Brexit white paper: What is the industry saying, and what are ‘trusted traders’?

A white paper on Brexit was been published this week setting out Theresa May’s vision for the UK’s future relationship with the EU, which will significantly affect the drinks trade.

The UK will leave the single market and the customs union and will instead create a “facilitated customs arrangement” to remove the need for customs checks and controls at the borders.

It also spells the end of freedom of movement, leaving the Common Agricultural Policy, and the Common Fisheries Policy, as well as terminating the jurisdiction of the European Court of Justice.

The full document can be found here.

The government hopes that the UK will be able to collect tariffs on behalf of the EU, but that it can set its own tariffs when trade deals with other countries are signed.

While trade bodies such as the Institute of Directors have welcomed the briefing’s publication, economists are wary of what the intricacies of looser trade ties with Europe will mean for the UK’s finances.

A foreword from Brexit secretary Dominic Raab within the document also states that the UK wants to “maintain frictionless trade in goods” with EU through a new
free trade area.

Below are a few examples of reactions from the industry. We will continue to update this post as more statements come in.

The BBPA

The British Beer and Pub Association (BBPA) approves of May’s desire to maintain current systems for Excise and VAT practices which will make the transition smoother, and welcomed some of the specifics on trade which should benefit the pub sector.

“It is encouraging that the Government is making progress in setting out its proposals for Brexit,” it said.

“While there is still much detail to be thrashed out in key areas such as immigration, there are a number of specific positive developments.”

The industry body wants the government to seek the Excise Control and Movement System upon leaving the EU, which will make selling European beer in pubs easier.

Good news, too, for young people planing to study or work in the UK’s on-trade. While freedom of movement is getting scrapped, the Youth Mobility Scheme — which allows under 30s to work in the UK for up to 2 years without being included in migration data — is to be extended.

The scheme currently exists for the UK and many Commonwealth countries, but the BBPA said it has long been pressing for this to be extended to the whole of the EU.

““It is encouraging that the Brexit white paper echoes some of the issues that we have been highlighting since the referendum,” said CEO brigid Simmonds.

“However, it’s still vital that the Government continue to work with us and the industry at every opportunity, so they understand what we need for a future outside of the EU. These proposals mark a positive step, but there remains much work to be done.”

UK Hospitality

UK Hospitality, which looks after the interests of those in the pub, bar and restaurant industries, was pleased with what it saw as the “importance and prioritisation of the food and drinks industry” in the wite paper.

CEO Kate Nicholls said: “We are pleased that the Government has recognised the value of the food and drink sector. We are also pleased that there appears to be no major deviation from previously stated positions, particularly the ability EU citizens to be able to work in the UK.

“It is vitally important that there is no friction in trade with the EU, and that goods – food specifically – is able to be traded to suit the Just In Time method that many hospitality businesses will need. It’s reassuring to see the Government acknowledging the need for such smooth UK-EU trade.

“UKHospitality will continue to be in near-constant dialogue with the Government, to promote the interests of the hospitality sector and ensure that businesses are not disadvantaged by Brexit. We also await the forthcoming report by the Migration Advisory Committee and will be liaising with the MAC to ensure that the sector has access to the talent it needs.”

The WSTA

WSTA chief executive Miles Beale.

Miles Beale of the Wine and Spirits Trade Association (WSTA) said that the document is “as welcome as it is overdue,” but noted that it doesn’t really do much to provide any real clarity over what will happen to trade regulations after the split in March.

However, Beale supported the PM’s call for a free trade agreement with zero tariffs and quotas, and praised her focus on Australia, New Zealand and the USA as key export markets for ratifying new trade deals post-Brexit.

“Australian wine is the most popular wine drunk in Britain and growth of New Zealand wine sales outpace all others,” he said.

“Australia and New Zealand import more spirits from Britain than any other country, and the opportunities for British exports of British gin and English wine to the USA are huge.

“The WSTA and its members recognise that the Future Partnership paper is a negotiating tool. There are several key elements in the text which we already know are unacceptable to the EU negotiating team and so uncertainty for business continues – with the clock ticking down. Both negotiating teams must now be flexible and constructive.”

Radio silence

Diageo and JD Wetherspoon have yet to respond to our requests for comment.

This may be because, put simply, we don’t know if the EU will settle on these terms, and even if they do it is not yet known how they will impact trade into the UK.

A spokesperson for Heineken told the drinks business that the drinks giant is “monitoring the developments, but not commenting on them.”

“Trusted traders” – how will it work?

The government has also proposed that it would not track the progress of goods across the UK, instead implementing a “trusted traders” policy, which would be central to realising a free trade area and frictionless trade with the EU.

It suggests that: “Where a good reaches the UK border, and the destination can be robustly demonstrated by a trusted trader, it will pay the UK tariff if it is destined for the UK and the EU tariff if it is destined for the EU”

Malcolm Dowden, legal director at City law firm Womble Bond Dickinson, said that this concept has its roots in the World Customs Organisation (WCO).

In Europe, “trusted traders” are referred to as Authorised Economic Operators.

“To qualify,” Downden said, “businesses must be able to demonstrate that they have both the policies and physical arrangements required to guarantee that goods have been transported securely and are properly accounted for.”

“businesses must currently be able to show at least three years’ experience of meeting customs obligations. That test cannot be met by the estimated 131,000 businesses who, according to HMRC estimates, will be brought into customs procedures for the first time.”

Attaining this AEO status, he adds, is “not straightforward.”

“The AEO application process theoretically takes up to 120 days. However, experience in practice suggests that the process often takes much longer – in some cases extending from 18 months to two years. AEO status cannot be regarded as an easy route, or as a quick fix.”

The white paper will not guarantee that companies granted AEO status in the UK will be recognised as such in the EU, he said.

“Without mutual recognition, AEO status would be of little value – and mutual recognition can only be achieved through a full political agreement with the EU.

“In the event of a “no deal” Brexit, or of a deal that did not include mutual recognition, the “trusted trader” concept that underpins the white paper suggestions would not provide “frictionless” trade.”