BCF blog: Brexit update June 2020
By David Park
EU Free Trade Negotiations
Whilst assisting members with their response to the coronavirus has been a priority over the past couple of months, it has not been to the exclusion of other crucial areas of policy. In particular, the clock is ticking on the Brexit transition period. Michael Gove announced on Friday that the UK had formally told the EU it would not seek an exemption, a decision that has been accepted by the EU. This means that unless the UK and EU can negotiate a Free Trade Agreement by the end of the year we could still end up with the worrying and costly prospect of a no-deal Brexit. So, it will be no surprise that this is the other major topic we have been prioritising in our public affairs work.
Last week’s news that the UK Government is planning a ‘light touch’ customs regime on imports in the immediate post-transition period, due to the impact of coronavirus on business, is welcome to some extent. However, on the other hand it is a recognition of how badly new customs measures could affect the flow of trade. Worryingly, reports from both the EU and UK camps signified very little progress had been made again in the June round of negotiations. Efforts are now being stepped up to try to achieve a breakthrough. Boris Johnson is due to speak today to the Presidents of the European Council, Commission and Parliament and there will be a more intensive round of talks over the month of July. Katya Adler of the BBC has a good summary of the situation here.
Ultimately, as with the wider business community, we want to see a comprehensive FTA put in place, one that is free of tariffs and that minimises added bureaucracy and cost to industry in other ways, be it through Rules of Origin or delays at customs and borders. We continue to speak with Government – including Ministers to officials – as well as with and through business groups such as the CBI and Make UK to press our case as firmly as we can.
Future Regulation of Chemicals
Critically, we want to see high regulatory standards maintained in the chemicals sector and want as close co-operation as possible between the EU and UK on chemicals regulation in future. We still believe those goals on regulation could best be achieved by the UK remaining part of ECHA, although the UK Government seems to have ruled that option out.
In terms of alternatives, the CIA and Cefic have published a joint position paper calling for the FTA to include an agreement for high-levels of co-operation and data-sharing between Defra and HSE in the UK and ECHA in the EU. This would not be a panacea and would still mean a separate UK REACH regime would be adopted. However, the aim would be to avoid the need for all substances in the EU REACH database to be re-registered in the duplicate UK REACH system, with all the costs that would entail for users up- and down-stream across both the UK and EU. The estimated financial costs to UK and European businesses of not achieving some sort of compromise in this area vary but a figure of at least £1 billion in fees alone, over two years, seems a reasonable and conservative estimate at this time, taking into account the number of substances involved and the UK Government’s decision to replicate the EU substance registration costs for any UK REACH system. If the cost of sourcing raw materials in the UK goes up because of these UK REACH costs, it’s going to impact all our members and make the UK a less competitive manufacturing base, leading to the potential loss of production to other plants in the EU.
As such, we are supporting the CIA and Cefic proposal on data-sharing and regulatory co-operation and are liaising with CEPE to try and build wider support in Europe for this potential outcome. However, we remain open to other ways of securing a high-level of future co-operation as long they achieve the aims of high standards, close alignment with EU regulations, and minimal added bureaucracy and cost to industry.
We will, over the coming weeks, be stepping up our engagement with MPs whose constituencies are home to members’ factories and facilities to gain their support for these principles and to get them, in turn, to place more pressure on the Government to achieve a satisfactory outcome in the FTA negotiations.