Prime minister Theresa May has said that the government is preparing for the possibility of Britain leaving the European Union without an exit agreement or any transitional deal to new arrangements.
As the government published two white papers detailing plans to create a new trade and custom regimes after Brexit, May told MPs yesterday that the government wanted to agree a two-year “period of implementation” to move from the UK’s membership of the EU to a new trading relationship.
May told MPs that this would be needed to give the government time to put new systems in place. “During this strictly time-limited period, we will have left the EU and its institutions, but we are proposing that for this period access to one another’s markets should continue on current terms and Britain also should continue to take part in existing security measures,” she said.
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Such an arrangement would make the UK’s departure from the EU as smooth as possible, she said, but acknowledged that this would need to be agreed as part of talks with the EU. These negotiations over the UK’s exit, which will resume this week, are currently focused on agreeing citizen’s rights, a “divorce bill” to cover the UK’s liabilities built up as a member of the bloc, and the plans for trade and customs arrangements on the island of Ireland.
“And while I believe it is profoundly in all our interests for the negotiations to succeed, it is also our responsibility as a government to prepare for every eventuality,” said May. “So that is exactly what we are doing.”
The trade white paper stated that the government would aim to transition all existing EU trade agreements and other EU preferential arrangements into deals with the UK. It also confirmed that the government would create a new framework to allow the UK to levy tariffs when necessary – either in the case of leaving the EU without an implementation agreement, or as part of prepations for the future regime beyond the transition phase. This trade remedies framework would protect domestic industry against unfair and injurious trade practices, or unexpected surges in imports, consistent with World Trade Organisation rules.
The government will shortly be issuing a call for evidence as a first step towards identifying which existing trade remedies measures have a UK interest, international trade secretary Liam Fox said.
“This paper is the first exciting step and sets out the principles behind an approach which will help British businesses to make the most of trade opportunities, contribute to a growing economy and create prosperity for communities up and down the UK,” he said.
The paper on customs arrangements set out for the first time some details of how customs, VAT and excise regimes would operate in the event that no deal is reached.
Under what it called “a contingency scenario”, the paper said the UK would need to establish a standalone customs regime for 2019, including setting tariffs and quotas, and establishing a goods classification system in line with the government’s WTO obligations.
Import duties would be applied to every country with which it does not have a trade deal or otherwise provide preferential access to the UK market, such as schemes for developing countries, and would be set out before the UK leaves the EU.
In addition, the white paper said companies that currently trade only with the EU will be subject to customs declarations and customs checks for the first time. They would need to be registered under the Economic Operators’ Registration and Identification System, while imported goods would be liable to customs duty and import VAT.
“The government is actively considering ways in which to mitigate the impacts on traders of such a scenario, and the Customs Bill will make provisions that would allow the government to implement such facilitations,” the white paper added.
On Northern Ireland, the paper said that the government was committed to finding solutions to maintain the common travel area with the Republic, and to address the fact that the province will have left the EU’s customs union.
Areas such as how current the roll-on roll-off ferry ports could be incorporated into a new customs regime, and the need for any checks at the Northern Ireland-Ireland land border, that were “likely to be the most complex”, the paper acknowledged.
“The government is seeking the views of businesses and other stakeholders on these solutions developing solutions to the issues that implementing a new customs regime would raise”, it stated.