GOVERNMENT AVOIDS CUSTOMS DEFEAT BUT NO DEAL INCHES CLOSER 17th July 2018
Pawel Swidlicki Senior Account Manager
KEY TAKEAWAYS The Government narrowly survived a series of votes on the Customs Bill last night, winning two of them by a margin of only three votes. This was after the Government had backed down and accepted four amendments to the bill tabled by the pro-Brexit European Research Group. These were intended to harden the UK’s negotiating position and drag it back more towards the vision of Brexit Mrs May outlined in her Lancaster House speech. While the Prime Minister insisted the amendments were "consistent” with the Government’s recently tabled white paper, this analysis is not shared by many MPs or commentators on either side of the debate. It would seem two of the four cut across key provisions of the white paper, while another limits its scope for manoeuvre as regards the Irish border backstop, without which there can be no withdrawal agreement and no transition period. The cumulative effect of the amendments and of the politics around them is to increase the likelihood of a no deal outcome. What amendments did the Government accept? The two most contentious amendments which only just passed concerned 1) ensuring that the UK definitively leaves the EU’s VAT regime and 2) that it will not in future collect tariffs on behalf of the EU unless the EU also reciprocates. Both concern highly technical issues but it is important not to get lost in the detail and keep in mind the bigger picture. 17 July 2018
Calum O’Byrne Mulligan Senior Account Executive
The VAT amendment is significant because, outside of the EU VAT regime, goods must be charged import VAT before they can be released into free circulation. It is hard to see how this process can take place without the need for new border infrastructure of the sort the Government has said it is committed to avoiding on the Irish border. The amendment on reciprocation, while sounding innocuous enough, undermines a key tenet of the Government’s bespoke proposal for a Facilitated Customs Arrangement. That arrangement would allow the UK to retain the benefits of the EU customs union (e.g. obviating the need to comply with burdensome rules of origin requirements) while also being able to strike its own FTAs. It is unlikely that the EU would have even agreed to the FCA in its current form anyway, but the reciprocal element – essentially expecting the EU to collect customs duties on behalf of the UK on its own territory – ensures it will almost certainly be dead on arrival. The third amendment sets out in primary legislation that there cannot be a customs border down the Irish Sea, i.e. between Northern Ireland and the rest of the UK. Although this is long-standing Government policy, and indeed also of the opposition, putting it into law reduces the Government’s scope for manoeuvre to accept the EU’s proposal for the Irish border backstop, which would see Northern Ireland essentially remaining in the EU’s customs union and large parts of the single market. Reminder: the backstop is designed to ensure that whatever happens, the free-flowing status quo on the border will be maintained, and without some form of
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