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The challenge of ports in a hard Brexit scenario

In August 2017 the UK released its proposal for the future border relations with the EU.

London’s main idea is referred to as “a highly streamlined customs arrangement” that allows the UK to leave the customs union but coming up with technological solutions that would speed up the processing of goods at ports.

That white paper makes clear that the UK government is preparing for the “no deal” scenario, which means “standalone customs and excise systems.”

That seems to be a warning to Brussels that the UK is ready to handle customs and is putting the infrastructure in place. However, that is a political bluff the logistics industry. “No deal” assumes that the market can quickly move to fill gaps in the supply chain from Europe. Many companies are considering moving production to Europe instead. That includes car manufacturing and Airbus.

Pessimism is justified.  Currently, Dover is Europe’s busiest ferry port and handles 500 non-EU trucks a day and 8,000 from the EU. There is no infrastructure in place to handle 8,000 trucks through the U.K customs. That means that although the U.K is theoretically “open for business,” the physical infrastructure that would allow seamless trade is not in place.

Without access to the Single Market and a Customs Union, there will be border controls.

Customs checks mean lorries will have to queue up and sailing cancelled, affecting supply chains, with detrimental effects when it comes to fresh food produce. That is serious since 95% of the U.K’s international trade takes place via shipping, that is, a sector supporting 250,000 jobs, in ferries and trucks.

Setting up infrastructure will take investment and time, and it is predicated on having in place an “interim period,” in which the UK will enjoy a bespoke and unprecedented agreement. That is legally impossible.

The UK proposes a mechanism of Authorised Economic Operators (AEOs). That is an accreditation process for import-export businesses that are solvent and have a track record of paying customs fees. That accreditation will allow their cargoes “fast track” processing at the border, while most of these traders would do a “self-assessment” of how much they owe in customs duties.

Also, the UK wants to install place recognition technology at ports, which would be linked to customs declarations, allowing cars to move without being manually stopped and checked. Of course, the white paper specifies that the UK is willing to commit to the level of investment required to make border controls seamless only if the EU responds in kind.

The will is there, but the task is enormous because other countries would not tolerate a special customs status for the UK. According to World Trade Organisation rules if you give preferential arrangements to a third country outside a customs union, you must apply it worldwide under the most favoured nation rule. In sum, the EU must make trade with the world seamless, not just with the UK.

All that assumes a lot of good faith that may not be there.

The UK does not have a good track record on border controls. In March 2017 OLAF proposed a €2bn fine as the UK has in recent years emerged as a backdoor for Chinese contraband to the Single Market.

Pressure on UK port infrastructure may get worse before it gets any better. Currently, the UK depends on the 2003 Le Touquet agreement, which essentially allows the UK to push the management of migration flows from British to French territory. Whether that kind of French goodwill can be maintained in the future, once a disorderly Brexit begins to cost French jobs, remains to be seen.