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International trade update

23 October 2020

With the initial shock of coronavirus having been absorbed, international trade issues are coming more into public discussion and reporting. Jack Semple Engineering & Machinery Alliance secretary gives us an update

Michael Gove, the de facto Brexit minister says he is concerned but not surprised by internal government figures showing that 61% of firms have made no preparations for the end of the Brexit transition period.

The government is to launch a transition advertising campaign next month under a £4.5 million contract with PR firm MullenLowe. The website Politico has reported on the communications plan.  This summer, the campaign will nudge people to take action, by warning of the “consequences and opportunity” ahead. 

In the autumn, the campaign will use an approach designed to “shock and awe”, the term used by the US military to describe the intended impact on the enemy of its military forces in the Iraq War. The contract is for 12 months and the campaign could go on well into 2022.

In December, the campaign will focus on “loss avoidance”, then switch to ‘”opportunities” in January. 

Government research is reported to have shown firms are complacent and that they are reluctant to act without certainty.  Some are more likely to prepare because they are worried about the impact of Brexit and these firms “will not respond well to overly positive messaging”.  Brexit voters are “less likely to prepare as they don’t believe in any potential negative consequences of leaving”.

Gove, speaking to the Northern Ireland select committee last week, said the planned campaign was needed “to make sure people aware of the both the challenges and opportunities as we prepare for life outside the EU and outside the single market”.

“There are a number of actions businesses have been encouraged to take, for example acquiring the wherewithal to be able to export to European countries once we are outside the customs union and single market, and to take advantage of free trade agreements and opportunities elsewhere,” Gove said.

Comment: Public and political discussion of preparedness has been one-sided, in that it has tended to focus on  administrative and process issues – what the UK government will do and require, and what businesses will have to do in response.  Much of this remains unknown, in detail.

Much less discussed is what companies are already doing in terms of their business relationships.  On the one hand, there is the potential for work to come back to the UK, on the other for it to move abroad.  Anecdotally, we have heard of UK firms losing EU business, and losing UK customers who have, or are in the process of, relocating outside the UK; and we hear of reshoring initiatives.  Here, there is little information, and such as there is, is not collated.  In the past three months, these issues have been eclipsed by the Covid crisis.

Similarly, attention has focused on government actions about the flow of goods into the country, because that is what government controls.  There is little discussion to the issue of exporting to the EU, which is - arguably - even more important.

Tariff pledge to Northern Irish firms

Michael Gove has said that secondary legislation would be brought in to re-imburse firms in Northern Ireland, should tariffs be payable because of a lack of agreement with the EU. That would be a unique arrangement and would be in place by the end of the Brexit transition period in December this year, he told the Northern Ireland committee.

Gove was unable to give other details of how arrangement for Northern Ireland would work.

Customs plan to be published next month

Meanwhile, next month, the government is expected to publish some details of how the customs and border controls will work.  HMRC is revisiting the UK ports over the next couple of weeks to re-appraise what is there and what will be needed.

This June HMRC announced a further £50 million funding to support customs intermediaries (customs agents, forwards etc) to gear up for post-transition processes, then implementation of which some of which has been postponed until July 2021.

UKCA mark – call for longer implementation period

The UKCA mark (UK Conformity Assessed) is due to come into force at the end of transition.  Various business organisations, including the Engineering and Machinery Alliance (EAMA), have written to the government urging a delay in implementation.  They have told government that there is insufficient time for firms to make the necessary changes needed in the certification and manufacturing process.  There is currently no government guidance on the UKCA.

EU trade talks

The UK has floated the idea that an agreement could include the EU imposing tariffs on UK goods, where the UK deviated from EU rules.  EU officials are reported to have described the idea the basis for a relationship of constant disputes.  The idea first appeared in The Spectator magazine, which used to be edited by Boris Johnson and where Dominic Cummings is a commissioning editor.

While both sides have sought to inject new urgency into the talks, there is little indication of substantive progress.

US trade talks

There is growing concern among UK trade bodies over the direction of US trade talks.  The US is reported to be determined to force acceptance of US standards, which are incompatible with current EU/UK standards, on subjects ranging from chlorinated chicken to electrical wiring. US standards are also widely seen as lower and undesirable. 

The UK government is determined to have freedom to adopt its own standards, or those of others, especially regarding new technologies.  In practice, this is likely to mean a towards US standards, although other global influences may also be relevant.  The challenge would be to maintain UK levels of influence, as influence within Europe would further diminish.

Dehenna Davison MP, who worked for Jacob Rees-Mogg for a year when a student (she is now 26), called on the Conservative Home website for “a new international trading order built on the foundations of the special relationship”.

In the first legislative controversy linked to a future US trade deal, the Agriculture Bill will allow chlorinated chicken to be sold in the UK.  Eighteen Conservatives voted against that part of the bill, including Theresa Villiers, a former Northern Ireland secretary and Treasury minister.  She is reported to have been blocked by the government from sitting on the intelligence and security committee because of defying the party whip.

Japan trade talks

Japanese trade negotiators appear to have dismissed UK ambitions for an ambitious, comprehensive trade deal, set out by trade secretary Liz Truss when the talks started two weeks ago. Japan’s chief negotiator said that the deal would have to be wrapped in a just a few weeks, in time to be ratified by the Japanese parliament and be in place for the end of the Brexit transition period.

Renewed talks could subsequently take place, if the UK wanted to join the Trans-Pacific Partnership, it is reported. 

New Zealand and Australia trade talks

Talks with both countries have been launched by PM Boris Johnson, with a photo opportunity highlighting the opportunity for the British to have Australian Tim Tam biscuits.