An international logistics expert has warned businesses a future free trade agreement between Britain and the EU would not permit anything like the frictionless trade they currently enjoy with the bloc.
Adam Johnson, director of Leeds-based Tudor International Freight, said Prime Minister Boris Johnson had declared repeatedly his intention to replace Britain’s current membership of the EU single market and customs union with a free trade deal, after Brexit.
He said, however: “The term ‘free trade’ is misleading, as in practice it would mean numerous new barriers to commerce between Britain and the EU being erected. That’s why the political declaration the Prime Minister agreed with the bloc, by far our largest trading partner, mentions an aim of lowering costs and friction, compared to if there was no such deal, but not avoiding them completely.
“It’s true that under a free trade deal, tariffs and quotas would not apply for at least some goods moving in both directions. Tariffs are import taxes that tend to inflate prices for buyers while quotas are limits sometimes imposed on the quantities or value of certain goods allowed into trading entities, such as countries and blocs, from outside. Tariffs tend to be particularly high on agricultural items – the EU average for these is 12 per cent, compared with its mean charge of four per cent on other goods, for example.”
Mr Johnson added, however, exporters from Britain to the EU would have to prove eligible products substantively originated here, to qualify for zero tariffs. The burden such a requirement imposed could be gauged from the fact that traders worldwide often preferred paying tariffs to evading them by demonstrating origin. This was believed to be the position with about a third of relevant exports from the EU, for instance.
He said: “Various non-tariff barriers would also apply under a free trade deal with the EU. These are often more formidable obstacles, as tariffs have generally been diminishing across the world for about 70 years.
“For example, even if they could avoid tariffs, Britain’s exporters to the EU would still have to face other taxes, like excise duty and VAT, provide security and customs declarations, plus experience risk-based inspections of their products.”
Mr Johnson said it was also probable the EU would not allow British watchdogs alone to continue approving highly regulated products destined for the bloc – such as hazardous chemicals, medical instruments, pharmaceuticals or cars – and insist on its own authorisation being needed too.
He said: “Under a free trade agreement, EU importers would additionally supplant British exporters as responsible for placing low-risk products from here on the bloc’s market. This is a status with significant onuses for aspects such as product labelling and legal liability, which some continental companies have already said they’d be reluctant to assume.
“Goods of animal origin shipped from Britain to the EU – such as fresh meat, milk and eggs – would also need export health certificates signed by veterinary surgeons. They’d additionally have to enter the bloc via designated border inspection posts, where all consignments would undergo identity and document checks, with up to half receiving physical inspections as well.”
Mr Johnson said such requirements would significantly increase administration, costs and delays for Britain’s traders with the EU, which could adversely affect sales, job security and bankruptcies.
He said the Prime Minister had pledged to have the free trade deal in place by the end of the post-Brexit transition period in December 2020. The government also intended to enshrine in law that this phase would not be extended, despite the draft withdrawal agreement it had concluded with the EU stating explicitly the period could last for up to another two years, if both parties agreed this by next July.
Mr Johnson said, however: “British businesses should take these pledges with a pinch of salt at present for four key reasons. Firstly, a full free trade deal only seems possible by the end of 2020 if the government merely accedes to nearly all the EU’s demands, which seems unlikely. Secondly, the alternative to a free trade agreement would effectively be a no-deal Brexit, which the Prime Minister knows would damage our economy severely.
“Thirdly, Parliament, not Boris Johnson, is sovereign, and even a legal commitment to avoid an extension can subsequently be amended with a simple one-line bill.
“Finally, these pledges come from a Prime Minister who has already repeatedly shown less than complete adherence to his Brexit promises. He once said, for example, that no British government could or should accept a trade border with Northern Ireland yet has now effectively agreed to exactly that.”
