,willbearthecash-flowimpact.64HMRCismakingthisahighprioritytobereadyby29thMarchand,particularly,toensurethatsoftwaresuppliersarealsoready.65

• ExportstotheEUwillcontinuetobezerorated–astheyaretothirdcountries.ExporterswillnolongerhavetokeepaEuropeanSalesListsincetheexportdeclarationwillprovideproofthatgoodshavebeenexported.(Previously,proofcould–intheoryatleast–beprovidedbymatchingexporters’andimporters’declarationsviatheVATInformationExchangeSystemtowhichtheUKwillnolongerbeparty.)

30. PerformersWILLbeabletotourandperformintheEU.

• Operasingers,musicians,bandsandotherperformershavebeenconcernedthat

theymaybeunabletoperformandparticularlytakeinstrumentsandequipmenton

61“Thelimitwouldbesetat£45permonthlybillingperiod,asatpresent(currently€50underEUlaw).Thegovernmentwouldalsolegislate,subjecttoparliamentaryapproval,toensurethealertsat80%and100%datausagecontinue.”DCMSGuidance“Mobileroamingifthere’snoBrexitdeal”13thSeptember201862VATforbusinessesifthere’snoBrexitdeal-GOV.UK23RDAugust201863https://uk.reuters.com/article/uk-britain-eu-vat/british-businesses-relieved-at-no-deal-brexit-vat-tweak-idUKKCN1L81N564PostponedaccountingforVATonimportshasalsobeenintroducedinFrancewhichwillhelptradeintheoppositedirection.http://www.douane.gouv.fr/articles/a13194-postponed-accounting-for-import-vat65Q138-Q141PublicAccountsCommitteeOralEvidenceHMRCStandardReportandAccounts5thSeptember2018

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tour.However,performerscanusetheATACarnet66whichallowsthetemporaryimportofequipment–to77countriesaswellas,infuture,theEU.ItisoperatedintheUKbytheLondonChamberofCommerceandIndustry.67

• TheBeatlesetalwereabletogotoandfromLiverpoolandHamburglongbeforetheUKjoinedtheEuropeanCommunity!ItoughttobeeasierforperformerstocrossbordersnowthanthenbecauseofadegreeofinternationalliberalisationbuttheUKshouldcertainlyseektonegotiateremovalofunnecessarytaxandotherobstacles.

66Partnership_pack_prepare_for_no_deal_changes_at_border__Third_edition_.pdf21stDecember201867https://www.londonchamber.co.uk/export-documents/ata-carnet/

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CONCLUSION:ARMAGEDDONORTHEMILLENNIUMBUG?

RemembertheMillenniumBug?About100daysbeforetheturnofthemillennium,PrimeMinisterTonyBlairannouncedthathestoodreadytocallouttheArmytocopewithcivilunrestcausedbytheeconomicandsocialcollapsethatmightbeunleashedbytheBugatmidnighton31stDecember1999.Despitespendinganestimated$75billionworld-widetotacklethethreatitwasstillfearedthat:planeswouldfallfromthesky,liftswouldcrashdowntheirshafts,theelectricitygridmightmeltdown,thetelephonesystemwouldfail,computerswouldnotworkorgorogueandthewholefinancialsystemmightcollapse.TheCBI(ofcourse!)joinedallpoliticalpartiesinwarninghowserioustheseconsequencescouldbe.

Almostno-onedaredsuggestthatthiswasallgrosslyexaggerated.Anyonewhodidsowasaccusedofdangerouscomplacencythatmightunderminethenationaleffort.MostscepticsfeltitwassafertobewrongwiththeherdthanrisktheodiumofsuggestingtheEmperorhadnoclothes.

Intheevent,nothinghappened.Thereissomedisputenowastowhetherthisisbecausetheriskwasgreatlyexaggeratedorbecausethoroughplanningpreventedproblemsemerging.Perhapsitwasacombinationofthetwo.ComparisonswiththeMillenniumBugNowwehearsimilarapocalypticfearsaboutleavingtheEUwithoutaWithdrawalAgreement.TheDefenceSecretaryannouncesthat3,500troopswillbeonstandby68.ThePrimeMinistersuggeststhatherinsulinmaybeatrisk.Remaincampaignerstalkofchaos,catastropheandArmageddon.

WillthisallproveasexaggeratedastheMillenniumBug?Ifnopreparationsweremadebygovernmentsorbusiness,therewouldbeseriousdisruption.ThatwastheperceivedpositionwhenleavingonWTOtermsbeganseriouslytobediscussed.So,itwasunderstandablethatdisturbingscenariosbegantocirculate.ButnowfarmoreisbeingdonenotjustthissideoftheChannelbutinFranceandbytheEUCommissiontopreparefor,andthereforeprevent,problemsmaterialising.

Nevertheless,thesameasymmetriesapplytoreportingandcommentingonwhatwillhappencome29thMarch2019asdidaheadof31stDecember1999:scarestoriesattractreadersandviewerswhereasreassurancedoesnot;itisfarsafertojointhechorusoffearthantogooutonalimbandpointouthowirrationalmostofthefearsare;reassuranceisderidedascomplacency.

Moreover,thistime–unlikewiththeMillenniumBug–thosewhowishtopreventBrexithaveavestedinterestinwhippingupfear,ignoringmeasuresthatwillpreventthose

68However,thetroopsarelogisticsexpertsandsparemanpower.UnlikeinBlair’sMillenniumBugscare,theyarenottodealwithcivilunrest.Moreover,GavinWilliamsonadmitsnoDepartmenthadsoughttheirhelp.Hansard18thDecember2018

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dangersmaterialisingandsilencingthosepointingouttheupsideofleaving.Broadcasters,inparticular,haveoftencastasidetheirOfcomobligationstobalanceandimpartiality.ManyadoptthehighlypartisanvocabularyoftheRemaincampaign.TradingonWTOtermsis“fallingoffacliffedge”.LeavingwithoutaWithdrawalAgreementisroutinelydescribedas“crashingout”neveras“cashingin”.Norarethosewhoassertthatanydealisbetterthannodealeverchallengedastowhytheyaresowillingtogiveaway£39billionfornothinginreturn?Channel4producedahalf-hourprogrammeofunchallengedpredictionsaboutthehorrorsofa‘nodeal’Brexitwithoutmentioningthatitsaves£39billion.And,liketheBBC,ithasnotreportedthewelcomenewsabouttheFrenchauthorities’planstoavoidcongestionatCalais,letalonethatHMRCsaytheywillnotneedtocarryoutadditionalchecksatDover.

Inaddition,thistimethegovernmentisclearlydeterminedtoplayupthesupposedhorrorsofleavingwithnoWithdrawalAgreementinthehopeofpersuadingMPstovotefortheEU’sunloveddraft‘deal’.ThegovernmentisinthebizarrepositionofpreparingtoleaveonWTOterms,whilepretendingthatitspreparationswillbeunsuccessful.Infact,talkingupthehorrorsof‘no-deal’isnotmerelyself-contradictoryitisextraordinarilyirresponsible.ThePM’sonlyhopeofsecuringanysubstantivechangesinherdraftdealdependonherconvincingtheEUsheisprepared–ineverysense–toleaveonWTOterms.TheRealityThesimpletruthisthatroughlythesamenumberoflorrieswillpassthroughDoverafterBrexitasdonow.Haulierswillhavetocompleteacustomsdeclaration,butthesearedespatchedelectronicallyinadvanceandcheckedautomaticallybytheCustomscomputerinSalford.Theyarenotexaminedattheborder.CustomsdeclarationsanddeclarationsoforiginarerequiredforgoodstradedacrosstheSwissborderbutdonotresultinlongdelaysorlengthyqueuesforthe23,000lorriesand2.2millionpeoplethatcrosseveryday.ThereisnoreasonwhytheyshouldcauseexcessivedelaysatDoverorCalais.Topreventcongestionatitsport,RotterdamintendstorequireexportersofgoodsdestinedfortheUKtohaveregisteredthattheircustomsdeclarationshavebeenfiledinordertoobtainentrytotheport–Dovershouldconsiderasimilarrequirement.Theprioritybetweennowand29thMarchmustbeboostingpreparationsbycompanies,customsagentsandsoftwareproviderstoensuretheyareasreadyaspossibletoimplementthecustomsproceduresthatwillberequiredofthemandawarethattheymustdosobeforegoodsaredespatchedtotheport.

TherewillberoughlythesamenumberofphysicalchecksofvehiclesarrivingatDoverasatpresentbecausechecksarebasedonanassessmentofrisk.AndtherisksofconcerntoHMRCaresmugglingoftobacco,alcohol,drugsandillegalimmigrants–noneofwhichrisksarelikelytochangeafterBrexit.Tariffs,iftheyareintroduced,willnotbecollectedattheportanymorethanVAT,whichisandwillremainbyfarthelargesttaxonimports,ordutiesontobaccoandalcohol–thenextbiggest.Tariffs,liketheseexistingtaxes,willbepaidelectronically–“computertocomputer”.

HMRChasmadeitclearitwill“prioritiseflowovercompliance”duringtheinitialperiodwhenhauliersmayarrivewithouthavingcompletedtheircustomsdeclarationsproperly.In

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otherwords,customsofficialswillbeinstructedtowavevehiclesthrough–andfollowuplater–ratherthanletcongestionbuildup.

Theoneadditionalpolicythisdocumentsuggestsisthat,ifnegotiationsonanEU/UKfreetradedealhavenotbegun,thegovernmentshouldconsidersuspendingalltariffs(bothonEUandnon-EUimports)foraperiodofmonthsafterBrexitday.Thiswillallowhaulierstimetogetusedtothenewproceduresandmakeiteasierforcustomsofficerstowavethroughnon-compliantvehicleswithoutconcernaboutlostrevenue.ItisveryunlikelythatbusinessesintheUKwoulddisrupttheirexistingsupplyarrangementstosourcefromabroadifthesuspensionoftariffsisknowntobegoingtolastforonlyafewmonths.

PeopleonbothsidesoftheBrexitdebateneedtobemorerealisticabouttheadjustmentsrequiredasaresultofBrexit.BothtendtoexaggeratetheextenttowhichtheEUwilldeliberatelyputobstaclesinthewayofBritishtrade.Ofcourse,theEUwantstheUKtobeseentofaceproblemsasaresultofleaving–notoutofmalicebuttodiscourageelectorsinothermemberstatesfromsupportingeuroscepticparties.

However,theEUandFranceinparticular,areclearlydeterminedtoensureasmoothflowoftradethroughCalais–notforourbenefitbutforfearoflosingbusinesstoBelgianandDutchports.Likewise,theEUislegislatingtoensurethatplaneswillfly,lorrieswilldrive,andAirbuswillgetitswings–becauseitisinitsinterest.

MostoftheotherchangesBritishbusinessesandofficialbodieshavetomakearenotdeliberatelyconcoctedbytheEUbutarethenaturalconsequenceofourchangeofstatusfromamemberstatetoathirdcountry.

Oncewehaveleft,BritishcompaniesmayneedtodowhatAmerican,Japanese,Chinesecompaniesdo–gettheproductswhichtheywishtosellintotheEU,certifiedascomplyingwithEUstandardsbyanauthorisedbodyinanEUmemberstate.UKcarmanufacturers,forexample,arereportedlyconfirmingthe‘typeapproval’ofexistingmodelswiththeSwedishcertificationbody.ForsomeproductssuchaprocessmayonlybenecessaryuntilaUK-basedbodyisrecognisedasabletocertifycompliancewithEUrules.TheEUalreadyrecognisescertificationofmanyproductsbynationalbodiesinanumberofnon-EUstates.

Theseproceduresaretiresomebutone-offandsimilartotheprocessesexportersundertaketotradeinmanyothermajormarkets.

WillleavingwithoutaWithdrawalAgreementandtradingonWTOtermsbeArmageddonoradampsquib?Willitbechaosor,liketheMillenniumBug,anon-event?

Itwouldberashtopredictthat‘everythingwillbeallrightonthenight’.Unforeseenproblemsmayarise,andsomebusinessesmayfailtoprepareforforeseeableproblems.Butexperiencesuggeststhatifonepreparesforthem,whatcouldhavebeenmajorproblemsturnouttobeminor.TheoddsarethataWTO+++BrexitislikelytoturnoutnearertheMillenniumBugthanArmageddon.

ThatwillbeagreatdisappointmenttoopponentsofBrexit!Buttheywillgetoverit.

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Thenwecanallturnourmindstowhatisfarmoreimportantthanthetermsofleaving–namelyhowweusethepowersweregainoncewehavetakenbackcontrolofourlaws,ourmoneyandourborders.Thatisanexcitingandpositivechallenge.

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'AnnexA:DoestheUKowetheEU£39billion?BritainshouldofcoursepayanysumsitlegallyowestheEU–ifany.TheLordsCommitteeconcludedthatintheabsenceofaWithdrawalAgreementwehadnofinancialobligationtotheEU.Citylawyersreachedthesameconclusion.TheamountsindicatedinthedraftAgreementhavebeenofferedintheexpectationofapositivetradedeal69onthebasisthat‘nothingisagreedunlesseverythingisagreed’.AccordingtotheNAOtherearefourmaincomponents:70

• Annualnetcontributions.Nearlyhalftheexpected£39billionwouldhaverepresentedtheUK’snetannualcontributionstotheEUduringthe21-monthtransitionperiod,whichwillnotarisewithoutaWithdrawalAgreement.No-oneconteststhatwewouldkeepthisifweleftwithnotransitionperiod.

• Resteàliquider.TheEUauthorisessomespendingcommitmentsonprogrammesextendingseveralyearsahead.Britain’snetshareoftheseoutstandingcommitmentsisputatabout£18billion.Thereisnoprecedentforacountryleavinganinternationalorganisationbeingexpectedtocontributetoongoingprogrammesinitiatedwhenitwasamember71.Organisationswhoseincomedeclines,whetherasaresultoftheirmembershipbaseshrinkingorsomeotherreason,havetoreadjusttheirbudgets.

• Pensions.Theremainderislargelyacontributiontotheaccruedpensionliabilitiesofcivil

servants(netofrepaymentofourcontributiontoEIBcapital).ButtheEUhasalwayschosentofinanceitspensionliabilitiesonapay-as-you-gobasis,notonthebasisofaccrualofentitlements.Newmemberstatesthereforepayfortheactualpensionsofcivilservantswhoretiredbeforethenewcountryjoined.Indeed,theUKhasbeenpayingtowardspensionsearnedbeforewebecamemembers.Toapplythepay-as-you-goprinciplewhilewetheUKwasamemberstatebutthentoapplytheaccrualsbasisinrespectofpensionspayableafterweleave,ismanifestlyunjust.Again,thereisnoprecedentforanorganisationwhichfundsitspensionsonapay-as-you-gotochargealeavingmemberonanaccrualsbasis.

• EIBcapital.TheonlysignificantpositiveitemisthereturnoftheUK’sinitialcapital

contributiontotheEuropeanInvestmentBank.However,theEUproposestowithholdtheUK’sshareofthebank’saccumulatedcapitalwhichlogicallyonlybuiltupbecauseoftheUK’sinitialinvestment.

TosmooththeEU’sruffledfeathers,weshouldagreetosubmittheEU’sclaimstoarbitrationbyanappropriateinternationaltribunal–witheveryconfidenceofwinning.

69Itwouldbealmostunprecedentedtopayforatradedealorfor‘accesstotheEUmarket’.Thenormal‘payment’fortarifffreeaccesstoanothercountry’smarketisallowingthatcountrytarifffreeaccesstoone’sownmarket.A‘zeroforzero’tradedealwouldmeantheUKforegoing£13billiontariffsontheEU’smuchlargerexportstotheUKversustheEUforegoing£5–6billiontariffsonUKexportstotheEU.So,itwouldbeparticularlystrangefortheUKtopayforthat.70EstimatedfiguresfromExitingtheEU:thefinancialsettlementNationalAuditOfficereport20April201871TheWithdrawaloftheUKfromtheEuropeanUnion:analysisofpotentialfinancialliabilities.CharlieElphickeMPandMartinHoweQCSept2017

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7January2019