In March 2021, the House of Lords European Union Committee published a series of reports examining the UK’s future relationship with the EU, as established in the EU-UK Trade and Cooperation Agreement (TCA). These were the committee’s final reports before it was replaced by a new European Affairs Committee.
One of the reports, Beyond Brexit: Food, Environment, Energy and Health, was the outcome of the EU Environment Sub-Committee’s inquiry into the TCA, covering agriculture and food, fishing, environment and climate change, energy, chemicals and health. The House of Lords is due to debate this report on 15 November 2021.
Trade in food and agricultural produce
The committee welcomed the fact that the TCA provides for tariff- and quota-free trade between the UK and the EU. However, it found that food producers face new barriers to trade in the form of sanitary and phytosanitary (SPS) measures, extra paperwork, increased haulage costs and outright export bans on some products (such as seed potatoes and some meat products) as a result of the TCA.
The committee was concerned that the increased paperwork and preparation required for food and agricultural exports to the EU were presenting “very difficult challenges for the sector, particularly small businesses”. The committee also concluded it was unclear whether there would be sufficient veterinary capacity to meet the increased demand for export health certificates, which are required to confirm that exports of live animals and animal products meet the health requirements of the destination country.
The committee noted that because food and agricultural produce are perishable, any delays at the border could be “particularly costly”. However, EU exporters to Great Britain would not encounter new non-tariff barriers and costs until the Government fully introduces its border controls. While the EU introduced full third-country controls on imports and exports from 1 January 2021, the UK decided to bring in its controls in stages. The original plan was for full border controls to be in place by 1 July 2021. However, the Government announced in March 2021 that the changes would be phased in over a longer period, to give businesses more time to prepare while they were also dealing with the impacts of the Covid-19 pandemic. The Government announced a further extension of the timetable in September 2021, so that full import controls will not now be in place until 1 July 2022.
Looking to the future, the committee argued that trade in food and agricultural produce between Great Britain and the EU would suffer if significant policy divergences on either side lead to tariffs and increased checks being introduced. It noted that under the TCA’s rebalancing mechanism, tariffs could be introduced if divergences in environment or climate protection affected trade or investment between the parties.
In the Government’s response to the committee report, the Government said it recognised the challenges in adjusting to new requirements facing those exporting agricultural products. It pointed out the UK had no direct control over the requirements and paperwork imposed by the EU for imports, but said it was encouraging the EU to be “pragmatic” in applying the requirements, given the UK’s high standards of public, plant and animal health. The Government said that during the TCA negotiations, the UK had proposed further use of equivalence mechanisms, where each side recognises the other’s standards as equivalent, to reduce trade friction whilst maintaining regulatory autonomy. However, the EU had not agreed to this. The Government said it remained open to discussion with the EU on how best to further reduce friction on trade in agri-goods, but this “cannot be on the basis of alignment with EU rules as this would compromise UK sovereignty over our own laws”.
The Government noted the “unique set of difficulties presented by perishable goods”, but said it had received feedback that the situation had improved dramatically since the TCA first came into operation at the start of 2021. It explained the delay in introducing full import border controls on EU goods was intended to help businesses adjust to the new trading arrangements and recover from the effects of the pandemic.
The Government also said in its response it would press on with its request for the EU to lift its ban on the import of UK seed potatoes. The Government regards the ban as “unwarranted and not based on evidence”. As of November 2021, the Government said it was still continuing to press the European Commission on this issue.
On the subject of divergence in food standards, the Government said the UK and EU had similar animal and plant health measures. The Government remained “committed to maintaining high standards in biosecurity, food safety, animal welfare and environmental protections”, but now also had the freedom to introduce its own SPS rules “based on more up-to-date science and better targeted” to manage risks specific to the UK. It argued the SPS chapter of the TCA recognises that controls should be risk-based and should not create unnecessary barriers to trade. It also said the framework would allow the UK and EU to agree trade facilitations going forward.
Other recent reports
Reporting on the UK border in the post-transition period in November 2021, the National Audit Office (NAO) reached similar conclusions to the EU Committee.
It said businesses were facing additional burdens as a result of leaving the EU single market and customs union, which will increase further as full import controls are phased in. It found that the food and fishing industries have been particularly affected because of higher export costs and limited preparation for the new checks. It identified increased bureaucratic processes, difficulties with groupage (whereby smaller traders share HGVs) and the cost of export health certificates as particular issues. The NAO said that smaller businesses, with fewer resources available, had been especially affected.
It concluded that the delay to putting the UK’s full border control regime in place put UK exporters at “a continued disadvantage” compared to EU exporters. The NAO said there was still uncertainty regarding the volume of animals, plants and related products that will require checking once the full controls are in place, and that trader and haulier readiness for the new requirements remains a “significant risk”.
The Food and Drink Federation (FDF) published statistics in September 2021 on food and drink trade trends for the first half of 2021. The FDF said the ongoing impacts of the Covid-19 pandemic and the new trading relationship with the EU had resulted in a drop of exports to the EU of 15.9% compared to the same period in 2020 and 27.4% compared to the same period in 2019. Exports of cheese and beef to the EU were down around a quarter compared to 2020 because of the “new challenges” facing exporters of products of animal origin to the EU, but other products had shown signs of recovery in 2020. The UK had imported nearly £1.7 billion less from the EU in the previous year, a drop of 11.2%.
The FDF attributed some of the fall to reduced demand for EU ingredients for use in UK manufacturing because of reduced exports to the EU, and to import substitution by UK manufacturers and retailers. The FDF noted that products of animal origin, including pork, beef and cheese, were “heavily impacted”. It predicted imports of these products would fall further in 2022 once the UK’s full border controls are in place.
Researchers at UK in a Changing Europe have identified food standards as an area of ‘active’ divergence, where the UK is legislating to move away from retained EU law. The Government has announced it plans to review retained EU law in England on genetically modified organisms and reform the regulation of gene-edited (GE) organisms. In a regulatory divergence tracker produced for the European Affairs Committee, UK in a Changing Europe suggested that if England opts for much looser regulation than the EU, “there is a risk of barriers to trade where English GE goods cannot be exported to the EU”.
Although the committee’s main focus was on the TCA, it also commented on the distinct arrangements for Northern Ireland under the Ireland/Northern Ireland Protocol to the Withdrawal Agreement. It noted that the consumer and political impacts of failing to find workable arrangements for the movement of food and agricultural produce from Great Britain to Northern Ireland would be “acute”. It called on all parties to continue to focus on finding solutions.
Discussions are currently ongoing between the UK and the EU on this subject. The UK put forward proposals in July 2021 on striking a ‘new balance’ in the protocol. The Government also called on the EU to agree a ‘standstill’ on existing arrangements, including the grace periods currently in force, and a freeze on EU legal actions against the UK, to create room to negotiate without further cliff edges. The Government argued that the conditions for invoking article 16 of the protocol had already been met. Article 16 allows either party to impose unilateral safeguard measures if the application of the protocol leads to “serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade”. However, the Government proposed making changes to the existing protocol rather than invoking article 16.
The EU put forward its own proposals for bespoke arrangements for Northern Ireland on SPS measures, customs, medicines and engagement in October 2021.
At the latest high-level meeting between the two sides on 5 November 2021, Lord Frost, Minister of State with responsibility for the protocol, reportedly said the EU’s proposals “did not currently deal effectively with the fundamental difficulties in the way the protocol was operating”. Maroš Šefčovič, Vice President of the European Commission, said he found it “disappointing” that there was no movement from the UK side. He warned there would be “serious consequences” for the UK if it triggered article 16.
Lord Frost said on 10 November 2021 that negotiations would continue “until it is abundantly clear that nothing more can be done” and “we are certainly not at that point yet”.
The committee report found that, as with agrifood products, the tariff-free trading arrangements under the TCA were positive for the fishing industry, but the sector also faced barriers to exporting to the EU, which disproportionately affect smaller operators. The committee acknowledged some of the barriers would be teething problems, but others “represent unavoidable, long-term impacts on the sector”.
The committee also highlighted the industry’s “disappointment” with the gradual increase in fishing quota for UK fishers to 2026 secured by the TCA. The committee quoted independent analysis that said the UK’s share of quota in its own waters would increase by 16.6%, rather than the 25% figure cited by the Government. The committee also concluded that the species where UK quota will increase are not necessarily those of value to the UK fishing industry. The committee accused the Government of sending “mixed messages” about whether it would seek to further limit the EU’s access to fishing in UK waters after 2026. It called for input from the industry and the devolved administrations into future quota negotiations, and parliamentary scrutiny of the yearly negotiations on total allowable catch (TAC).
In its response, the Government argued the TCA provides a “significant uplift” in quota for UK fishers. It estimated this to be worth around £146 million for the UK fleet compared with the average annual EU catch from UK waters (including quota and non-quota fish species) based on 2018 values. It said there was “high demand” for all parts of the fishing industry for the additional quota it had secured, although it acknowledged that some vessels would have to adapt to make use of the new opportunities. After 2026, access to UK waters would be subject to annual negotiations. The Government said it would provide regular updates to Parliament on progress in the annual TAC negotiations.
The Government also pointed to funding it had provided to the sector: up to £23m for seafood businesses affected by changes to export requirements and the impacts of the pandemic, £32.7m to support the UK seafood sector, and a further £100m to support the industry and coastal communities.
In September 2021, the National Federation of Fishermen’s Organisations published analysis it had commissioned on how Brexit is impacting the fishing industry. This suggested that “the bulk of the UK fishing fleet is on a trajectory to incur losses amounting to £64 million or more per year, with a total loss in excess of £300 million by 2026, unless changes are secured through international fisheries negotiation”. The analysis was based on factors such as “paper fish” (quota that would probably not be fished), red tape and non-tariff barriers, and changed arrangements with non-EU member states.
Over recent weeks, there has been an ongoing disagreement between the UK and France about fishing arrangements under the TCA.
France claims that the UK has breached the TCA by failing to grant fishing access licences to some French boats in UK and Jersey waters. France seized a UK trawler it said had no licence to access French waters and threatened further actions against the UK, such as limiting access to French ports for British vessels to land their catch and increasing customs checks on British vessels and trucks at French ports. France has also pressed the EU to take action against the UK under the TCA.
The UK says that the French vessels have failed to provide GPS data showing their historic fishing patterns in support of their applications for continued access to the UK 6–12 nautical mile zone. The UK argues that if France acted on its threats, it would be in breach of the TCA.
Lord Frost said on 10 November 2021 that his intention was to “keep working to get an outcome which is fair to those who are genuinely entitled to fish in our waters”.
Energy and environment
The committee welcomed the inclusion of climate change as an essential element in the TCA, but expressed concerns about the domestic enforcement of environmental law. It said it was “deeply disappointed” there was still no statutory basis for the new Office for Environmental Protection (OEP), and called on the Government to progress this as a top priority. The Government said in its response that the OEP would be established in interim form by July 2021 and would be able to receive complaints about suspected breaches of environmental law. The Environment Act, which provides a statutory basis for the OEP, received royal assent on 9 November 2021.
The committee raised concerns that cross-border electricity trading arrangements would be less efficient under the TCA than before. However, it welcomed the fact that the TCA provides for new cross-border electricity trading arrangements to be developed for the day-ahead market timeframe (electricity traded one day before it is delivered) by 1 April 2022. In its response, the Government said it was “committed to developing and implementing robust and efficient electricity trading arrangements” and was taking steps to ensure the necessary cooperation between electricity market operators. The Government made regulations in May 2021 to impose duties on electricity transmission operators in Great Britain to develop the new cross-border trading arrangements for the day-ahead market.
The committee said it agreed with industry and environmental groups that the UK and EU should prioritise linking their emissions trading systems (ETS). The TCA commits both parties to exploring options for linking their schemes, but does not oblige them to do so. In its response to the report, the Government said it would be taking forward its commitments in the TCA to cooperate on carbon pricing and to consider linking with the EU ETS.
In its divergence tracker, UK in a Changing Europe noted that the EU’s July 2021 proposals to widen its ETS to cover maritime transport, road transport and heating buildings would take it beyond what is covered in the UK ETS, making it harder to align the schemes in future. It suggested that greater divergence between the two schemes would increase the likelihood of UK exports to the EU being subject to carbon border adjustment mechanism tariffs in future.
The committee welcomed tariff- and quota-free trade under the TCA for the chemicals sector. However, it noted the chemicals industry was facing costs in securing access to the data it needed to register substances with the UK REACH regulation system that had already been registered under the EU REACH system. It suggested the Government was not sufficiently acknowledging this challenge. The committee concluded that divergence between the two regulatory systems would increase compliance costs for the UK chemicals sector. It therefore called on the Government to avoid divergence for divergence’s sake. The committee also called on the Government to monitor how many substances are being registered on UK REACH compared to the number already registered on EU REACH, and to set out what it would do if it appeared the new regime would result in fewer substances being available in the UK.
The Government said in its response that it did understand the transition to UK REACH presents challenges to the industry. In developing the new system, the Government said it had put measures in place to minimise the costs and burdens. However, it said the costs associated with obtaining access to the data needed to register a substance for the Great Britain market would be a matter of commercial negotiation for companies. The Government said it was considering a proposal from a number of chemical trade associations that would mean full datasets would only be required for new substances not already registered on EU REACH before the end of the transition period, or for priority substances. The Government also said it would report on UK REACH in line with statutory requirements, and noted that the number of chemicals registered would reflect commercial decisions by suppliers and demand in the Great Britain market.
The Government assured the committee it would not “take divergent decision for the sake of it”, but nor would it be appropriate to automatically implement future EU decisions under UK REACH.
UK in a Changing Europe’s divergence tracker notes that since the end of the transition period, the EU has legislated to restrict 13 more hazardous chemicals (or is in the process of doing so), only two of which the Department for Environment, Food and Rural Affairs has said will be restricted under UK REACH. UK in a Changing Europe suggested that because the UK was slower than the EU at bringing in new chemicals regulations, “regulatory standards are likely to be lower in the UK, especially in the early phases of the UK REACH programme”. It also assessed that where divergence meant there were distinct standards to comply with in Great Britain and in the EU, companies would be likely to prioritise conforming with EU standards as it represented a larger market.
The committee welcomed the replacement healthcare arrangements the Government has established for UK residents visiting the EU. It also said it was “encouraged” by early signs of continued UK-EU cooperation on cross-border threats to health, evidenced by the UK’s access to the EU’s Early Warning and Response system in relation to the Covid-19 pandemic. However, the committee highlighted the “alarming shortages” of staff in the social care sector, suggesting they would “exacerbated by the Government’s post-Brexit immigration policy”. It accused the Government of lacking a “credible plan” to address the shortage of social care staff.
In its response, the Government said it recognised adult social care employers can struggle to recruit and retain the right number of staff, and it was working with the sector and other government departments to understand how to further support recruitment and retention. However, the Government said it did not anticipate that the end of the Brexit transition period would have an immediate impact on workforce supply. Firstly, EU citizens already working in the social care sector would be able to apply to the EU Settlement Scheme to continue living in the UK after 30 June 2021. Secondly, the Government argued the flow of EU workers into the sector annually is small comparable to the size of the workforce: fewer than 5% of all workers joining the sector in a direct care role in 2019/20 had arrived from the EU in the previous 12 months.
The Government acknowledged that under the new points-based immigration system, the majority of roles in adult social care are not eligible for the skilled worker route or for the health and care visa. In July 2021, the Government commissioned the Migration Advisory Committee to carry out an independent review of adult social care and the impact the ending of free movement on the sector. It is due to report its findings on adult social care in April 2022.
Social care workforce data published by Skills for Care in October 2021 showed that the adult social care sector has become increasingly reliant on workers from the EU in recent years, with 7.2% holding an EU nationality in 2020/21, up from 4.7% in 2012/13. However, the proportion had remained fairly steady since 2017/18. Skills for Care noted there had been no evidence of the existing non-British workforce leaving at an increased rate since free movement ended and new immigration rules came into force on 1 January 2021. However, it concluded that with the introduction of points-based immigration, it meant “this route of supply [was] no longer available for front line workers”, so “employers will have to find more staff from the domestic labour market to keep up with demand”.
Cover image by Heiko Janowski on Unsplash.