Third country status for UK in trade deal with EU
The UK left the EU on 31 January this year, but has remained in the single market and customs union during a year-long transition period, temporarily allowing freedom of movement to continue and trade to remain frictionless.
Now, a free trade agreement described by Prime Minister Boris Johnson in his Christmas Eve announcement as a 'Canada style' agreement has been reached with just one week left before the transition period ends. The deal avoids tariffs and quotas, he said.
The last sticking point – negotiations on fishing rights – had been resolved leaving the UK's share of fish in its waters rising from 50% today to two thirds over a five-and-a-half year period, according to Johnson. "To get ready for that moment, those fishing communities will be helped with a £100m programme to modernise their fleets and the fish processing industry."
However, the deal will need to be ratified by parliament and if it is not signed off by 31 December then tariffs could come into force.
Key questions
The Food and Drink Federation (FDF) welcomed the UK’s trade agreement with the EU but says key questions are still to be answered.
“UK food and drink is breathing a sigh of relief that we have a deal but we will hold the celebrations until we have scrutinised the detail,” said Ian Wright, chief executive of the FDF.
“We must first answer key questions about which individual sectors of the industry will be unable to access the EU market without facing tariffs under the agreed rules of origin.”
Constructive approach
“We welcome the prospect of a more constructive approach to enforcing new rules, on both sides of the border,” Wright added.
“We hope for a much more collaborative relationship between London and member states with the minimisation of disruption at the border due to new trade frictions introduced as a priority.”
The FDF chief also questioned why a deal had taken so long to be agreed, while warning there would be consequences from the brinkmanship.
“The prime minister promised UK businesses over a year of transition in which to adapt to a new set of rules. He has delivered us four working days,” said Wright.
“Food and drink manufacturers will do their best to keep food flowing. However, this week’s chaos at Dover and the last gasp nature of this deal means that there will be significant disruption to supply and some prices will rise.
“Disappointed shoppers and consumers will rightly ask why a deal had to take so long.”
'Stormy waters ahead'
Mella Frewen, director general of FoodDrinkEurope, the FDF's trade group counterpart in Europe, said: "Congratulations on a deal, this is good news. But we must warn that stormy waters lie ahead for the agri-food sector – and for EU-UK trade in agri-food products worth around €48bn – if we don’t get the next part right.
"We all need to look at the detail of the agreement to understand the full implications, but it is essential for EU and UK authorities to move at lightning speed to ensure businesses understand the new trade requirements, that border controls can operate efficiently from January 1 and that the Commission has a crisis management protocol, including direct communications with agri-food chain operators, to identify and solve border issues as they arise over the coming weeks and months.
"Failure to move quickly will lead to more border chaos and supply chain disruption that will not only put thousands of jobs at risk, but also impact the safe supply of affordable agri-food products to consumers. Given the agri-food sector will be one of the sectors worst-hit by the effect of Brexit, we are also calling for a swift deployment of the EU’s €5 billion Brexit Adjustment Reserve."
National Farmers Union (NFU) president Minette Batters said: “The successful conclusion of a deal between the UK and EU is very positive news for British agriculture. The EU is our largest trading partner and we have been clear throughout negotiations that maintaining tariff-free access to the EU market is absolutely crucial for our food and farming industry, not only for farmers’ businesses and livelihoods, but for our ability to continue to provide a secure supply of quality, home-grown food for the nation.
Tariff-free element 'a relief'
“We will now analyse the details of this agreement to ensure it meets the needs of British food and farming. The tariff-free element will be a particular relief for farmers that rely heavily on the EU export market, such as our sheep farmers, as well as farmers across British agriculture that produce the safe, traceable and affordable food that underpins more than £14 billion worth of export sales each year to the EU.
“It does remain the case though that our relationship with the EU will experience a fundamental change at the end of the transition period on 1 January 2021 and we do anticipate that there will still be disruption to trade at the border. New checks, paperwork and requirements on traders will add costs and complexity. It is vital government does all it can now to prioritise exports of our high quality, perishable agricultural products to make sure that these products are not left languishing in queues at the border when the changes take effect.
“With only seven days left until the end of the transition period and traders still facing a huge amount of disruption on the ground, I would urge both the UK and EU to now use the basis of this deal to continue talks to manage any disruption we may experience from 1 January.”
Standards met
Third country status for the UK means the country has met all of the necessary animal health and biosecurity standards for trade.
The decision by the EU to approve exports of meat, dairy and other products of animal origin in this way was welcomed by the NFU.
“Receiving third country listing status from the EU for our animal products is absolutely critical and will allow an export trade worth more than £3bn to continue at the end of the transition period,” said Minette Batters, NFU president.
“This is a step forward in the government’s preparations for the end of the transition period.
“While this listing is good news, we must bear in mind that there will be significant friction for our exports to the EU from the 1 January and it’s crucial the government minimises this disruption as much as possible in the time remaining,” Batters added.
Deal relief
Welsh farmers union FUW “breathed a sigh of relief” over the deal, it said.
“The consequences of a no-deal for farming and other industries would be catastrophic, so it was always hoped that common sense would prevail," said FUW President Glyn Roberts.
“However, there was always a risk that refusals to compromise on one or other side could lead to the worst-case scenario.”
Roberts also welcomed the EU's formal listing of the UK as a third country, saying the move was essential in terms of allowing Welsh food exports to the EU.
“However, our access to the EU market, which is the destination for three quarters of Welsh food and drink exports, will still face significant barriers after 31 December, with non-tariff barrier costs expected to rise by 4-8%,” he added.
Potato concerns
Roberts said the full text of an agreement would have to be scrutinised in order to assess the full impacts and benefits, and a number of concerns existed, including in terms of seed potato exports.
NFU Scotland also picked up on the issue, commenting that the trade deal “has failed Scotland’s internationally recognised seed potato industry".
It added: “From the 1 January it will not be possible for Scottish seed potatoes to be exported to the EU.
“As an EU Member State, Britain exported around 30,000t of seed potatoes, worth £13.5m, to mainland Europe each year and the majority of these were high-health stocks grown in Scotland.
“There is also significant trade with Northern Ireland that is now at risk although great efforts have been made by the seed potato trade to export earlier to beat the 31 December deadline.”
Cautious welcome
Richard Harrow, chief executive of the British Frozen Food Federation (BFFF), said news of the trade deal was a great relief after an “uncertain and testing year”.
However, he warned that many challenges lie ahead.
“The devil will be in the detail of the new agreement, but the top line information that trade will in the majority of cases be tariff and quota free is important,” said Harrow.
The BFFF chief also pointed out that many businesses who have not previously exported outside of the EU will now find themselves exporting food, even if it is only to Republic of Ireland.
“From the 1 January, this will require additional and often complex paperwork, including Export Health Certificates for products of animal origin (POAO) and prenotification of shipments to Customs in the Republic of Ireland – all of which will place additional burden and costs on the frozen food industry, at a time when many of our members, especially those supplying the out of home market, are struggling to stay in business.
“We still have additional complexity for moving products between Great Britain and Northern Ireland. In the short term the process for some products will be simplified, but in comparison to how products move today even this is has many additional stages,” Harrow added.
“Also, from April 2021, members will need to provide the same level of paperwork as exporting to the EU and provide new specific labelling for Northern Ireland adding further complexity and cost.”
Clarity needed
Northern Ireland Food and Drink Association (NIFDA) chair Nick Whelan said that, while preferable to a no-deal scenario, there is still clarity needed around bureaucracy and dispute resolution.
He added: “As was the case when the Withdrawal Agreement was agreed, this deal is welcome insofar as it takes us from the cliff edge – but it is far from perfect, and we still need clarity on a number of key areas.
“If the Northern Ireland protocol is to be durable, the UK and EU will need to address the challenges to local consumers of reduced choice and increased cost as a result of new administrative burdens on GB-NI trade.
“Additionally, we need a fair arbitration system to be in place from day one as there will be errors and teething problems as we come to terms with new procedures, and we want to minimise waste.”
Logistics
Elizabeth de Jong, Logistics UK's policy director, said: “A deal is great news for the UK economy, since it removes the risk of tariffs being placed on almost every item imported from the EU, which would have raised prices and slowed the rate of economic growth.
"We are still absorbing all the details, but it looks as though HGVs will continue to have access to the EU market, and aircraft will still be permitted to fly to and from the EU, which safeguards the UK’s highly interconnected supply chains and protects the jobs of those charged with keeping the country stocked with the goods it needs.
“Meanwhile, Logistics UK is urging traders to continue to get ready for new trading conditions as they were before, as the new trading relationship will still require many of the same preparations, not least the introduction of customs declarations and additional checks on food and livestock. Logistics UK is advising traders not leave paperwork to the last minute, or ignore it, as this will cause delays to journeys.”
