By Jamie McNish, Trainee Solicitor

While much of the focus on the government’s White Paper has been on its political fallout, it contains important indicators of how a future UK-EU relationship may take shape.

In Part 1 of our look at the Chequers Plan, we focus on the treatment of goods, while in Part 2 – which can be found here – we discuss the provision of services post-Brexit.

Goods

Though other areas are addressed, the main detail of the White Paper comes in its treatment of goods. The UK government hopes to establish a new “free trade area” with the EU – for goods only – with rules facilitating “frictionless access” at the border but not going beyond what is necessary to achieve this. A new system would work “as if” the UK were in a combined customs territory with the EU.

While the broader detail of the plan is yet to be set out, the main thrust of the proposal is that there would be a “Facilitated Customs Arrangement”, with no tariffs or quotas for goods traded between the UK and EU. Where goods arrive in the UK from outside the EU, they would be subject either to UK or EU tariffs, depending on the ultimate destination of the good. It is proposed that mechanisms would be put in place – such as a “trusted trader” regime, and methods for repayment of incorrect tariffs – to make this process as smooth as possible.

The White Paper also envisages UK participation in EU technical committees and agencies such as the European Medical Agency, as a non-voting member, in order to ensure continued consistency of the UK’s approach with that of the EU. The UK would also look towards conforming with EU compliance standards in an effort to maintain this “frictionless access” to the EU market, seeking to prevent the need for businesses to meet two sets of requirements.

“Common rulebook”

It is proposed that a common rulebook exist for certain areas – namely manufactured and agri-food goods – operating in limited circumstances. These are broadly characterised as those rules which can be checked at the border, but also include compliance activity as mentioned above. It is hoped that this common rulebook would, once agreed, enable the frictionless access which is desired.

The goal is that the rules would cover those areas in which conformity is necessary in order to prevent checks at the border and the burden of dual standards. The rules should not, according to the White Paper, go beyond what is necessary to achieve this, with matters such as marketing and labelling requirements being areas on which divergent approaches could be adopted.

The system would, as the UK government sees it, therefore allow the transport of goods across the border to continue relatively unchanged, without the need for customs or regulatory checks. The specifics of what may be contained within such a common rulebook would require to be agreed with the EU in due course. Once goods were within the respective markets, there would be greater scope for the UK and EU to adopt different approaches to their treatment.

While the White Paper proposes this framework, there are significant details which require to be added in order to have a clear picture as to how the new regime would work. Moreover, it remains to be seen whether the EU would be amenable to such a proposal, splitting as it does the free movement of goods from the other fundamental freedoms, which are generally characterised by their indivisibility.

In those areas that the UK government proposes divergence from the EU position, there is not yet an indication on the direction that those diversions may take. There is an urgent requirement for clarity on what future rules on, for instance, agriculture may look like – while the White Paper suggests that border and compliance related rules would be agreed in common with the EU, this leaves a large area on which the position remain even less clear, and issues such as how leaving the Common Agricultural Policy will be dealt with remain to be addressed.

Post-White Paper votes

Following the publication of the White Paper, there were votes in the House of Commons on amendments to two related Bills passing through Parliament – the Taxation (Cross Border Trade) Bill (“Customs Bill”) and the Trade Bill. The votes and their amendments can be seen as a challenge to the UK Government’s White Paper proposal even before it has been subject to EU scrutiny.

The Customs Bill

On the Customs Bill, four key “rebel” amendments were agreed, along with various government amendments. These mean that, among other things:

  1. The UK shall be prohibited from collecting taxes or duties on behalf of the EU, unless the EU reciprocates. The White Paper acknowledges that the EU will not apply UK tariffs at its border, and that “mechanisms” will be required, so this amendment places some doubt on the proposal from the outset.
  2. It will not be possible to create a separate customs territory for Northern Ireland.
  3. Parliament must approve any import duty if a customs union is formed with the EU.
  4. VAT cannot be charged on cross-border movements within a customs union.

Future Customs Arrangement

The effect of these amendments is that the scope for any future customs arrangement has been limited, even before the proposals have been finalised. It remains to be seen whether the plan as set out in the White Paper will be one which is amenable to each of the various actors involved – within both the UK and EU.