EFTA and the Customs Union

Transcription

1 EFTA and the Customs Union Avoiding a hard border in Ireland? EFTA 4 UK Discussion document 26/09/2018 Page1

2 CONTENTS Brexit Timetable PG3 Executive summary PG4 Introduction/customs unions PG5 What is the Customs Union? PG6 Pros and Cons of a customs union with the EU Pages 7-8 Problems pertaining to staying in a cu PG9 What have Politicians said about customs union? Pages A bespoke customs partnership? PG12 Graphic: Legatum Institute comments about customs union PG13 Political declarations Pages No Silver bullet PG16 In search of solutions PG17 Smart Border 2.0 report Pages Policy Exchange Report PG20 DCB Report - PG21 Hans Maessen Report Pages Legatum Institute Report Pages ERG Report Pages Analysis/CDS System PG28 CDS & CHIEF Pages Customs 2020 and UCC Pages Analysis/RoO PG35 RoO agreements PG36 REX System PG37 Common Transit Convention and SAD Pages Common Travel Area PG40 Article 8 PG 41 Article 50 PG42 WCO PG43 UNECE PG44 WTO Trade Facilitation Agreement Pages TIR Convention Pages GATT PG 49 Swiss Borders - PG50 Norway-Sweden Border PG51 EFTA Pages Norway then Canada? PG55 HM Government report PG 56 Summary / Leo Varadkar speech Pages EEA Agreement Pages Political Fudge? /Conclusions Pages How and when? PG66 Chart of elements of new customs/trade arrangement PG67 Is this possible? Pages Afterword - PG71 Postscript One - controlling immigration? pg72 Postscript Two Mrs May s Misunderstandings PG73 EU rules? PG74 How much EU law? PG75 Is EEA compatible with a customs union? PG76 EFTA Free Trade deals explained/references PG77 References Pages Page2

3 Brexit Timetable: 23 June the UK votes to leave the European Union in a public referendum. 29 March Theresa May sends Article 50 letter to European Council President Donald Tusk to notify him of the UK s intention to leave the EU June 2017 Negotiations formally begin in Brussels March UK is provisionally scheduled to leave the European Union. 3 Planned transitional period/ implementation phase scheduled to run to 31st December Sed fugit interea, fugit inreparabile tempus - Virgil Page3

4 Executive Summary We believe the best option for the UK post-brexit would be to adopt an off-the-shelf model such as the EFTA/EEA (European Economic Area) relationship with the EU which is enjoyed by countries such as Iceland. The Government is currently seeking a bespoke Free Trade Agreement with the European Union, not to replicate any existing arrangements between the EU and a third country. The Prime Minister is aiming for a new arrangement which is more comprehensive than the EU-Canada CETA agreement. It is unlikely that the UK will be able to achieve such a deal; and even if one is reached, it would take several years to negotiate, ratify and be implemented. An FTA won t solve Irish border issues. There is at present a very real risk of a no-deal Brexit which would be damaging to the UK economy and international relations. The UK Government has pledged that no new physical infrastructure will be introduced on the ROI/NI border. 4 We believe that many Parliamentarians who otherwise would support an EFTA-based Brexit model are disincentivised by the apparent incompatibility of the model with frictionless borders on the Island of Ireland. We believe that a solution is indeed possible to resolve these apparent contradictions, which we will outline. It involves entering into a transitional customs union with the EU. Page4

5 Introduction It can be argued that there is insufficient time and goodwill for the UK to negotiate a bespoke relationship with the European Union. If a truly bespoke arrangement is ruled out, the following questions arise - what remains? Does any extant model satisfy the needs of the UK? Once examined and understood, the precedents of Norway, Switzerland, Liechtenstein and Iceland the European Free Trade Association (EFTA) countries offer the UK the best way forward. While their relations with the EU are not uniform (Switzerland s arrangements with the EU are not the same as Liechtenstein s; Liechtenstein s arrangements differ from those of Iceland) they represent existing, established and robust relationships that we can learn a great deal from. The UK could negotiate its own UK model based on these existing agreements between the EU and the EFTA countries. Customs Union? However, while several parliamentarians are broadly supportive of our ideas, many believe that we would also need to be in a Customs Union with the EU after Brexit. They believe this for two reasons firstly, they believe that being in a Customs Union with the EU would allow us to benefit from the EU s portfolio of Free Trade Agreements (FTAs) and secondly, they believe that remaining in a CU is the only way to solve the issue of the Irish border. In this report we will look at all these issues and make appropriate recommendations. Page5

6 What is the Customs Union? A Customs Union is set up when two or more countries agree to tariff-free trade between themselves but also agree to match a commonly agreed set of tariffs between themselves and the rest of the world (RoW). The European Union contains many elements, but one of the most important is that it is also a customs union. For simplicity s sake we will refer to this as The Customs Union. Since the UK is leaving the EU and won t be a member state after March 2019 we cannot be in the EU customs union. The UK could however negotiate a customs union or special customs arrangement with the EU. Turkey, Jersey, The Isle of Man (IOM) 5, Guernsey, Monaco, San Marino and Andorra all have special customs arrangements with the European Union and the UK could do likewise. This transitional customs union could be used until it could be superseded by the new bespoke UK-EU customs partnership we are proposing. Page6

7 Pros and Cons of a Customs Union with the EU Advocates of the UK remaining in the EU s Customs Union (or a custom union or arrangement which mirrors it) generally do so for four main reasons: Ireland The first and most important reason is a desire to avoid a hard border/physical infrastructure on the Island of Ireland which they believe would not only be a negative symbol but also exacerbate political tensions and potentially disrupt the Peace Process. Border disruption The second reason is to avoid costly and time-consuming delays at UK ports and entries such as the Port of Dover and Eurotunnel. There are concerns about the potential to disrupt companies that use the just in time (JIT) business model. Existing Free Trade deals The third reason is a desire to continue to share in the Free Trade Agreement (FTA) portfolio that the EU has developed with third countries. Some also believe that we could enter into any new ones the bloc negotiates. Tariffs Members of a Customs Union traditionally abolish tariffs, quotas and duties between themselves. These are of course sensible reasons to support a cu, but to briefly address them: A UK-EU customs union on its own would not prevent border disruption at ports or land borders. Border staff and infrastructure doesn t just deal with tariffs. There is no guarantee that we could roll over or grandfather the EU s existing FTAs with third countries. As we wouldn t be in the EU, the UK would not be automatically party to them. Tariffs, quotas and duties between the EU and UK can be avoided by other means. Page7

8 Opponents of the UK remaining in the EU s Customs Union (or a custom union or arrangement which mirrors it) generally oppose it for two main reasons: New Free Trade deals Being inside a customs union would seriously inhibit the UK pursuing new free trade agreements (FTAs) with third countries, since we would be unable to unilaterally alter our tariffs. Even if we stayed in the EU s Customs Union there is no guarantee we could share in their existing and future FTAs. Sovereignty By definition, being in a customs union places restrictions on UK trade policy. Symbolically remaining in the/a customs union with the EU would be unacceptable to those parliamentarians and members of the public who seek to take back control from the EU. In this report we will outline a model by which the UK and EU could address each of these areas of concern. In the following pages we will look at existing international and regional agreements, we will look at relevant expert studies and the text of the EU treaties themselves. Page8

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10 What have Politicians said about the Customs Union? PM Theresa May The Prime Minister has stated that the UK will not be a member of the EU s Customs Union. The United Kingdom is leaving the European Union. We will no longer be members of its single market or its customs union. 6 Theresa May However, the Prime Minister has also stated: I know my emphasis on striking trade agreements with countries outside Europe has led to questions about whether Britain seeks to remain a member of the EU s Customs Union. And it is true that full Customs Union membership prevents us from negotiating our own comprehensive trade deals. Now, I want Britain to be able to negotiate its own trade agreements. But I also want tariff-free trade with Europe and crossborder trade there to be as frictionless as possible. That means I do not want Britain to be part of the Common Commercial Policy and I do not want us to be bound by the Common External Tariff. These are the elements of the Customs Union that prevent us from striking our own comprehensive trade agreements with other countries. But I do want us to have a customs agreement with the EU. Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position. I have an open mind on how we do it. It is not the means that matter, but the ends. 7 Page10

11 Shadow Brexit secretary Sir Keir Starmer MP: Well, we ve long championed being in a Customs Union with the EU and the benefits of that; obviously it s the only way realistically to get tariff-free access. It s really important for our manufacturing base, and nobody can answer the question how you keep your commitment to no hard border in Northern Ireland without a customs union. I mean, in the general election we consistently said the benefits of a customs union must be retained. Then over the summer, as you know, I laid out the position for the transitional arrangements, that we d be in a customs union, and said then that it ought to be an option on the table. The customs arrangements at the moment are hardwired into the membership treaty, so I think everybody now recognises there is going to have to be a new treaty [between the UK and the EU]. It will do the work of the customs union. So it is a customs union. Will it do the work of the current customs union? Yes, that s the intention. And in the end; we have obligations to our economy, obligations to our manufacturing base, and also obligations in Northern Ireland. There is nobody credible who is saying that you can keep to the commitment in Northern Ireland to no hard border without a customs union. I think it will be a new agreement. The question is how close and whether we really get the benefits of both the single market and the customs union, and that s been our focus throughout. 8 Page11

12 A bespoke Customs Partnership? Sir Keir Starmer s concerns about tariff-free trade and the Irish peace process are of course perfectly legitimate. We maintain however that both his and Mrs May s aims can be achieved outside of a customs union. Our proposed new Customs Partnership would build on several elements as we will outline; but the most important precondition to make it a success will be continued membership of the European Economic Area (EØS / EEA). Retaining EEA membership solves many of the problems associated with leaving the EU s customs union and ameliorates many others. Until the new Customs partnership can be ratified and enacted, we believe the UK should participate in a transitional customs union with the EU. Our proposed new Customs Partnership can be best described as a hybrid solution, since it comprises many elements. In the following sections we will describe these different elements; and the overall shape of the new Partnership. Page12

13 Even if the UK stays in a/the customs union, it would not by itself prevent a return to a hard border on the Island of Ireland. As a report 9 by the Legatum Institute think tank explains: Page13

14 Political declarations EU chief negotiator Michel Barnier has said: The consequences of Brexit should not and must not lead to the return of a hard border, neither on maps nor in minds. In December, the UK agreed that, unless and until another solution is found, Northern Ireland will maintain full alignment with the rules of the Single Market and the Customs Union which support North-South cooperation, the all-island economy, and the protection of the Good Friday Agreement. Both sides in this negotiation are firmly committed to a backstop. It is a guarantee to avoiding a hard border on the island of Ireland. So, since we all agree that we do not want a border, and since the UK agreed to respect Ireland's place in the Single Market, then that means goods entering Northern Ireland must comply with the rules of the Single Market and the Union Customs Code. That is our logic. Simple as that. Ladies and gentlemen, The EU does not want to have a hard border between Ireland and Northern Ireland. We are seeking practical, practical and operational, solutions to a complex problem. No more, no less. Finally, the backstop will apply unless and until another solution is found as part of the future relationship. We are ready to look constructively at all options which allow us to meet our objectives - all options. 10 Page14

15 The 2017 Northern Ireland and Ireland Position Paper by HM Government on behalf of the United Kingdom 11 stated that Delivering our shared objective for a land border that is as seamless and frictionless as possible cannot be achieved solely through preserving the Common Travel Area and maintaining the free flow of people between Northern Ireland and Ireland. It is also important to ensure that there is no return to a hard border as a result of any new controls placed on the movement of goods between the UK and the EU. This will require detailed engagement on customs, agriculture, and other relevant economic matters as negotiations progress. The UK welcomes the clear commitment from the European Council and Commission to work on flexible and imaginative solutions to avoid a hard border. The nature of the border clearly means that we must aim for an agreed, reciprocal solution. In this report the UK Government pledges to: Recognise the crucial importance of avoiding a return to a hard border for the peace process in Northern Ireland. This must mean aiming to avoid any physical border infrastructure in either the United Kingdom or Ireland, for any purpose (including customs or agri-food checks). Address other regulatory and customs-related barriers necessary to deliver as frictionless a land border as possible including waivers from security and safety declarations, and ensuring there is no requirement for product standards checks or intellectual property rights checks at the border. Prime Minister Theresa May has said: like any country sharing a land border with another nation, we have a duty to seek customs and regulatory relationships with each other to ensure borders work smoothly. I have said consistently that there can never be a hard border between Northern Ireland and Ireland. I said it in my letter triggering Article 50, in my speech at Mansion House and many times besides. Both sides in the negotiation understand that and share a determination never to see a hard border in Northern Ireland. 12 Clearly, both the EU and UK are desperate to avoid a Hard Border in Ireland and have said so repeatedly. But how can this be avoided? Page15

16 No Silver bullet? We believe that previous commentators on the issue of the Customs Union and the Irish border have failed to find a solution to it because they are seeking a single silver bullet solution to a raft of complex issues. As we discussed earlier, there is a solution; but it is a hybrid solution building on some existing agreements, some new systems and an ambitious new UK-EU customs partnership. [Above graphic is reproduced in larger size later on in this document] Before we outline our proposals, we will outline what has been said on the subject by some others from politicians and think-tanks, to experts and various pressure groups. Page16

17 In search of solutions Former Foreign Minister and Boris Johnson MP recently wrote in the Daily Mail: what I can say for sure is that there are far better technical solutions than either of these hopeless backstop arrangements. Around the world, authorities are finding ways of abolishing frontier checks and doing them elsewhere. Why is that so unthinkable for Ireland? The Irish currently use their ports and airports to check only one per cent of goods arriving from anywhere outside the EU, let alone the UK. We live in a world of smartphone apps and electronic forms and Authorised Economic Operator schemes. There is no need for any kind of friction at the border at all. 13 In order to examine Mr Johnson s claims, we have extensively studied the extant material on this subject. There have been several articles, reports, studies and discussion documents which have attempted to outline how the UK and EU can minimise border disruption after Brexit, if the UK leaves the Customs Union. We shall examine just a few of these reports in this section. Page17

18 Smart Border 2.0? In , the European Parliament's Committee on Constitutional Affairs (AFCO) in conjunction with the European Parliament's Policy Department for Citizens' Rights and Constitutional Affairs commissioned a study on the effects of Brexit on the Irish border and how negative impacts could be minimised. The detailed study, entitled Smart Border 2.0 Avoiding a hard border on the island of Ireland for Customs control and the free movement of persons 15 was authored by Lars Karlsson, a former World Customs Organisation (WCO) Director of capacity building and also a former senior officer in Swedish customs. 16 In the report, Karlsson outlines how best practice from other countries combined with existing technologies and new computer systems could create a Smart Border. This proposed smart border would feature Automatic number plate recognition (ANPR) systems and new EU-UK information sharing agreements in conjunction with: A Smart Border solution, with a conceptually re-designed border based on a combination of International standards; existing Customs models; Operational best practice examples from other parts of the world Page18

19 Mr Karlsson stated in the study that to make a Smart Border on the Island of Ireland feasible there would need to be: We believe that the suggestions and ideas contained in this study could indeed help resolve many of the potential problems after Brexit that might arise on the Island of Ireland. However, it is our view that this study seems to be quite optimistic. Mr Karlsson presents this solution as something that can be rapidly achieved (by 29 March 2019 at 23.00) predominately by technological means. While laudable and worthy of praise, Mr Karlsson s study cannot on its own provide an answer to all the issues. Mr Karlsson s Smart Border concept might also prove to be upsetting to those groups and individuals to whom any visible new border apparatus is unacceptable. Nevertheless, some of the Smart Border ideas, combined with EEA membership, could form the nucleus of a solution. We will come back to that later. Page19

20 Policy Exchange The policy exchange think tank have written a report 17 entitled Getting Over the Line in which they write: an Irish border without physical infrastructure is fully attainable arrangements based on the UK s proposals for an expanded trusted trader scheme and exemptions for small traders will suffice to operate a border without infrastructure. Modern technology means that physical customs posts, or even cameras, are no longer essential at borders. This has been pointed out by Lars Karlsson, a customs expert commissioned by the EU to look into this subject, who envisages the use of mobile phone and GPS technology to track HGVs, together with the computer-based customs clearing (the norm across much of the world). Computerised customs clearing consists of declarations of tariff duties payable, including on import content, and also the necessary certification of regulatory approval. Inspection of animal health and food standards can occur at producers premises, is common in current practice. Customs clearance occurs at the exporter s premises and the sealed consignments can then cross the Irish border while being tracked electronically by customs authorities. Our conclusion is that the UK can deliver the promise of no hard border in Ireland without remaining in the EU Customs Union since very few consignments are actually checked at existing EU borders, and those checks are usually based on intelligence received, such checks can easily be made away from borders. To make their proposals work in practice, they write: Because of the unique situation of Northern Ireland three additional things are needed. 1. A wider adoption of the trusted trader scheme 2. Derogation for small traders (eg tradesmen crossing the border with their tools and equipment). 3. A system of self-assessment (which is set out in the EU Customs Code and which is the direction of travel for EU trade with third countries). This report is interesting, but like many similar reports, we believe it to be overly optimistic. Page20

21 DCB In his 2018 report A Firm Solution to the Hard Border 18 British Member of the European Parliament David Campbell-Bannerman (known informally as DCB) wrote: Later in the report he states that: In an article for the Brexit Central website on the same subject, the MEP wrote: a customs border will exist but will become academic if we have a tariff-free and quota-free deal between the EU and UK, as is being offered already by the EU Council and President Tusk. Customs exist to levy duties, enforce quotas and check on standards. Our laws and Sanitary & Phytosanitary (SPS) standards, such for food or veterinary, are the same now so there will be little need for customs checks. Page21

22 [Cont.] My Irish border paper seeks to suggest technical ways to solve these issues. Having had the great privilege to work on the beginnings of the Good Friday Agreement as Special Advisor to the then Secretary of State for Northern Ireland, Sir Patrick Mayhew, in (standing behind John Major and John Bruton the day the talks started and proposing the original successful means of decommissioning terrorist weapons through self-destruction verified by neutral observers), I remain totally committed to maintaining the peace on the island of Ireland it has saved 300 plus lives a year for 20 years. It is absolutely right there should be no hard border. But who is asking for one? No one. 19 Mr Campbell-Bannerman s report and article both contain many sensible arguments and interesting ideas. However, he seems to believe that his vision for UK-EU frictionless trade can be achieved rapidly and outside of both customs union and EEA. We at EFTA4UK are not so optimistic. Hans Maessen report Recently the name of Mr Hans Maessen has been mentioned in British Eurosceptic circles. As reported by The Sun Newspaper: GOING DUTCH Brexiteer MPs led by Jacob Rees-Mogg have hired a Dutch customs guru to solve Irish border headache Hans Maessen, the ex-president of the Dutch customs association, is drawing up the alternative solution to the Prime Minister s troubled Chequers blueprint. BREXITEER Tory MPs led by Jacob Rees-Mogg have hired a Dutch customs guru to solve the Irish border headache. The border-expert has been secretly advising the Brexit hardline ERG group of MPs led by Jacob Rees Mogg. 20 Page22

23 We don t yet know what the details are of the plan he has produced for the ERG, but we can make some educated guesses based upon a recent document he wrote entitled Drive through borders: a comprehensive UK and EU customs strategy for Brexit. 21 The document is subtitled: A set of innovative regulations and business concepts that meet the customs requirements, inclusive the (Northern) Ireland border. To facilitate a frictionless border between the EU and the UK In the document he writes: Regulatory checks are necessary to secure that all regulations concerning health, safety and environment are met. This paper assumes that there will be no import duties between the EU and UK after Brexit. This will be the case if the UK stays in the customs union and also if a comprehensive free trade agreement is agreed on. If the UK stays in the customs union, it will not be able to form its own trade policy as it will be bound to the EU trade deals with other blocks. Under a free trade agreement, the UK can formulate its own global trade policy. On day one after Brexit all regulations between the UK and the EU will still be aligned. Only after changes take place by either the UK or the EU, and these changes are not followed by the other party, regulatory alignment will diverge. It is in the interest of both parties to stay aligned as much as possible to facilitate trade. Mr Maessen goes on to explain that in the context of the Irish border: There is only limited traffic on the Northern Irish border with goods from outside the EU. It is not a logical route to import third country goods into the EU or the UK. Transactions in general have a repetitive character and a limited variety of goods Page23

24 He also states that: The Union Customs Code (UCC) already is fully equipped to facilitate inland clearance. Please take notice that all customs declarations are done digitally. Pre-clearance is already legally possible within the UCC. Mr Maessen seems to be suggesting that technological solutions coupled with both regulatory alignment and a bilateral agreement to avoid tariffs will lead to a frictionless border. It seems to us plausible but ambitious. Legatum Institute study The Legatum Institute have produced a report of their own on these matters, called Mutual INTEREST - HOW THE UK and EU CAN RESOLVE THE IRISH BORDER FOR BREXIT in which they declared: The reintroduction of customs controls on the Irish border does not, however, mean a return to the 1960s, or even the 1990s, with two border posts and uniformed customs officers. The problems which Brexit will cause for the island of Ireland in general, and at the border in particular, are serious but not insoluble. In the report they explain that: Page24

25 They elaborate: This section of their report outlines a key element of how they believe a smooth border could work: Legatum s proposals are interesting (and similar to the Smart Border 2.0 ideas) but we believe that they cannot solve all of the complexities involved. Page25

26 ERG Report: The Border between Northern Ireland and the Republic of Ireland post-brexit The European Research Group (ERG) released a report recently 22 in which they claim that physical inspections at borders are an everdecreasing rarity: A key point to recognise from these studies is that, across the world, a very small proportion of shipments are actually inspected physically. In the UK, 4% of imports are currently subject to physical inspection, the same proportion as in Italy. In France and Germany, the figure is 3%; in Belgium and the Netherlands it is 2%. The Republic of Ireland physically inspects only 1% of imports. Filing of notification and declarations are completed electronically except in the most exceptional circumstances. The Customs Freight Simplified Procedures, for example, allow for freight movements to be pre-notified electronically, enabling customs control to take place at the premises of the importer. This is not, however, merely an EU phenomenon. The United States physically inspects 4% of its imports, and Australia 3%. In Norway and Japan, only 1% of shipments are inspected. Where inspections are carried out, they are chiefly intelligence-led and particularly aimed at countering smuggling activities. They go on to say that: A hard border after Brexit between Northern Ireland and the Republic of Ireland is totally undesirable, which is why no one is arguing for new infrastructure at the border; not the UK, nor the EU, nor the Republic of Ireland. There is little third-country traffic in Northern Ireland, as it is not a logical route to transport goods from outside the EU. In addition, there are few goods which were originally produced outside the UK sold from Northern Ireland to the Republic of Ireland and vice versa. This implies that the overwhelming majority of goods will be of EU or UK origin, so Declarations of Origin should not be a major issue on the border. In most cases, the origin will be correctly declared by the REX statement on the invoice of the seller. Page26

27 The ERG also says (in regard to product compliance): At present all goods produced within or imported into the UK have to conform with EU safety, environmental and other standards and are then free to move throughout the internal market without checks. When the UK leaves the EU, it will initially retain all the EU product rules and regulations in UK law so its goods will in fact be compliant. But what if problems did arise however? The ERG say in regard to Ireland: Cross-border trader on the island of Ireland is characterised by many regular crossings of goods, often from the same points of origin, on the same routes, to the same destination, in the same lorries. In any case, Northern Ireland has only five commercial ports (Belfast which handles 67% of port freight Coleraine, Larne, Londonderry and Warrenpoint) with a small volume of freight handled by the two Belfast airports. If [Problems were to arise] on any scale, it would be easy to detect at points of entry and continued cooperation between HMRC and Irish customs could speedily identify it. The report seems to propose that the risks to frictionless trade on the Island of Ireland have been significantly exaggerated, which we don t believe. This report seems heavily inspired by both the smart borders 2.0 report and Hans Maessen s Drive through borders report. Page27

28 Analysis: Many of the reports and essays we have looked at seem very similar. The majority claim that technological solutions can resolve the problems associated with leaving the Customs Union (both in general and on the Island of Ireland) and that they can be implemented rapidly. However, as Mrs May has said: Both sides in the negotiation understand that and share a determination never to see a hard border in Northern Ireland. And no technology solution to address these issues has been designed yet, or implemented anywhere in the world, let alone in such a unique and highly sensitive context as the Northern Ireland border. 23 We believe that a purely technological solution would not solve the Irish border problems, but even if it could, it would not be ready for April However, new technology and systems will be a key element of any long-term solution. We will examine some in the next section of this report. Customs Declaration Service (CDS) This new HMRC customs system will allow those who import or export goods to calculate and pay the correct duty and taxes, as well as complete customs information electronically. As the UK government website explains: HM Revenue and Customs (HMRC) will begin a phased launch of the Customs Declaration Service (CDS) in August CDS will replace the existing Customs Handling of Import and Export Freight (CHIEF) system, with all declarations taking place on CDS from early Page28

29 CHIEF currently processes declarations to facilitate the international movement of goods between the UK and non-eu countries. CHIEF will continue to run for a time to aid the transition to CDS. Why CDS is replacing CHIEF CHIEF is one of the world s largest and most sophisticated electronic services for managing customs declaration processes, but it s nearly 25 years old and can t be easily adapted to new requirements. The decision to replace CHIEF with CDS was made before the EU referendum, however CDS will be scaled to handle any potential increases in the volume of declarations that may result from the UK s exit from the EU. 24 You might ask why this is relevant to the situation in Ireland. Well as an article for Wired magazine explained: Passing through borders is increasingly becoming less reliant on paperwork, and the Irish border may be no exception. Both the UK and the EU are in the process of creating fully electronic customs systems; the UK is going to introduce a Customs Declaration Service (CDS) for goods entering and leaving the UK by the end of this year, and the EU's Customs Union Code says its "customs formalities are still in the process of being gradually transitioned to electronic systems." These electronic systems could enable quicker movement between different customs zones since - there is no time taken filling in forms. This could be used for anyone crossing the border and ease the flow of traffic. 25 In a letter 26 to the Chair of the Treasury Select Committee, the HMRC s Jim Harra wrote that: HMRC s assessment is that the CDS delivery schedule is feasible and that current risks and issues are resolvable at this stage. The timetable for delivery is challenging but achievable. Page29

30 HMRC is prioritising delivery of CDS for Day 1 of the UK leaving the EU. CDS will be implemented in a phased roll-out, with plans that all customers will have been migrated onto CDS by January We will continue to operate the current Customs Handling of Import and Export Freight (CHIEF) service in tandem with CDS during the transition from one system to the other. This will act as extra contingency, should it be required for Day 1. We are also planning for a technical upgrade to increase the stability and capability of the current CHIEF service. The Customs Declaration Service will replace the CHIEF system. Brexit increases the importance to the UK of providing a modern, flexible customs declaration service that can deliver functionality that will facilitate the flow of trade from Day 1. CDS will deliver simplification measures that facilitate international trade e.g. the automation of current manual processes. CHIEF currently deals with over 60m declarations a year. The new service (CDS) is being designed to deal with the much higher volumes we would expect. A 2018 report from the UK s National Audit Office (NAO) 27 reported that: The UK and EU have made progress towards an agreement that will leave customs arrangements unchanged until December However, until this agreement is confirmed, the government has directed HMRC to continue planning for a no deal scenario with the expectation that a fully scaled and operational customs system will be in place in March The Customs Declaration Service (CDS) will process customs declarations from a variety of routes and will help to clear goods to cross the border. On 19 March 2018, the government published a draft agreement on the withdrawal of the UK from the EU. The withdrawal agreement Page30

31 proposes an implementation period that will apply from 29 March 2019 until 31 December If the draft agreement is approved and this preserves customs arrangements as they are, traders who operate solely within the EU will not have to submit customs declarations until after December As a consequence, the assumption is that there would not be an associated increase in the volumes of customs declarations until after this date. HMRC has accelerated work on its contingency option for handling customs declarations in the event of no deal in March In July 2017, we reported that HMRC had identified contingency arrangements in case CDS was not ready on time, but had not planned these in detail. HMRC has now made progress with planning and implementing contingency arrangements. These involve scaling up the existing CHIEF system to manage up to 255 million customs declarations each year. HMRC expects this to cost 8.7 million. If it successfully completes this work, HMRC should have the system capacity to handle customs declarations no matter what the outcome of negotiations between the UK and the EU. Traders will continue to have access to CHIEF, which HMRC intends to continue running alongside CDS, for a period after January This will help mitigate the risks of CDS not being ready as traders will be able to revert to CHIEF. These reports suggest that: UK customs activities are increasingly moving towards electronic systems, and away from physical paperwork and checks. The new CDS system should be up and running well before December 2020, but HMRC are updating and increasing the capacity of the older CHIEF system as a precautionary measure. It stands to reason that the more that the UK and EU can move away from physical checks and paperwork to electronic declarations and Page31

32 communications, the more frictionless that EU-UK borders will become. The EU s UCC and Customs 2020 As we have seen so far, the UK is modernising its customs systems and increasing their capacity. The EU is also moving towards more efficient (and more I.T. based) customs systems as a result of the adoption of the Union Customs Code (UCC). The European Commission s website states: The UCC is the new framework regulation for the rules and procedures for customs throughout the EU. Modern IT systems are essential in order to allow customs systems to work efficiently and they are at the heart of the new rules. The new UCC puts in place IT systems that both customs administrations and traders need for simple and fast clearance of customs procedures while also ensuring that all necessary checks and controls are carried out. The new rules are the outcome of a rigorous and comprehensive dialogue involving all partners. More specifically, it will: streamline customs legislation and procedures across the EU; offer greater legal certainty and uniformity to businesses and increase clarity for customs officials; simplify customs rules and procedures to make customs transactions more efficient and modern; complete the shift to a paperless and fully electronic and interoperable customs environment; introduce more speedy customs procedures for compliant and trustworthy businesses. The UCC should be fully implemented by the end of During the transitional period, the new rules will apply by using existing IT systems and, in some cases, paper forms. Work to develop the new systems or to upgrade existing ones has already begun. 28 Page32

33 As the Irish Tax and Customs office website states 29 : The Union Customs Code (UCC) was introduced across the European Union (EU) on 1 May It introduced a number of changes to how goods cross EU borders and some transitional arrangements will operate until The UCC also introduced a number of new concepts and modernises many existing procedures. Some of these changes will require the development of new IT systems and enhancements to existing systems, which will be introduced on a phased basis up until the 31 December Revenue will undertake a large body of mandatory electronic customs systems developments over the period 2016 to These are required as a result of the introduction of the UCC and the related IT Work Programme. Among the principles enshrined in the UCC are: The mandatory use of electronic processing techniques for the exchange and storage of information between: customs authorities customs authorities and economic operators. The uniform application of the UCC across all Member States including the use of internationally accepted data models and message formats. The adoption of a work programme to support the upgrading or development of the electronic systems and associated processes. It also includes the setting up of the transitional periods and the regular review of that work programme. The use of non-electronic processing techniques on a transitional basis, up to 31 December 2020, where electronic systems are being upgraded or developed. 30 Page33

34 The ERG report discussed elsewhere in this report states that: The Union Customs Code allows an alternative to customs clearance at the border. The exporter makes a customs declaration at the exporter s premises; this is followed by a transit declaration, which gives the possibility to transport the goods to their destination without fulfilling any formalities at the border. Finally, the transit declaration is followed up by an import declaration when the goods arrive at the premises of the importer on the other side of the border. If customs want to inspect the goods, mobile teams can do so when the goods are declared as they are loaded or unloaded. As well as implementing the UCC, the EU also has a related programme called The Customs 2020 Programme. 31 The programme, (with a budget of million) was created to: improve cooperation between customs authorities and international organisations, third countries, other governmental authorities, including Union and national market surveillance authorities, as well as economic operators and organisations representing economic operators. As the European Commission website explains: The specific objectives shall be achieved, in particular by: (a) computerisation; (b) ensuring modern and harmonised approaches to customs procedures and controls; (c) facilitating legitimate trade; (d) reducing compliance costs and administrative burden; and (e) enhancing the functioning of the customs authorities. Page34

35 Analysis Both the EU and UK are upgrading their customs procedures and I.T. systems and are spending large sums to do so. Perhaps fortuitously, both the setup of the UK s new CDS system (and upgrade of the old CHIEF system) roughly coincide with the timetable for the completion of the EU s UCC implementation and Customs 2020 programmes. If as we recommend, the UK remains in a customs union with the EU for around two years after the March 2019 exit date, these systems should be complete and interacting well, by the time the UK switches to its new bespoke UK-EU customs partnership - likely Rules of Origin? If the UK was to be in the EEA after Brexit, or alternatively sign an FTA with the EU, there would be no tariffs on trade in goods between them however, this fact alone does not resolve the problem of complex rules of origin (RoO) on goods. This is because the parties who have a bilateral deal still need to prove that their goods actually originate in their territories and not from outside of them (or dependent on the agreement, what % of the product comes from their territory or how much additional work was done on a product originating from outside the territory). [This has little relevance to trade between EU states since they all use the same Common External Tariff and have free circulation of goods between themselves.] There are several arcane agreements and systems the UK could use to help mitigate RoO issues, as we will explain. Page35

36 Protocol 4 of the EEA Agreement Protocol four of the European Economic Area (EEA) agreement covers Rules of Origin rules and also encourages administrative cooperation between the customs authorities of the Contracting Parties (which include all EU and the three EFTA/EEA states). Expert Dr Richard North has written this regarding Protocol four: implementation of that Protocol does not require border checks. The system is based on a system of certificates proving origin and verification checks are undertaken by the customs authorities of the exporting countries, usually by auditing the certificate holders' processes at their places of business. 32 Pan Med RoO agreement The Regional convention on pan-euro-mediterranean preferential rules of origin is a dense and legalistic agreement which few non-trade people can understand but appears to confer significant benefits on its signatories in terms of simplifying trade complexities. The convention is open to EFTA states: The system of Pan-Euro-Mediterranean cumulation of origin allows for the application of diagonal cumulation between the EU, EFTA States, Turkey, the countries which signed the Barcelona Declaration, the Western Balkans and the Faroe Islands. It is based on a network of Free Trade Agreements having identical origin protocols. Those origin protocols are being replaced by a reference to the Regional Convention on pan-euro-mediterranean preferential rules of origin (PEM Convention). A single Convention will facilitate the on-going revision of the PEM rules of origin aiming at modernising and simplifying them. In addition to bilateral cumulation, diagonal cumulation applies within the pan-euro-med zone. This means that materials which have obtained originating status in one of the Contracting Parties may be incorporated in products manufactured in another Contracting Party without those products losing their originating status when exported to a third Contracting Party within the pan-euro-med zone. In parallel, full cumulation is currently operated within the European Economic Area (the EEA comprises the EU, Iceland, Liechtenstein and Norway) and between the EU and Algeria, Morocco and Tunisia. The EEA countries apply full cumulation between them, the EEA being considered as a single territory, with a common "EEA originating status". They also apply diagonal cumulation with the other partner countries of the pan-euro-med zone. An important point is that EEA members can apply diagonal cumulation of origin also between themselves whenever it can confer preferential origin of an EEA country (in this case the declared origin will be the one of the country, not the EEA origin itself). 33 Page36

37 Rex system? The European Commission website describes the REX system: The Registered Exporter system (the REX system) is the system of certification of origin of goods that applies in the Generalised System of Preference (GSP) of the European Union since 1 January It is based on a principle of selfcertification by economic operators who will make out themselves so-called statements on origin. To be entitled to make out a statement on origin, an economic operator will have to be registered in a database by his competent authorities. The economic operator will become a "registered exporter". The REX system will progressively and completely replace the current system of origin certification based on certificates of origin issued by governmental authorities and on invoice declarations made out under certain conditions by economic operators. The supporting IT system, which is called the REX system, is made available by the European Commission. As Hans Maessen stated in the report we discussed earlier: The proof of the origin of goods is of major importance in a customs declaration as duties depend on the origin of imported goods. In the coming years, a new system to prove the origin of goods, called Rex, will be introduced worldwide, including the UK and the EU. Unfortunately, origin rules are very complicated, especially if goods are assembled or processed. Rex gives an exporter the option to inform the buyer and customs about the origin of traded goods on the invoice with a simple statement. The EU could extend access to REX to the UK as part of a UK-EU customs partnership. As the European Commission has stated: Progressively, the REX system will also be applied in the context of bilateral trade agreements between the EU and the partner countries. CETA, the free-trade agreement between the EU and Canada will be the first such agreement. 34 Page37

38 Common Transit Convention (CTC) and SAD The Common Transit Convention is described on the European Commission website: The common transit procedure is used for the movement of goods between the 28 EU Member States, the EFTA countries (Iceland, Norway, Liechtenstein and Switzerland), Turkey (since 1 December 2012), the former Yugoslav Republic of Macedonia (since 1 July 2015) and Serbia (since 1 February 2016). The procedure is based on the Convention of 20 May 1987 on a common transit procedure. Alex Stojanovic, a researcher at the Institute for Government explains 35 how the CTC could be useful for the UK after Brexit: for customs at least, joining the Common Transit Convention does offer Britain one lever to alleviate pressures at the border. The Common Transit Convention allows a suspension of customs checks and payment of duties until the goods reach the destination country. Its signatories include the EU member states, the European Economic Area (EEA) states, Macedonia, Serbia and Turkey. It s not just the agreement that matters but the technology that underpins it. The New Computerised Transit system (NCTS) is only open to members of the Convention. For both exporters and authorities, it increases the efficiency and security of the procedure. By supporting paperless customs clearance, NCTS reduces the cost of customs procedures and the number of trucks queuing at the border, meaning a faster flow of goods. From a customs authority s perspective, NCTS connects customs offices across the signatory countries. When negotiating its new bespoke customs partnership then, the UK should attempt to retain access to the New Computerised Transit system (NCTS) and Common Transit Convention. A HM Government report on Future customs arrangements suggests they have the same idea: we would look to simplify the requirements for moving goods across borders, for example: through membership of the Common Transit Convention (CTC), which simplifies border crossing for goods in transit, meaning that goods do not need to complete import and export declarations each time they cross a new border - it Page38

39 would allow goods moving between the UK and the rest of the world, and vice versa, to travel via the EU, without paying EU duties, providing cash-flow benefits to traders, and would make border clearances easier at key ports and airports, such as Dover and Holyhead. 36 The single administrative document (SAD) As described on the European Commission website: The single administrative document (SAD) is a form used for customs declarations in the EU, Switzerland, Norway, Iceland, Turkey, Macedonia and Serbia. Since the 1987 Convention on the simplification of formalities in trade in goods it also applies to the territories of the EFTA countries (Switzerland, Norway and Iceland), Turkey (since 1 December 2012), to the former Yugoslav Republic of Macedonia (since 1 July 2015) and to trade between these countries and the EU. 37 The related 1987 Convention on the simplification of formalities in trade in goods states: This Convention lays down the measures to simplify formalities in trade in goods between the Contracting Parties, in particular by introducing a single administrative document (hereinafter referred to as the single document) to be used for any procedure at export and import and for a common transit procedure (hereinafter referred to as transit), applicable to trade between the Contracting Parties regardless of the kind and origin of the goods. It goes on to say: Nothing in this Convention shall preclude the Contracting Parties from applying simplified procedures, whether or not based on the use of computers, with a view to greater simplification for operators. Simplified procedures may, in particular, consist in allowing operators not to have to present to a customs office either the goods in question or Page39

40 the declaration relating to them, or in allowing them to draw up an incomplete declaration. In such cases, a declaration, which, if the competent authorities agree, may be a general periodic declaration, must be submitted subsequently within the time-limits laid down by those authorities. 38 The Convention on the simplification of formalities in trade in goods is open to EFTA states adding weight to the idea that the UK should rejoin that august trading organisation. Common Travel Area The Common Travel Area is a pre-existing arrangement. The House of Commons Library 39 says of the CTA: The Common Travel Area (CTA) is a special travel zone between the Republic of Ireland and the UK, Isle of Man and Channel Islands. It dates back to the establishment of the Irish Free State in Nationals of CTA countries can travel freely within the CTA without being subject to passport controls. Although both the Republic of Ireland and the UK maintain their own visa and immigration policies, there is a significant degree of practical cooperation and policy coordination in order to ensure the security of the CTA. Controls on the Irish border are also generally regarded as impractical and undesirable. Irish nationals have a special status in UK law which is separate to and pre-dates the rights they have as EU citizens. In short, the Republic of Ireland is not considered to be a foreign country for the purpose of UK laws, and Irish citizens are not considered to be aliens. Maintaining the CTA would clearly reduce the need for any hard border in Ireland. Page40

41 Lisbon Treaty Article 8 Can the EU s treaties themselves offer any help to the UK if we pursue a new bespoke Customs Partnership? Possibly so. Article 8 of the European Union s consolidated Treaties 40 states that: The Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness If the UK leaves the EU in 2019, we will no longer be an EU member state but a neighbouring country. While Article 8 is undoubtedly vague and more of a general declaration of goodwill than a specific legal obligation, it certainly corresponds well with our idea for a bespoke customs partnership. We could cite this to the EU when negotiating our new bespoke customs partnership. Page41

42 Article 50 The EU s Article 50 suggests some kind of agreement with the UK should be concluded after the two-year Article 50 period, but it is very vague: Article Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements. 2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament. 41 On their own, the provisions of Article 50 text don t really help us, but taken in conjunction with Article 8, we believe they could be used to convince the EU that they should accept the proposals set out in this document. If the government does decide to go down the route we suggest, then Mrs May should cite Article 8 regularly in talks. Page42

43 WCO - World Customs Organization With 182 Members, the WCO is the world s largest and most important customs body. The EU member states are members of the WCO and the EU itself has in their words Status akin to WCO membership. 42 The WCO website explains its vision and goals: The WCO provides leadership, guidance and support to Customs administrations to secure and facilitate legitimate trade, realize revenues, protect society and build capacity 43 WCO Goals - Promote the security and facilitation of international trade, including simplification and harmonization of Customs procedures. The WCO, as the global centre of Customs excellence, plays a central role in development, promotion and support for the implementation of modern Customs standards, procedures and systems and has positioned itself as a global leader in Capacity Building delivery 44 The UK should consult with the WCO, specifically its European section - ROCB Europe (European Regional Office for Capacity Building) to help the UK and EU draft their new bespoke customs partnership. This would certainly fall within their remit, as ROCB Europe describe their aims as: ROCB Europe is the 6th and final ROCB that also comprises WCO s largest region with its 51 member states and the European Union. The regional capacity building aims at modernizing Customs Services by taking into consideration global directions, standards, Customs in the 21st century policy document by the WCO, WCO Framework of Standards to Secure and Facilitate Global Trade (SAFE), Revised Kyoto Convention, WCO Capacity Building Compendium and such. Page43

44 United Nations Economic Commission for Europe (UNECE) International Convention on the Harmonization of Frontier Controls of Goods (1982) The UNECE International Convention on the Harmonization of Frontier Controls of Goods (to which the EU, UK, Ireland and France are signatories 45 ) is one of the international agreements which the UK and EU would be forced to fall back on; in the undesirable event of a no-deal Brexit. As the UNECE website states: The Convention applies to all goods being imported or exported or in transit, when they are moved across one or more maritime, air or inland frontier. Its objective is to reduce barriers to international trade and facilitate the movement of goods by reducing the requirements for completing formalities as well as the number and duration of controls, in particular by national and international coordination of control procedures and of their methods of application. 46 This agreement could be useful as one of many building blocks making up our new customs partnership. Specifically, our new agreement would reaffirm both the UK and EU s commitments under this existing agreement. Article 6 of the Convention is particularly useful: The Contracting Parties undertake to co-operate with each other and to seek any necessary co-operation from the competent international bodies, in order to achieve the aims of this Convention, and furthermore to attempt to arrive at new multilateral or bilateral agreements or arrangements, if necessary. Page44

45 WTO Trade Facilitation Agreement The World Trade Organisation (WTO) ratified a new agreement last year 47 the Trade Facilitation Agreement (TFA). This agreement could help the UK and EU maintain a frictionless border after Brexit. The TFA is relevant because not only is the UK a WTO member, but also the EU itself has been a WTO member since 1 January All 48 member States of the EU are also WTO members. 49 The WTO website explains the purposes of the TFA: The objective of this Agreement is to boost global trade by expediting the movement, release and clearance of goods. 50 Release and clearance of goods Time is a valuable commodity. Several TFA provisions will facilitate more rapid movement of goods across borders such as through the release of products even before the final determination of customs duties, expediting shipments from certain air cargo, and prioritizing perishable goods. Automation and e-services Going digital can help make trade easier. Under the TFA, there are provisions requiring WTO members to accept e-payments and electronic versions of certain documents where appropriate and possible Harmonized processes and standards Traders find it helpful when rules and procedures are predictable and familiar across borders. They like it too when authorities coordinate with one another. The TFA contains articles on Border Agency Cooperation and Customs Cooperation and it states that WTO Page45

46 members establish a single window or entry point to participating authorities or agencies. 51 The TFA official text contains many interesting elements: Members, Recognizing the need for effective cooperation among Members on trade facilitation and customs compliance issues; Hereby agree as follows: ARTICLE 7: RELEASE AND CLEARANCE OF GOODS 1 Pre-arrival Processing 1.1 Each Member shall adopt or maintain procedures allowing for the submission of import documentation and other required information, including manifests, in order to begin processing prior to the arrival of goods with a view to expediting the release of goods upon arrival. 1.2 Each Member shall, as appropriate, provide for advance lodging of documents in electronic format for pre-arrival processing of such documents. 2. Electronic Payment Each Member shall, to the extent practicable, adopt or maintain procedures allowing the option of electronic payment for duties, taxes, fees, and charges collected by customs incurred upon importation and exportation. ARTICLE 8: BORDER AGENCY COOPERATION 1. Each Member shall ensure that its authorities and agencies responsible for border controls and procedures dealing with the importation, exportation, and transit of goods cooperate with one another and coordinate their activities in order to facilitate trade. 2. Each Member shall, to the extent possible and practicable, cooperate on mutually agreed terms with other Members with whom it shares a common border with a view to coordinating procedures at border crossings to facilitate cross-border trade. Such cooperation and coordination may include: (a) alignment of working days and hours; (b) alignment of procedures and formalities; (c) development and sharing of common facilities; (d) joint controls; (e) establishment of one stop border post control. Page46

47 ARTICLE 9: MOVEMENT OF GOODS INTENDED FOR IMPORT UNDER CUSTOMS CONTROL Each Member shall, to the extent practicable, and provided all regulatory requirements are met, allow goods intended for import to be moved within its territory under customs control from a customs office of entry to another customs office in its territory from where the goods would be released or cleared. The TFA could clearly help to alleviate some of the problems connected to leaving the EU Customs Union, but on its own, it is no panacea. TIR Convention As the UNECE website states: The Customs Convention on the International Transport of Goods under Cover of TIR Carnets (TIR Convention, 1975) is one of the most successful international transport conventions and is so far the only universal Customs transit system in existence. To date, it has 74 Contracting Parties, including the European Union. It covers the whole of Europe and reaches out to North Africa and the Near and Middle East. 52 But what precisely does the TIR convention do? The website goes on to explain: The TIR Convention facilitates the international carriage of goods from one or more customs offices of departure to one or more customs offices of destination (up to a total of four customs offices departure and destination) and through as many countries as necessary. As a rule, the vehicle remains sealed throughout the TIR transport and, thus, goods are generally not inspected at border crossings. However, customs authorities remain entitled to perform inspections whenever they suspect irregularities or randomly. The Convention applies to transports with road vehicles, combinations of vehicles as well as containers and allows for the use of the TIR Carnet for all modes of transport, provided that some portion of the journey is made by road. 53 The European Union itself, Norway, Switzerland, the UK and Ireland are just some of the 68 signatories to this agreement. Page47

48 Clearly this agreement will prove useful after we leave the EU s Customs Union and help to maintain frictionless trade. TIR (Transports Internationaux Routiers, International Road Transport) Each EU Member State, including the Union itself, is a Contracting Party to the TIR Convention European Commission website 54 Interestingly, the TIR system is to be supplemented by a new system called E-TIR 55 which aims to ensure the secure exchange of data between national Customs systems related to the international transit of goods, vehicles or containers according to the provisions of the TIR Convention Our proposed bespoke customs partnership with the EU should reaffirm the UK and EU s commitments, duties and responsibilities under the TIR convention. Page48

49 GATT The General Agreement on Tariffs and Trade (GATT) 56 is another of the international agreements which the UK and EU would be forced to fall back on; in the undesirable event of a no-deal Brexit. The GATT agreement (signed 1947, updated 1994) is still in force as it has been incorporated into the WTO. Crucially, The EU has been a WTO member since 1 st of January The 28 current member States of the EU are *also* WTO members in their own right. 57 Some of the GATT clauses could be useful for the UK and EU when trying to create a legal basis for their new bespoke customs partnership. Article XXIV of GATT says (emphasis ours): The provisions of this Agreement shall not be construed to prevent advantages accorded by any contracting party to adjacent countries in order to facilitate frontier traffic. The contracting parties recognize the desirability of increasing freedom of trade by the development, through voluntary agreements, of closer integration between the economies of the countries parties to such agreements. They also recognize that the purpose of a customs union or of a free-trade area should be to facilitate trade between the constituent territories and not to raise barriers to the trade of other contracting parties with such territories. GATT offers us little else in relation to the NI/ROI border issues. It does speak in positive language however. For example: Page49

50 Switzerland/EU borders The Swiss borders with the EU are undoubtedly efficient but not frictionless. The UK could certainly learn a lot from studying their methods, as a non-eu country that trades a great deal with it. Interesting however, was oral evidence 58 given to the Northern Ireland Affairs Committee by Dr Christian Bock, Director General, Federal Customs Administration (Switzerland), and Lieutenant Colonel Rebekka Straessle, Chief of Staff, Swiss Border Guard. The below exchange took place: Unlike the reports we looked at earlier which emphasised primarily technological solutions to border issues, Dr Bock identifies the need for close co-operation and joint strategies also. He clearly believes an invisible border is possible on the island of Ireland. Page50

51 Norway/Sweden border The Norway/Sweden border has been examined repeatedly since the EU referendum as an example of a low-friction border. Professor in public law Henrik Wenander of Lund University explains: Norway and Sweden have close ties, characterized by a high degree of trust. This is indicated by the fact that several of the border crossings in the sparsely populated areas along the 1,630km long border are unattended. The decisive factor for the success of Norwegian-Swedish crossborder movement is undoubtedly the European Economic Area (EEA) treaty. This agreement between the EU and Norway (as well as Iceland and Liechtenstein) means that Norway is connected to the EU common market. Norway can trade most goods with its EU neighbours, without customs duties being levied. There are, however, some exceptions, such as agricultural products and food. The success of Norwegian-Swedish cross-border mobility may thus be explained by a combination of cultural features, including a high degree of mutual trust and legal arrangements. The importance of the EEA treaty cannot be overlooked. Without an overarching arrangement of this kind, cross-border movement would probably be much more difficult. Given the historical differences, the relation between Norway and Sweden cannot, of course, be directly transferred to Ireland or other parts of Europe. It does indicate, however, that extensive legal cooperation, problem solving mechanisms on different levels and mutual trust are key features of successful cross-border mobility. 59 Page51

52 A 2017 BBC report on the Norwegian border 60 contained an interesting claim: EFTA/AELE Whatever form of relationship the UK reaches with the EU, the UK should seek to rejoin the European Free Trade Association (EFTA) of which we were a founder member. This Free Trade Association has 27 FTAs covering 38 countries and territories outside the EU including Canada. 61 Unlike the EU, EFTA has a unique two-track trade deal system. EFTA s negotiators work to negotiate trade deals for the bloc as a whole, while allowing member states to negotiate their own bespoke trade deals. An example of this is that all of EFTA has a trade deal with Hong Kong, but EFTA member Switzerland has a separate trade deal with China. EFTA has many experienced trade experts and negotiators on the payroll, while the Page52

53 UK hasn t had to negotiate its own trade deals for decades and is now currently scrambling to recruit sufficient personnel. Britain could become part of the extensive EFTA trade network and still sign her own separate deals when we have re-established the necessary negotiating teams; a win-win situation for the UK. If the UK rejoined EFTA, it would of course boost the organisation s profile and clout during negotiations (both with the EU27 and third countries). The EFTA countries are not subject to the EU s ever closer union as EFTA is an economic project not a political one. Joining EFTA is essential, since when we leave the EU; we stand to lose access to all the EU-third country trade agreements that the EU has signed in the last few decades. In addition, EEA membership is only available to EU or EFTA states. Former Prime Minister Margaret Thatcher stated in her book Statecraft : There are, though, useful precedents. In 1992, Norway Iceland and Liechtenstein that is the remaining EFTA countries bar Switzerland concluded negotiations with the EU which established a European Economic Area (EEA). These countries now enjoy free trade with the European Union; that is the freedoms of movement of goods, services, of people and of capital. They also enjoy the unhindered access guaranteed by the operation of the European Single Market. But they remain outside the customs union, the CAP, the CFP, the common foreign and security policy and the rest of the legal/bureaucratic tangle of EU institutions. But Britain is in a different league from countries like Norway (population 4.4 million) or Iceland (population 270,000), let alone Liechtenstein (population thirty-two thousand.) Page53

54 We could press for Britain to be represented in the drawing up of all Single Market Legislation. Mrs Thatcher also wrote that: Switzerland is unique in many ways. But whatever Switzerland has secured in its dealings with Europe, Britain too could certainly obtain without great difficulty. Switzerland enjoys free trade with the EU. The EFTA model is perhaps not ideal: but it is certainly an acceptable option. Former Labour Prime Minister Tony Blair said in 2000: Of course, Britain could survive outside the European Union. We could probably get access to the Single Market, as Norway and Switzerland do. Norway then Canada? Page54

55 Some MPs (notably Nick Boles) and commentators such as Mr George Trefgarne and Professor George Yarrow have discussed the idea of the UK joining EFTA/EEA as a stepping stone towards a CETA+ or SuperCanada free trade deal down the line. While there is undoubtedly some merit to their ideas we would suggest three points to them: 1. We believe the UK will find that life as an EFTA/EEA member is actually a great fit for us (we helped create it!) and not wish to leave. 2. The EFTA countries might not like the UK simply using them as a waystation. For that reason, the UK should commit in advance to a respectable period of time as an EFTA/EEA member say 10 years. When that time is close to an end, MPs could discuss extending membership or seeking a new relationship. 3. A CETA-style deal probably wouldn t be enough to keep frictionless trade in Ireland. We would probably need a DCFTA combined with an Association Agreement, as we described in our publication the last parachute. HM Government report on Future customs Arrangements The Government s report on future customs arrangements 62 advocates that the UK should remain a party to the CTC (as we covered earlier) but it also contains some other interesting ideas: The United Kingdom wants to build a new, deep and special partnership with the European Union. As we leave the European Union and therefore the EU Customs Union, the Government seeks a new customs arrangement that facilitates the freest and most frictionless trade possible in goods between the UK and the EU, and allows us to forge new trade relationships with our partners in Europe and around the world. The report contains this section which chimes well with our own proposals: Page55

56 Our ultimate customs arrangement will depend on our negotiations with the EU both the UK and EU Member States would benefit from time to fully implement the new customs arrangements, in order to avoid a cliff-edge for businesses and individuals on both sides. The Government believes a model of close association with the EU Customs Union for a time-limited interim period could achieve this. The report says the government is seeking: bilateral implementation of a technology-based solution for roll-on, roll-off ports which could consist of pre-arrival notification of consignments on a port IT system, linked to customs declarations and vehicle registration numbers so that vehicles were not required to stop at the border, enabling traffic to flow smoothly. Also: The border between Northern Ireland and Ireland is the UK s only land border. We must avoid a return to a hard border, and trade and everyday movements across the land border must be protected as part of the UK-EU deal. They also outline: A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on EU trade as possible. This would aim to: continue some of the existing arrangements between the UK and the EU; put in place new negotiated and potentially unilateral facilitations to reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures. There are several good ideas in this report which could be implemented between March 2019 and the end of the transitional period. Summary Page56

57 As we have seen in this report, different experts have different views on how to resolve the problems which may arise from leaving the EU s Customs Union. We at EFTA4UK believe that on the whole, they collectively have an overly-optimistic view of what can be achieved and in what timescale. But before we elaborate, lets focus on some of the positive and constructive points: Existing International agreements and conventions on customs and trade matters could potentially provide a decent baseline for trade with the EU after Brexit even if no special bilateral deal was agreed. We are thinking here specifically of GATT, TIR Convention, SAFE and the WTO TFA. These agreements (amongst others) would help protect the integrity of supply chains. As the Legatum Institute report we mentioned earlier states: modern customs borders are both efficient and low-impact. The UK is recruiting thousands of new Border Force staff 63 and the ROI is hiring 1,000 new customs officers and vets. 64 Other EU countries are also hiring new customs staff. These additional personnel should help mitigate any problems at ports and airports. New Technology and systems are being set up/implemented which will replace outdated systems and boost capacity specifically the UK s new CDS system and the EU s Customs 2020, UCC and Registered Exporter system (REX) 65 programmes; as well as international programmes such as the E-Tir system. Despite these positive factors, we maintain that even when taking them into account they still may not be enough to allow the UK to leave the EU in 2019 and maintain frictionless trade. In order to maintain frictionless trade, the UK should first be realistic about the Timescale. By remaining in a form of customs union until 2020, we allow time for new systems to mature, be tested properly and synchronised. We give time for recruitment and training of new personnel, both on the EU side and UK side. Page57

58 The extra time would allow officials from the UK and EU to learn lessons and best practice from borders around the world, most notably the Norway-Sweden border, Swiss-EU crossings and USA/Canada border. Greater preparation time is therefore of paramount importance. For this reason, the UK should agree to stay in a form of customs union with the EU until But even if we stay in it until 2020 and new technological and procedural systems are successfully implemented, it still may not be enough to maintain a frictionless border. The question is therefore, what should we do? The Irish Taoiseach Mr. Leo Varadkar has said: We will do all we can, in Brussels, in London and in Dublin, to achieve the best outcome for everyone on this island - to protect our peace, our freedom, our rights, and our prosperity. We will talk, as I have in recent weeks, to the First Ministers in Scotland and in Wales, two people with whom I share a common view which favours the UK remaining in the single market and a customs union. However, there are people who do want a border, a trade border between the United Kingdom and the European Union and therefore a border between Ireland and Britain and a border across this island. These are advocates of a so-called hard Brexit. I believe the onus should be on them to come up with proposals for such a border and to convince us and convince you; citizens, students, academics, farmers, business people that it's in your interest to have these new barriers to commerce and trade. They ve already had fourteen months to do so. If they cannot, and I believe they cannot, we can then talk meaningfully about solutions that might work for all of us. Page58

59 For example, if the United Kingdom does not want to stay in the Customs Union, perhaps there can be an EU-UK customs union. After all, we have one with Turkey. Surely we can have one with the United Kingdom? If the UK does not want to stay in the Single Market, perhaps it could enter into a deep Free Trade Agreement with the EU and rejoin EFTA of which it was a member prior to accession. And if this cannot be agreed now, then perhaps we can have a transition period during which the UK stays in the single market and customs union while these things are worked out. This is the space in which agreements are made. These are the practical solutions I am proposing. 66 Mr Varadkar s suggestions correspond well with our own ideas, namely the UK could apply to join EFTA and then have a phased transition period inside both single market and customs union while these things are worked out. Page59

60 The EEA Agreement The European Economic Area (EEA/ EØS) Agreement entered into force on 1 January , bringing together all the European Union Member States and three EFTA/AELE States Iceland, Liechtenstein and Norway. As a 2018 report by the House of Commons Library summarized: Advocates of EEA membership argue that this is the best option from an economic point of view as it would mean the UK remains a member of the single market. Membership of the single market facilitates trade with other members by removing tariffs and quotas and by reducing non-tariff barriers such as differing technical specifications and labelling requirements. Unlike the customs union, which is relevant only for trade in goods, the single market covers both goods and services. This agreement allows tariff-free trade in goods and services between the EEA countries; but also eliminates most non-tariff barriers (NTBs). The EEA Agreement goes far beyond a simple free-trade agreement: The agreement has several features which make it valuable if the UK was to maintain EEA membership, specifically in regard to customs co-operation and border co-operation. Page60

61 Protocol of the EEAA is entitled On simplification of inspections and formalities in respect of carriage of goods and contains clauses such as those below: Article 9(2) of the EEA Agreement is a key element to our proposals: Page61

62 As Professor Henrik Wenander has explained: The decisive factor for the success of Norwegian-Swedish crossborder movement is undoubtedly the European Economic Area (EEA) treaty. This agreement between the EU and Norway (as well as Iceland and Liechtenstein) means that Norway is connected to the EU common market. Norway can trade most goods with its EU neighbours, without customs duties being levied. 69 As the report by the Legatum Institute outlined elsewhere in this report stated: membership of the single market would mitigate the need for controls on SPS and product regulation to be in place at the Irish border. While the EEA Agreement provides for tariff free trade in goods and services and eliminates more non-tariff barriers than any standard free trade agreement, it does not provide complete coverage, as trade in agricultural and fisheries products is largely not covered by the EEAA. However, the EEA Agreement and its additional protocols do contain clauses pertaining to agriculture and trade in fish, for example: Page62

63 The EEA countries can negotiate country-specific amendments with other EEA members, which are then enshrined in new protocols or amendments to the EEAA. Retaining EEA membership alone would not be sufficient to maintain frictionless trade between the EU and UK after Brexit. But as the example of the Norway-Sweden border shows, EEA membership makes things much simpler. So in addition to EEA membership; we believe the UK should negotiate a bilateral customs deal with the EU, which would be reflected in the form of a new protocol to the EEA Agreement. Interestingly however, the EEA expert Dr Richard North believes that the EEA agreement itself is sufficient for frictionless trade without any additional deals on customs issues: Bearing in mind that the EEA Agreement is an adaptive framework, and includes provision for the elimination of customs duties on imports and exports, and any charges having equivalent effect (Article 10), there is actually no need for Efta/EEA states to sign up to a customs agreement. There is nothing to be gained from it, in terms of improving the crossborder flow of goods and, as a result, none of the Efta states are members of a customs union with the EU. This should be known to Mrs May and her negotiating team. The EEA Agreement, with specific adaptations to suit the specific needs of the UK, is a means by which we can get as close to frictionless trade with the EU as makes no difference. 70 Page63

64 Political Fudge? Despite everything we have outlined in this document, there is still a chance that some critics on either side of the debate will say our proposals contravene the rules of the European Union. To them we would highlight the many examples such as Vatican City, Jersey, Guernsey, Monaco and the Isle of Man all of whom enjoy longstanding special relationships with the EU but aren t in it. If the political will is there on both sides, any remaining difficulties can be either kicked into the long grass or settled using that age-old political tool the fudge. Conclusions The UK is leaving the European Union in If the UK simultaneously leaves the EU, European Economic Area and EU Customs Union at this time, the economic repercussions are likely to be immense on both sides of the channel. Perhaps in recognition of this, the Prime Minister has in principle negotiated a transitional period/ implementation phase scheduled to run from 29 March 2019 to 31 December During this period the UK will be a de facto a member of the Single Market and Customs Union. Mrs May has said that the UK will leave this customs union in So how should the UK proceed? Our best hope for a Smart Brexit and to avoid a no-deal crash out therefore, is for the UK to apply as soon as possible to rejoin the European Free Trade Association (EFTA), (which the UK helped to create in the 1960s) and create a new relationship with the EU based on the precedents of the EFTA countries. Page64

65 Using this method, we could still enjoy significant access to the Single Market, better control migration into the UK, regain control over our fishing grounds, regain our WTO seat and repatriate swathes of borrowed sovereignty from Brussels. We should also consult the World Customs Organization (WCO) and seek their advice regarding new technologies and simplification and Acceleration of Customs Procedures. We can use the period from 29 March 2019 to 31 December 2020 to move from being an EU/EEA state inside the Customs Union (as we presently are) to an EFTA/EEA state with a bespoke customs partnership agreement with the EU. By that point CDS and UCC should be fully implemented. Page65

66 How and When? While the exact timetable will of course be a matter for negotiation, and some of these steps may happen concurrently, we believe the general sequence should follow the order below: MPs and Peers should create an APPG (All-Party Parliamentary Group) on EFTA. The UK government should make clear its intention to remain in the EEA. The UK is a signatory to the Agreement already and legally has to give 12 months notice if it wishes to leave the Agreement (it hasn t). The UK should agree to remain both in the EEA and a customs union for approximately two years after Brexit. Discuss with the WCO s think-tank on how best to co-ordinate EU and UK customs systems. The UK should apply to rejoin EFTA. Remain in the EEA (European Economic Area) by switching from the EU pillar to the EFTA pillar. Apply in principle to become a party to the EFTA network of FTAs, to take effect when the UK leaves customs union with the EU. Ask countries who already have preferential trade with the UK via the EU is they would like to roll-over or grandfather their present relations with the UK. Negotiate an additional protocol to the EEA agreement dealing with NI/ROI cross border trade. When CDS/UCC are up and running effectively and UK EU customs organisations have established the necessary synergy, the UK (and Smart Border 2.0 ideas like networked ANPR systems are in place) the UK can leave the customs union with the EU, transferring to the new bespoke customs partnership (a bilateral UK-EU agreement) which will work together with the new EEA protocol. Page66

67 The chart below represents to what degree we believe different elements will contribute towards frictionless trade as part of a new UK-EU Customs Solution. Percentages approximate. Page67

68 Is this possible? We at EFTA4UK believe that the ideas set out in this report are both realistic and achievable, specifically a new relationship based on the Norway model plus additional agreements on Ireland, customs and cross-border border trade. Is such a deal with the EU possible? We say yes. Firstly, all parties involved have pledged to avoid a Hard border. Secondly, customs expert Hans Maessen has stated: It is in the interest of both parties to stay aligned as much as possible to facilitate trade. Thirdly, as we outlined earlier in this report, the EU s article 8 states: The Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness Page68

69 In addition, let s also take into consideration that the EU s chief negotiator Michel Barnier has recently said: We are prepared to offer Britain a partnership such as there never has been with any other third country 72 Mr Barnier also said recently (3 rd September 2018): We are prepared to discuss a customs agreement of some sort that simplifies customs arrangements between the United Kingdom and the EU. 73 He has also said: We are ready to look constructively at all options which allow us to meet our objectives - all options. Irish Prime Minister Leo Varadkar has stated 74 : Europe needs a deal. Britain needs a deal. We're not going to be preparing for a hard border - we're not preparing for any sort of land border between N Ireland and Ireland." 75 Finally, the Prime Minister has said, pragmatically: I do want us to have a customs agreement with the EU. Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position. I have an open mind on how we do it. It is not the means that matter, but the ends. In conclusion then, our plan would not only be possible and legal but also enable all sides to accept it. Page69

70 Our proposals would deliver on the referendum result we would be out of the European Union It would not lead to the break-up of the UK It would protect jobs and the economy The EU could accept such an agreement UK could sign its own free trade agreements (FTAs) around the world We could take part in beneficial European programmes such as reciprocal healthcare arrangements and EUROPOL It would secure the peace process by avoiding a hard border on the Island of Ireland Mrs May should pitch this model to Parliament, her party and the media as a bespoke British Brexit model. If she did so, we believe it would command widespread support both at Westminster and in the country at large. If you agree with the proposals in this document, please ask your Member of Parliament and Members of the European Parliament to support them efta4uk@mail.com Page70

71 Afterword: The purpose of this document Whether you voted to leave or remain in the EU, we must accept that the decision has been made and the government has a duty to try and implement it. That said, all possible steps must be taken to preserve the Union (UK), safeguard jobs and avoid the return of a hard border on the Island of Ireland. While some commentators and politicians have dismissed the risks with a wave of their hands or a shrug of their shoulders, we feel that it is our responsibility to make sensible, thought-out proposals to minimise any risks. We believe that the best way forward is for the UK to adopt a EFTA model similar to Iceland or Liechtenstein; with a few UK-specific tweaks perhaps, but no overt cherrypicking. It may be the case that few policymakers read this report, and fewer still may take notice of its contents. It is a labour of love that we do not expect to receive any recompense for. But we believe that morally, those with the necessary knowledge and ideas to contribute something to this debate should do so. Any solution to the issues surrounding leaving the Customs Union must include not just technological but also political ideas. We have tried to provide them. If the government adopt as official policy the ideas contained in this report, we believe that there will be no return to a hard border in Ireland. In addition, we believe that not only will there be no net job losses in the UK; there will actually be a net jobs increase. We have done all we can to explain our ideas. The torch must now be passed to Parliamentarians and to the public to read them, discuss them (perhaps even improve on them) and implement them. - EFTA4UK Campaign group, 22/09/2018 Page71

72 Postscript One controlling immigration? What about Immigration/Free movement of people (FMoP)? It is true that accessing the single market via the EEA means signing up to a version of the EU s four freedoms including free movement. But this need not be a deal-breaker. Firstly, UK businesses and the NHS currently depend heavily on EU/EEA workers. And UK citizens will still want to live work study and retire in the EU; so some kind of reciprocal deal will have to be struck anyway. If the UK joins EFTA/EEA it could use articles of the EEA agreement to better regulate any excesses or surges in migration. Example: Article 28 EEA allows for tweaks and temporary measures to control migration from the EEA "justified on grounds of public policy, public security or public health". If over time these measures proved insufficient the UK could put a unilateral brake or restriction on migration from the EU/EFTA under the Safeguarding measure described in Article 112 EEA. This would force the EU and EFTA countries to come around the table as per Article 113: "Article A Contracting Party which is considering taking safeguard measures under Article 112 shall, without delay, notify the other Contracting Parties through the EEA Joint Committee and shall provide all relevant information. 2. The Contracting Parties shall immediately enter into consultations in the EEA Joint Committee with a view to finding a commonly acceptable solution." How would the EU respond to the UK using the emergency brake if it was needed? The procedure is set out in EEA Article 114. If a safeguard measure taken by a Contracting Party creates an imbalance between the rights and obligations under this Agreement, any other Contracting Party may towards that Contracting Party take such proportionate rebalancing measures as are strictly necessary to remedy the imbalance. Priority shall be given to such measures as will least disturb the functioning of the EEA. This means that if the UK used the safeguarding measures to restrict EU free movement the EU: - Could only take steps which are both proportionate and strictly necessary - Would be obligated to immediately enter into consultations in the EEA Joint Committee with a view to finding a commonly acceptable solution." What commonly acceptable solution was ultimately decided upon would of course be a matter for diplomacy and negotiation. Page72

73 Postscript Two Mrs May s misunderstandings On the 21 st of September 2018, Mrs May gave a speech in response to the Salzburg talks. In this speech she said: the EU is still only offering us two options. The first option would involve the UK staying in the European Economic Area and a customs union with the EU. In plain English, this would mean we d still have to abide by all the EU rules, uncontrolled immigration from the EU would continue and we couldn t do the trade deals we want with other countries. That would make a mockery of the referendum we had two years ago. 76 You might legitimately ask - how does this speech affect what we have outlined in this report? There are a lot of elements packed into these paragraphs, so lets go through them: The EU is happy for us to stay in the European Economic Area (EEA) good. The EU seem to be suggesting we should stay in a Customs Union with it. As we have described earlier in this document, a transitional customs union may well be required but not a permenant one. Re: uncontrolled immigration from the EU see Postscript One. we d still have to abide by all the EU rules Wrong. See below. we couldn t do the trade deals we want with other countries. Wrong, see below. Page73

74 What about the EU rules we would have to follow? A 2015 report in the Icelandic press entitled Iceland has adopted 10% of EU laws stated that a: study was carried out for the Foreign Ministry a decade ago regarding the period from 1994, when Iceland's membership of the EEA Agreement came into effect, to Based on the two replies from the Foreign Ministry a total of 62,809 pieces of legislation were passed by the EU from 1994 to Some 6,326 of those were included in the EEA Agreement or about 10%. 77 The Norwegian Nei Til EU campaign group reported in 2016 that: In the period of , EU adopted 14,117 pieces of legislation, while 1,605 directives and regulations were incorporated into the EEA agreement. This amounts to per cent of the total. 78 An article on the website of The Alliance of European Conservatives and Reformists (AECR) stated that: the EU adopts about ten times as many laws as are introduced in Norway through the EEA Agreement. During the period , a total of 4,724 acts were incorporated into the EEA Agreement. Over the same period, the EU simultaneously adopted 52,183 directives, regulations and other legal instruments. Only 9.05 percent of the new EU laws were thus incorporated into the EEA Agreement. 79 Page74

75 In 2015, Dr Richard North contacted the EFTA secretariat, to see if they could clarify further. They reported that 10,862 acts had been incorporated into the EEA Agreement since its inception in 1992, but that there were only 4,957 acts remaining in force at the time of their reply. Dr North stated in response that: By contrast, the very latest count of the EU laws in force (today) stands at 23,076. As a percentage of that number, the EEA acquis of 4,957 acts currently stands at 21 percent. In effect, the EEA (and thus Norway) only has to adopt one in five of all EU laws not the three-quarters that is claimed. 80 So exactly how much EU law is incorporated into EEA law is difficult to say, but based on the above sources, a figure somewhere between 15 and 20 percent seems likely. But what is this EU Law and where does it come from? Michael Emerson, Associate Senior Research Fellow at the Centre for European Policy Studies and former EU Ambassador to Moscow wrote in 2015: The large majority of EU rules are those governing health and safety standards of industrial and food products for consumers and workers, of which about one quarter are international (ISO) standards, these being usually copy-and-paste identical to EU ones. 81 Mrs May herself has previously admitted herself that a lot of the rules we would have to continue to follow (regardless of what trade arrangements we have with the EU really) are inspired by international bodies (where we would regain our vote and voice after brexit): The UK will need to make a strong commitment that its regulatory standards will remain as high as the EU's. That commitment, in practice, will mean that UK and EU regulatory standards will remain substantially similar in the future. Many of these regulatory standards are themselves underpinned by international standards set by non-eu bodies of which we will remain a member - such as the UN Economic Commission for Europe, which sets vehicle safety standards. Countries around the world, including Turkey, South Africa, South Korea, Japan and Russia, are party to the agreement. 82 Page75

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