Confidence collapses in key Customs system after May triggers Brexit talks

The UK government signed the letter triggering its EU renegotiation process on  March 29. Almost immediately, Britain’s Infrastructure and Projects Authority downgraded the likelihood of a key Customs system upgrade being ready on time for a Spring 2019 withdrawal from the EU, and the chair of the relevant Parliamentary committee said that confidence in its successful implementation   “has collapsed”.

But it has disturbingly little control over the agenda for the following two years of negotiation leading up to Britain’s planned exit.

  1. Can it control the UK? There is now the serious prospect of both Scotland and Northern Ireland breaking away from the UK during the Brexit negotiations. The Scottish Nationalist Party called for a second referendum on Scottish independence , and Britain’s Brexit minster agreed in late March that Nortern Ireland would be able to rejoin the EU if a majority of voters on each side of the intra-Ireland border voted for unification
  1. The divorce settlement. The EU insists it won’t discuss a new trade relationship until the UK agrees to an expensive divorce deal. Mrs May says in that case she’ll walk away from the negotiation and simply adopt the same WTO-governed relationship with the EU that China and the US have.
  1. No plans for handling May’s threat. A multipartisan Parliamentary committee revealed on March 11 that there simply is no plan for managing trade if Brexit talks break down. Its chairman, a leading Conservative Brexit advocate, accused May’s government of a “dereliction of duty.” The same day, a leaked Treasury report claimed May’s threat carried “the most negative long-term impact” of any option for Brexit.
  1. And no credible plan for migrants or Customs clearance under any scenario. Even if the UK negotiates a sensible exit agreement with the EU, there are no detailed plans for ensuring businesses retain adequate access to the EU migrants their prosperity depends on.A substantial proportion of Britain’s trade with non-EU countries goes through Continental ports, and at present does not need UK Customs clearance. So Brexit will increase the amount of UK imports and exports needing Customs clearance fivefold.

March 11 press reports seemed to indicate UK Customs planning for post-Brexit clearance systems is extraordinarily inadequate. Claims on March 8 that British Customs had failed to cooperate with an EU investigation into an alleged €5 billion  fraud over Chinese trouser imports will place more pressure on Britain’s generally trade-friendly Customs systems to increase physical inspections of Asian apparel imports. On March 26, press leaks indicated that UK Customs had briefed the UK government in March 2016 that “Any form of customs controls will increase the costs to businesses and consumers of imported and exported products. These costs can be both financial and measured in time/delays.”

By March 31, the chairman of Parliament’s Treasury Committee, Andrew Tyrie, said that “confidence in the successful implementation of the CDS” (the Customs Declaration Service systems upgrade project that HMRC describes as ‘business critical”) “has collapsed”.

  1. New trade deals Britain wants to start negotiating other trade deals as soon as it leaves the EU. But it is hard to see the point of seeking deals with a USA so obsessively anti-trade as it is under Trump, or with China’s current government.
  1. Other preference deals. There are so many complex trade issues to sort out over the next two years, it is hard to see how the UK will have time to agree its immediate relations with low-income countries (like Bangladesh or Morocco) that are so important to apparel traders. No government announcement has shown any policy on this

Britain, like the US, is planning a complete revolution in their international trade – but using inexperienced politicians, with an utterly unjustified belief in their competence, to lead that revolution. Some downright silly posturing by EU officials is making Britain’s problem worse – and the British politicians handling them are behaving about as foolishly.

Those politicians may grow into their jobs, with time. And they may start giving their business communities the information needed to plan: but I fear both governments have leaders incapable of listening to advice.

I’d like to think I’m needlessly pessimistic…

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