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EU's Barnier says 'fundamental divergences' persist in UK trade talks

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The European Union’s Brexit negotiator said on Monday that big differences persisted in trade talks with Britain but that both sides were pushing hard for a deal, writes Gabriela Baczynska.

“Time is short. Fundamental divergences still remain, but we are continuing to work hard for a deal,” said the EU negotiator, Michel Barnier (pictured). Trade negotiators resumed talks on the shape of the new EU-UK relationship after a post-Brexit standstill agreement expires on Dec. 31. As in the last few weeks, the focus was still squarely on dividing up fishing quotas and ensuring fair competition for companies, including on regulating state aid.

Face-to-face talks, suspended last week after a member of the EU delegation tested positive for the new coronavirus, will resume in London “when it is safe to do so”, said a source who follows Brexit, speaking on condition of anonymity. Another source, an EU official, added: “The differences on the level playing field and fisheries remain major.” The British The Sun newspaper reported at the weekend that the negotiators were looking at a clause that would allow a renegotiation of any new fishing arrangement in several years’ time.

An EU diplomat, a third source who spoke under condition of anonymity, confirmed that such an idea was under discussion, but added that the bloc insisted on linking it to the overall trade agreement, meaning that fishing rights could only be renegotiated together with the rest of trade rules. “We need to uphold the link between fishing and trade rules, this comes in a package,” the source said. The EU official said annual renegotiation of fishing quotas was a ‘no-go’ for the 27-nation bloc. Fisheries are a particularly sensitive issue for France.

Thierry Breton, the French representative on the European Commission, the EU executive, said last week: “We shouldn’t have in the Brexit deal revision clauses in one or two years, when everything would change again. We won’t let that happen. We need to give our entrepreneurs predictability.”

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Brexit butchers EU trade for Scottish beef producers

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Brexit has dealt a blow to Andrew Duff’s business. His burgeoning sales of high end Scottish beef to Europe are on hold because his business is too small to navigate the post-Brexit customs border for now, writes .

The 32-year-old had been on the verge of expanding the family business, using his social media marketing skills to promote the rare beef that has been reared on farms across the Scottish lowlands and borders for centuries.

Instead his Macduff business is now one of thousands across Britain that lack the financial firepower to throw at the myriad health checks, customs declarations and higher logistics costs that are required to export goods into the European Union.

“With these customers it takes years to build the relationship and get them on board, and it can take seconds to lose,” said Duff, whose clients include an award-winning butcher in Germany and a Michelin-starred restaurant in Belgium.

“Luckily January is a quiet month. Come February, March, if the situation is still the same then it could be problematic,” he told Reuters.

Far from the dire warnings of clogged ports and tailbacks that preceded the departure, Brexit so far has seen factories and fishermen unable to complete paperwork and get the goods off their yard. Many still do not know which forms need completing. Different couriers give different answers.

The government has said it is helping businesses deal with the “teething problems”. It has urged exporters to make sure their paperwork is in order and said it will give 23 million pounds ($31 million) to fishermen who have lost sales due to delivery delays.

Prime Minister Boris Johnson argued that Britain would be free to trade globally once it had cast off the shackles of the EU. But his pursuit of a relationship that enables Britain to set its own rules means those firms trading with Europe face a full customs border.

Hardest-hit are the small companies that built up during Britain’s 47-year membership of the world’s biggest trading bloc to sell often low-priced product that was couriered at speed across the continent.

Almost half of 2018’s 76 billion pounds in exports to the EU from small and medium sized enterprises came from firms employing fewer than 9 people.

Where a huge meat or fish producer can fill one truck with one product and complete one set of customs paperwork, Duff sources top quality cattle from a selection of farms.

His goods - bone-in pieces from Shorthorn and Luing breeds - are sent on a truck carrying products from other suppliers, a process known as groupage.

Now a vet-approved health certificate is required for each firm’s goods, meaning potentially up to 30 per truck. One fish exporter said he needed over 400 pages of export documentation for one EU-bound lorry. One error can block delivery.

Duff’s transport company have said they are struggling as it is to help big customers, so groupage must wait.

He is also worried about prices, knowing that he cannot absorb all the costs of customs declarations, longer logistics times and the health certificates.

Logistics bosses believe Brexit could force a shake-out in trade. Truck volumes between Britain and the EU were on average down 29% in the first 20 days of the year, according to data firm Sixfold. Logistics groups say some trucks are returning empty to Europe to avoid export paperwork. Prices are rising.

One of those caught up in the bureaucracy is Sarah Braithwaite, who worked 16-hour days to build a horse feed firm that until 1 January was selling into 20 European countries.

This month her stock has failed to get to Europe or been rejected by customers over unexpected customs bills and taxes. Her Forage Plus has halted European orders - making up to 30% of her sales - and is refunding £40,000 to customers.

Braithwaite says her business is too small to build a presence in Europe to overcome the new barriers. “The trade that we’ve got now wouldn’t support the cost of setting all that up,” she said.

Both she and Duff are hopeful that exports can resume once the new system has bedded in but nerves are frayed. In desperation Braithwaite called the UK government for help.

The message she got back: ring the French embassy.

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‘It is not a friendly signal from the UK immediately after leaving the European Union’ Borrell

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The EU’s High Representative on Foreign Affairs, Josep Borrell, was asked about the decision of the UK to refuse full diplomatic status to the EU Ambassador to the UK Joao Vale de Almeida and his team in London. Borrell said that it was not a friendly signal from the UK immediately after leaving the European Union.

Borrell pointed out that the EU’s 143 delegations around the world had all - without exception - granted the delegations a status equivalent to that under the Vienna Convention. He said that the EU would not accept that the UK would be the only country in the world that will not give the EU delegation the recognition equivalent to that of a diplomatic mission. 

“Granting reciprocal treatment based on the Vienna Convention on Diplomatic Relations is standard practice between equal partners and we are confident that we can clear this issue with our friends in London in a satisfactory manner,” said Peter Stano, the commission’s spokesman for foreign affairs.

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Commission proposes to amend the EU's 2021 budget to accommodate the Brexit Adjustment Reserve

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Following the proposal for a Brexit Adjustment Reserve the Commission put forward on 25 December, the Commission has today proposed a €4.24 billion increase (equal to €4bn in 2018 prices) of the EU's 2021 budget. This will ensure sufficient resources are available this year to support EU countries in addressing the immediate effects of Brexit. The total amount for the Brexit Adjustment Reserve is €5bn in 2018 prices, or €5.37bn in current prices for the MFF 2021-27. This would bring the budget to €168.5bn in commitments and €170.3bn in payments.

Commenting on the decision, Commissioner Hahn said: “The EU budget has always been and continues to be a tool to deliver on EU's political commitments. The Brexit Adjustment Reserve is yet another example of European solidarity. The Commission will now work with the European Parliament and the Council to ensure that money becomes available to businesses and companies, regions and local communities as soon as possible.”

Cohesion and Reforms Commissioner Elisa Ferreira (pictured) added: “Our motto in Cohesion policy is to leave no one behind. The Brexit Adjustment Reserve will come in support to those most impacted by Brexit. European unity was key throughout the negotiations and European solidarity will be crucial to deal with the outcome.”

The Brexit Adjustment Reserve will be rapidly available and flexible, and will cover expenditure to counter adverse consequences of Brexit in all member states over a period of 30 months. The vast majority will be allocated through pre-financing already in 2021, calculated on the basis of the expected impact of the end of the transition period on each member state's economy, taking into account the relative degree of economic integration with the UK. This includes trade in goods and services, and the negative implications on the EU fisheries sector.

An initial breakdown per member state is available online here. The remaining €1 billion in 2018 prices will be paid in 2024, after the member states have notified the Commission about the actual expenditures incurred. This will allow to respond to unforeseen events, and ensure that the support from the Brexit Adjustment Reserve is concentrated on the members states and sectors most affected by the withdrawal. For more information on the Brexit Adjustment Reserve, see here and here.

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