The key to a successful policy choice is maximising opportunity and minimising disruption. From the beginning of my involvement in the UK’s decision to leave the EU, I’ve always said that Brexit should be judged by these two tests.
The reason the UK could not remain in some version of the customs union and single market, or align with EU regulations, is because while that would minimise the disruption, satisfying the first test, it would not maximise opportunity, and so fail the second. Meaningful external independent trade policy and domestic regulatory reform would not be possible. So we had to secure a Free Trade Agreement (FTA).
Having identified the Irish border as a key problem to resolve from late 2016, I developed a series of papers culminating in the Alternative Arrangements Commission. This work was the precursor to the Northern Ireland Protocol, which the two governments are now managing.
Northern Ireland and Great Britain must work together to make sure there is no hard border on the island of Ireland, unfettered access between Northern Ireland and Great Britain, and as close to free flow as possible from Great Britain to Northern Ireland. If they succeed, then Northern Ireland will be in a privileged position which no part of a customs territory has ever had before: free access to all its major markets. Great Britain, the EU and, through the UK’s external trade policy, all the UK’s major trading partners such as the US, Australia, New Zealand, Japan and the member countries of the Comprehensive and Progressive Trans Pacific Partnership (CPTPP). This would mean a successful Brexit: opportunities maximised and disruption minimised.
The EU-GB border is highly complex and trade-intensive. The UK government has adopted a phased approach to the UK border (not including the boundary between Northern Ireland and GB) in order to minimise disruptions which involves a simplified process for UK importers.
The challenge is that the UK and EU have highly integrated supply chains often involving many products and parts of products that move back and forth multiple times. For example, goods move across the EU-GB border 32 times to create just one Volkswagen car. The UK and EU are so physically close that they have relied on trucks to carry goods back and forth, and many of these movements are on a “groupage” basis, where products are picked up throughout GB and the continent on their way to the Dover-Calais corridor (across which there are 17,000 freight movements per year).
In many ways the challenge that the UK and EU face is the same challenge that is faced by other busy trade borders such as that between the US and Canada border for example. All borders now aspire to be invisible, and as one of my colleagues on the Alternative Arrangements Commission – Tony Smith, former head of UK Border Force – was wont to say, borders are no longer a line on a map but a series of transactions. The UK has also announced an ambition to have the best border in the world by 2025, a commendable and, I believe, achievable aim.
But to do that, the customs and border management sector needs to re-invent itself. The old ways of doing customs will not work in this new reality if we are to satisfy the first test set out above. Instead the UK must make a virtue out of necessity and embrace the technology available in the 21st century. For too long customs administration has languished in the 19th century with its reliance on wet stamps, paper documents and physical inspection. Fortunately, necessity is the mother of invention. Digital solutions could lower the cost and time involved in customs administration. Artificial intelligence could help answer traders most frequent questions. Interactive videos could teach the basics to small and medium-sized traders who need to develop their understanding of the processes involved.
This is becoming an imperative. The UK government has said that there will be 250 million or so extra declarations post Brexit, and if we do not solve this challenge there could be long delays at the border.
Customs should not be a process that distracts a trader from his or her core business, but instead a commodity. The closer we can get these processes to looking like an order from from an online retailer like Amazon, the better. That is the why I have worked on the development of Digital Trader Services which officially launches this month. Given the challenges of the UK border, If it did not exist, you would have to invent it.
Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.
CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.
