Battle lines drawn as trade negotiations fired up

Battle lines drawn as trade negotiations fired up

BLOG · BY TTF  · 10 Feb 2020

Battle lines for Brexit negotiations were drawn last week, as UK prime minister Boris Johnson countered the European Commission’s demands for a level playing field with his vision for “hard Brexit”.

While Britain formally left the European Union on 31 January 2020, the actual change this affected is minimal – and will remain so – at least for the next 11 months of the transition period. Rather this was only the starting gun for politicians and technocrats to get into the nuts and bolts of what the new relationship between the UK and EU actually entails.

 EU Commissioner Michel Barnier says the UK must meet EU conditions and ensure a ‘level playing field’ if the UK wants to achieve zero tariffs, with clear demands drawn in recommendations released yesterday by the Commission. This included three key elements: an economic partnership, a security deal, and rules on how any agreement would be policed.

However, UK Prime Minister Boris Johnson in a speech from Greenwich made clear his intention remains to withdraw the UK from both the customs union and the single market. Even at the cost of losing the privileged access to the EU market.

At the centre of this debate is regulatory divergence. While Brexit may now be assured, the areas where the UK is to seek such divergence remain largely shrouded in mystery. If the advantages of independence from the EU are to be realised, these areas must be carefully picked.

This did not stop Boris Johnson in his speech ruling that there is “no need for a free trade agreement accepting EU rules on competition policies, subsidies, social protection, the environment or anything similar, any more than the EU should be obliged to accept UK rules.”

He further emphasised that in brokering a Canada-style free-trade accord, there’ll be no alignment with EU standards; European law courts will have no jurisdiction over the UK, and he’ll make no concessions. This leaves the UK to potentially do business on World Trade Organisation (WTO) terms in most areas, with tariffs on goods, and higher regulatory barriers between the UK and Europe.

Thankfully for the timber industry, both Canada and the EU recognise the importance of the conservation and sustainable management of forests, and all Canadian forestry products enjoy duty-free, quota-free market access to the EU.

More concerning was the Prime Minister floating the idea that he may seek a similar ‘trade deal’ to that which Australia has with the EU if the UK fails to achieve a CETA like agreement. Unfortunately, Australia does not have a formal trade deal with the EU. Brussels and Canberra have been in talks over a free trade deal since 2018 but have so far failed to reach a compromise.

While there is a ‘mutual recognition agreement’ set up to facilitate trade in industrial products by reducing technical barriers between the EU and Australia, beyond this both trade mainly along common WTO rules.

However, common standards do matter! The Timber Trade Federation support the BSI’s position for the UK to continue having common standards with CEN (European standards body) and ISO (international standards body). Simplifying the market to a single standard model has had a positive impact on both UK businesses and customers, resulting in a fall in the number of national standards within Europe from 160,000 in 1980 to just 20,000 today.

Adding further concerns is the strength of the UK’s negotiation team for Free Trade Agreements. Boris Johnson admitted this when he said the UK must begin using muscles it has not used for decades to start negotiating free trade deals.

While the UK was an EU member, it was automatically part of around 40 trade deals that the EU had struck with more than 70 countries, and during Brexit, the UK was given permission to replicate many of these agreements. So far, the UK has managed to roll over 20 “continuity” deals, covering 50 countries or territories, about 8% of total UK trade.

However, the ability of the UK to negotiate its own independent trade deals is to a significant degree untested – and like it or not, 50% of UK trade is with the EU. In a world of ‘America First’, the UK should expect little in the way of compromise from friends across the Atlantic, or for that matter members of the Commonwealth. The world has changed significantly in the last four decades.

While the trade battle continues between the EU and the UK, the TTF will be focused on ensuring continuity and close alignment with EU and minimal disruption to the timber industry. This year we will also continue to lobby the Government on domestic policies to ensure that targets find there ways out of speeches and into reality – particularly on house building and climate change.

Whatever the outcome of Brexit, we need a good environment for doing business, and with the likes of the Confederation of Business Industries (CTI) we continue to work with Government to prepare for new legislation.

Make sure you are kept up to date with the latest Brexit news, and if you want more information and deeper analysis on how Brexit will affect your business register for the UK Softwood Conference on Wednesday 4 March.