One year on—Trade in goods between Great Britain and the European Union Contents

One year on—Trade in goods between Great Britain and the European Union

Chapter 1: Introduction

Background

1.The EU-UK Trade and Cooperation Agreement (TCA)1 was agreed on 24 December 2020 and entered into force on 31 December 2020, four and a half years after the result of the UK’s referendum on EU membership. The TCA established the foundation for a trading relationship between the UK and the EU, among other matters. This reflected the UK’s status as an independent third country following its departure from the EU on 31 January 2020 and the end of the subsequent transition period on 31 December 2020.2

2.Announcing the agreement of the TCA on 24 December 2020, the Prime Minister stated that “there will be no non-tariff barriers to trade” and that it was “a deal which will if anything … allow our companies and our exporters to do even more business with our European friends.”3

This inquiry

3.In January 2021, the predecessor to this Committee, the House of Lords EU Select Committee, launched a coordinated series of inquiries analysing the TCA and its implications for the future of UK-EU relations. Among these was a report entitled ‘Beyond Brexit: Trade in Goods’4 based on an inquiry undertaken by the EU Goods Sub-Committee, which concerned trade in goods and connected issues between January and March 2021.

4.This subsequent inquiry into trade in goods between Great Britain (GB) and the EU was conducted by the European Affairs Committee between September and December 2021. The Committee launched the inquiry and issued a call for evidence on 20 September, receiving 17 written submissions. The Committee held five oral evidence sessions, hearing from a total of 13 witnesses, including the Paymaster General, Rt Hon Michael Ellis QC MP, for the Government. During this period, Rt Hon Lord Frost, Minister of State at the Cabinet Office with responsibility for EU relations, also appeared before the Committee to provide a general update on the UK’s relationship with the EU; the Committee took the opportunity to ask him questions relevant to this inquiry, and his responses have also been included in this report where appropriate. A full list of the evidence we received can be found in Appendix 2. We are grateful to all who contributed.

5.This inquiry commenced some nine months after the implementation of the TCA and specifically examined the general consequences of its implementation on GB-EU trade to date; successive delays to the implementation of checks and controls on EU imports into Great Britain, most recently on 14 September 2021; the effect of this ongoing ‘asymmetry’ in the regimes applied to goods imported from the EU versus those exported to the EU; how consistently checks and controls on exports from Great Britain have been applied by the 27 individual EU Member States; and general preparedness at all levels and across all stakeholder groups for the delayed introduction of import checks and controls from 1 January and 1 July 2022.

6.This report does not cover trade between the EU and Northern Ireland, which is governed by the Protocol on Ireland/Northern Ireland (the Protocol) under the Withdrawal Agreement and faces a very different set of issues. Nor does it cover trade between GB and Northern Ireland. Issues concerning the Protocol and its implementation are primarily the domain of this Committee’s Protocol on Ireland/Northern Ireland Sub-Committee and fall outside the scope of this inquiry.

7.Neither does the report consider the wider impact of the UK’s withdrawal from the EU beyond trade in goods, for example the new restrictions on trade in services, or the ending of the free movement of workers between the UK and the EU. Although we offer some brief analysis of the relationship between the recent labour shortage problems and the trade in goods, considerations of the impact of other UK-specific, as well as wider continental and global labour trends in this area, similarly fell outside the scope of this inquiry.

8.Government responsibility for the issues covered in this report is diffuse and complex. In his letter dated 25 November 2021, the Paymaster General explained the different departmental competencies:

“The Cabinet Office plays a central convening role in respect of the border, in recognition of the fact that the border is a complex system encompassing the interests of many departments. Departments whose Ministers exercise responsibility for different aspects of the border include HM Treasury / HM Revenue and Customs (customs policy and administration), the Department for the Environment, Food and Rural Affairs (the regime for Sanitary and Phytosanitary checks, and for chemicals and other controlled goods), the Home Office (security and immigration policy, and operational delivery at the border through Border Force), the Department for Transport (transport issues related to border disruption), and the Department for International Trade (export promotion).”5

9.We note the complexity and diversity of Government departmental responsibilities for matters related to GB-EU trade in goods. It is vital that the coordinating role played by the Cabinet Office is exercised effectively to prevent this diffuse spread of competencies from causing practical problems.

10.This inquiry took place against the backdrop of ongoing tensions between the UK and EU over both the operation of the Protocol on Ireland/Northern Ireland, and specifically the Government’s indications that it may be prepared to invoke Article 16 of the Protocol; and, separately, the implementation of the fisheries arrangements introduced by the TCA.

11.We did not take significant evidence on these two disputes, which remain unresolved and have yet to have systemic impact on the flow of goods between the EU and GB—and may not do so for several months, if at all. However, if these issues are not resolved, either of them could ultimately lead to future disruption to the trade in goods between GB and the EU, for example, through the imposition of tariffs or even the suspension or termination of the TCA.

12.Regarding the dispute over the Protocol, the Paymaster General said that he did not think “the purported suspension of the TCA [by the EU] is very likely”, but added that the Government had “robust contingencies” in place.6 In a letter to the Committee dated 25 November, he further added that these contingencies included “verifying that the continuity of supply for critical goods… is maintained,” as well as existing contingencies such as Operation Brock, a traffic management system which was deployed during the COVID-19 related disruption at the border in December 2020.7


1 Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part (24 December 2020): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/948119/EU-UK_Trade_and_Cooperation_Agreement_24.12.2020.pdf [accessed 30 November 2021]

2 A detailed explanation of the background and implementation of the TCA can be found in European Union Committee, Beyond Brexit: the institutional framework (21st Report, Session 2019–21, HL Paper 246)

3 Prime Minister’s Office, 10 Downing Street, ‘Prime Minister’s statement on EU negotiations: 24 December 2020’, (24 December 2020): https://www.gov.uk/government/speeches/prime-ministers-statement-on-eu-negotiations-24-december-2020 [accessed 1 December 2021]

4 European Union Committee, Beyond Brexit: Trade in Goods (24th Report, Session 2019–21, HL Paper 249)

5 Letter dated 25 November 2021 from Rt Hon Michael Ellis QC MP, Paymaster General, Cabinet Office to Lord Kinnoull, Chair, European Affairs Committee: https://committees.parliament.uk/publications/8030/documents/82745/default/ [accessed 1 December 2021]

6 Q 87 (Michael Ellis MP)

7 Letter dated 25 November 2021 from Michael Ellis MP, Paymaster General, Cabinet Office to Lord Kinnoull, Chair, European Affairs Committee: https://committees.parliament.uk/publications/8030/documents/82745/default/




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