The House of Lords is scheduled to debate the following motion on 2 February 2023:

The Earl of Kinnoull (Crossbench) to move that this House takes note of the report from the European Affairs Committee ‘One year on—Trade in goods between Great Britain and the European Union’ (4th report, session 2021–22, HL Paper 124).

1. Committee inquiry and report

On 20 September 2021, the House of Lords European Affairs Committee launched an inquiry into trade in goods between Great Britain (GB) and the EU. In an accompanying call for evidence, the committee explained the background behind this decision as follows:

Following the conclusion of the UK-EU Trade and Cooperation Agreement (TCA) and the end of the transition period on 31 December 2020, the UK formally left the single market and customs union. This led to the introduction of a series of new non-tariff barriers to trade between GB and the EU, including checks and controls on goods crossing the GB-EU border.

On 14 September 2021, the UK government announced a further delay in the introduction of new import controls on goods entering GB from the EU. These new checks and controls, which had been due to be implemented from 1 October 2021 and 1 January 2022, will now be introduced from 1 January 2022 and, in the case of many new controls for food and animal products, 1 July 2022. This decision is the third time the government had delayed the introduction of these import controls. In announcing this delay, the government stated that its “own preparations, in terms of systems, infrastructure and resourcing, remain on track to meet” the original timetable, and that the delay instead reflected the impact of the pandemic and wider pressures on supply chains.

In contrast to this approach, the EU introduced full import controls from 1 January 2021. This has led to an asymmetry between GB exports to the EU and GB imports from the EU, with the former facing more checks and controls than the latter.

During its short inquiry, the committee received 17 pieces of written evidence and held five oral evidence sessions. Witnesses providing oral evidence included representatives from the British Chambers of Commerce, the British Ports Association, the Cabinet Office and HM Revenue and Customs. Michael Ellis, then paymaster general, also gave evidence.

The committee published its report, entitled ‘One year on—Trade in goods between Great Britain and the European Union’, on 16 December 2021. In an accompanying news article published on the UK Parliament website, the committee provided an update on the context surrounding its recommendations. It said:

The UK-EU Trade and Cooperation (TCA) was agreed on 24 December [2020] and entered into force on 1 January 2021. Among other matters, the TCA established the foundation of a trading relationship between the UK and EU reflecting the UK’s status as a third country following the UK’s exit from the European Union.

The UK government has adopted a phased approach to the introduction of checks and controls on goods imported into Great Britain (GB) from the EU, whereas the EU introduced full controls on 1 January 2021. The government has further delayed the introduction of these checks and controls on several occasions, most recently on 14 September 2021.

At the time of writing, from 1 January 2022 importers of goods from the EU into GB will need to submit full customs declarations; a separate grace period, which waived the requirement for traders to submit a supplier’s declaration when seeking to claim zero-tariff treatment under the TCA’s rules of origin, will also expire on this date. From 1 July 2022, a number of new requirements for products subject to sanitary and phytosanitary controls will be introduced.

On 15 December 2021, the government announced that the requirements due to be introduced from 1 January 2022 would not apply, for now, with respect to goods imported into Great Britain from the island of Ireland.

The article listed the report’s main findings as follows:

  • Since the agreement of the TCA and the end of the transition period nearly one year ago, businesses trading goods between Great Britain and the EU have faced additional administrative burdens, making it more complicated and expensive to trade with the EU. These burdens have fallen particularly heavily on smaller and medium sized businesses (SMEs), who have fewer resources to draw upon to help them adapt. This has affected SMEs both in the UK and the EU.
  • The challenges facing businesses include compliance with rules of origin, complex sanitary and phytosanitary (SPS) and customs requirements, new VAT requirements, and haulage restrictions. The committee also heard that British exporters are concerned about the inconsistent application of the new rules by different EU member states; navigating this requires significant extra time and resource, the burden of which again falls disproportionately on SMEs.
  • The committee calls on the government to seek an agreement on SPS with the EU as an urgent priority and to do more to provide access to professional support for small businesses.
  • The committee recommends that the government restore a version of its SME Brexit Support Fund, but with wider eligibility criteria; businesses were only eligible for support from the original fund if they traded exclusively with the EU.
  • The committee’s report also investigates the government’s decision on 14 September 2021 to delay the introduction of certain UK import controls. It concludes that the arguments for and against this decision are finely balanced, with some businesses welcoming the extra time but others arguing that the delay has undermined business planning and puts UK exporters at a competitive disadvantage to their counterparts in the EU.
  • The committee also expresses significant concern about the imminent expiry of the grace period for suppliers’ declarations on rules of origin, and the introduction of the requirement for full customs declarations, on 1 January 2022.
  • The committee warns that there is likely to be some further short-term disruption in the new year as these new requirements are phased in, though how extensive this turns out to be will depend on the government’s attitude to enforcement of the new rules.
  • The committee also urges the government to do all it can to communicate the new requirements, particularly to small businesses, ahead of the deadline.
  • The committee finds early evidence in the available trade data of an initial reduction in trade with the EU following the implementation of the TCA on 1 January 2021, although there have been signs of some recovery in recent months.
  • Overall, the committee concludes that it is difficult at this time to disentangle the impact of the end of the transition period from that of the Covid-19 pandemic at a macroeconomic level, but that the new challenges individual traders have faced on the ground cannot be attributed solely to the pandemic.
  • The committee welcomes the government’s intention to implement a lighter-touch border regime, as well as its wider drive to operate the “best border in the world” under its 2025 UK Border Strategy.

Commenting at the time of the report’s publication, Lord Kinnoull, chair of the committee, added:

The impact of the new trade barriers on business since the implementation of the TCA on 1 January 2021 has been uneven. Smaller businesses, which often lack the resources to adjust to new costs, and the agri-food sector, which faces an additional set of trade barriers in the form of sanitary and phytosanitary requirements (SPS) requirements, have been particularly hard hit.

With further customs and rules of origin requirements for importers coming down the track in a matter of weeks, it is vital that the government communicates these deadlines to businesses and enforces them in a pragmatic manner that seeks to educate traders, rather than punish them.

It is important that these current challenges do not disincentivise GB-EU trade in either direction. We urge the government to engage the EU in further dialogue and utilise platforms such as the TCA specialised committees to reach a more flexible and more comprehensive agreement to develop a mutually beneficial and efficient trading relationships with its neighbours in the EU.

2. Government response and subsequent developments

The committee received the government’s response on 16 February 2022 and later published the document on 23 March 2022. In its response, the government addressed the committee’s 55 conclusions and recommendations in turn.

In a follow-up letter dated 29 April 2022, written after the committee had considered the government’s response, Lord Kinnoull wrote to Liz Truss, then secretary of state for foreign, commonwealth and development affairs, to request further information. He wrote:

Overall, the committee was impressed by the quality of the government’s response and has asked me to express its gratitude to your department and to the Cabinet Office for addressing, in detail, many of the conclusions we drew in our report. We anticipate that the response will serve as a valuable foundation for the debate in the House, as and when this is arranged.

However, notwithstanding the high overall quality of the government’s response and in light of the lengthy backlog of committee reports awaiting debate in the House, the committee has decided to write to you now regarding several outstanding matters that remain unanswered or uncertain.

These matters included:

  • the January 2022 changes
  • government support for SMEs
  • further SPS negotiations with the EU
  • customs cooperation
  • the TCA’s institutional machinery
  • benefits to individual businesses
  • import controls on EU goods

Graham Stuart, then minister of state for Europe, responded in a letter dated 13 July 2022. The letter included a response to the matters raised in Lord Kinnoull’s earlier letter with the exception of import controls on EU goods.

The subject of import controls on EU goods had been the subject of a separate letter dated 28 April 2022 from Jacob Rees-Mogg, then minister for Brexit opportunities and government efficiency. He drew the committee’s attention to a written ministerial statement made on the same date on the subject (see also an accompanying government press release). This set out that the following controls which were planned for introduction from July 2022 would be delayed for a fourth time. They included:

  • a requirement for further SPS checks on EU imports currently at destination to be moved to a border control post
  • a requirement for safety and security declarations on EU imports
  • a requirement for further health certification and SPS checks for EU imports
  • prohibitions and restrictions on the import of chilled meats from the EU

Mr Rees-Mogg explained that adhering to the July 2022 date would have “introduced complex and costly checks that would have then been altered later” as the government introduced its programme to digitise the UK’s borders. He added:

No further import controls on EU goods will be introduced this year. Businesses can stop their preparations for July now. We will publish a target operating model in the autumn that will set out our new regime of border import controls and will target the end of 2023 as the revised introduction date for our controls regime, which will deliver on our promise to create the world’s best border on our shores.

This new approach will apply equally to goods from the EU and goods from the rest of the world. It will be based on a proper assessment of risk, with a proportionate, risk-based and technologically advanced approach to controls. This includes the single trade window which will start to deliver from 2023, the creation of an ecosystem of trust between government and industry, and other transformational projects as part of our 2025 borders strategy.

In response, Lord Kinnoull wrote to Mr Rees-Mogg on 18 May 2022 with a number of follow-up questions. An accompanying article published on the committee’s webpages summarised the contents of his letter as follows:

The committee’s response thanks the minister for his letter and highlights the committee’s ongoing interest in this policy area. It neither welcomes nor criticises the decision itself, noting the changes in circumstances that underpin the decision and the range of views among affected stakeholders. However, it asks the minister a number of questions arising from his letter, including:

  • how the government will ensure that businesses can trust that the government’s new timetable will be adhered to
  • whether this latest decision represents a more fundamental change in the government’s approach to import controls, rather than merely another delay
  • how the government will mitigate the impact on GB exporters of the “asymmetric” controls in place at the GB-EU border
  • whether the government intends to compensate port authorities for the resources they have invested in physical infrastructure, which now may not be needed
  • how the government will safeguard the UK’s biosecurity from dangerous or illegally smuggled food and animal products in the absence of certain SPS controls
  • whether the government is confident that it is compliant with its international legal obligations at the World Trade Organization

On its ‘plant health portal’, the Department for Environment, Food and Rural Affairs indicates the draft target operating model has been delayed and will now likely be published in “early 2023”. It states:

In early 2023, the government will publish a draft target operating model (TOM), setting out how it intends to deliver the 2025 border strategy, for consultation with businesses and the border industry. The final TOM will be published later in early 2023.

The TOM will set out our new regime of border controls and create a seamless new digital border. This new model will harness new technologies, make best use of real-time data and better target risk to reduce friction and costs for businesses and consumers and create a radically simpler yet secure experience for traders moving goods, including plants and plant products, across the UK border. Alongside the development of a world-leading border for trade, this government remains committed to protecting and enhancing UK biosecurity.

We will issue more details on how we will […] further engage with key audiences in the UK and the rest of the world (RoW) to collect feedback when the draft TOM is published. We will ensure that everyone with an interest, including all stakeholders involved in the trade of plants and plants products, has the opportunity to provide feedback ahead of the final TOM publication.

3. Read more

Cover image by Jarosław Bialik from Pixabay.