06 Nov Brexit – A very organic problem
Brexit, the United Kingdom leaving the EU. What is going on? Why is it happening and how will it affect the Organic industry as a whole?
How it all started
So, from the 1st of January 2021, the UK will have formally left the EU. From a UK perspective, this was the UK’s ‘Trump moment’. A vote that should have never been, a result that was met by shock and disbelief by business leaders across the globe.
In the end, inevitably, Leave won the referendum. The leaders of the Remain group, who didn’t expect to lose, quit. The leaders of the Leave group, who didn’t expect to win, quit as well.
This was 4 years ago…
As soon as the dust settled we came to realise the sheer scale of the task of untangling a mess of rules, regulations and agreements. This was way more than the general public knew, or even cared about.
What has this got to do with Organic produce?
Common agreement is hard
The issue about Organic food comes from a bigger issue about equivalence. Equivalence is based on the EU and the UK agreeing that they work to the same standards. Like a driving license. If you hold a UK license you are able to drive, for a limited time, in most other countries. This is because the UK driving test is designed to a global standard.
Currently, the UK and the EU are struggling to agree on what constitutes Organic food. The state of play at the moment is as follows. The UK have agreed to recognise Organic food shipped from the EU, until December 2021. But there has been no agreement on Organic foods shipped from the UK to the EU. This means, if you are exporting organic products from the UK, well, nobody really knows at the moment. The UK Soil association is working on a fix but it’s not clear yet.
So that was four years ago, everything must be agreed now?
Absolutely nothing is ready
For the last four years, business leaders, CEOs and anyone with even a fleeting interest in business have been asking for details. They have been creating contingency plan after contingency plan. Trying to work out the best way to survive after the official split. Now this would have been hard enough if the deal with the EU was agreed and in place before we handed in our notice to leave. But the UK government in its wisdom decided ‘look before you leap’ was an overrated idiom. They decided it was better to leave first, then sort out all the boring details.
With no certain plans for either importing or exporting in place and with borders being moved on a daily basis things, to put it mildly, are in a state of confusion. Recently to stop the port of Dover from being gridlocked by new customs regulations, politicians have mooted the idea of putting a border around the South-Eastern part of the UK.
The UK Prime Minister has said all along, there will be absolutely no extra border checks. Recently, he has admitted that, of course, there will be more border checks. ‘No deal is better than a bad deal’ are words that will go down in history. Spoken by the , then, UK Prime Minister Theresa May. A phrase that makes complete sense if you are buying a car, house or anything day to day. However, if you are leading a country out of the best trade market deal in history, that phrase is complete nonsense. From the first point, there absolutely ‘has’ to be a deal, one way or another. It is impossible to cut off all trade links with mainland Europe. This is just hyperbole to over simplify the difficulty of extended trade deal talks.
Why are the trade talks lasting so long?
People have likened the talks to a game of poker, ‘who’s holding all the cards’ etc… It’s not a bad analogy really, but it’s more like playing poker with a crowd of people behind you constantly shouting out your cards and how you should play them. Regular trade deals are not easy by any means. The sheer number of products you have to account for is bewildering. But with the heightened media attention of Brexit there are a myriad of issues at play. Not just trade but travel, crime prevention and safety regulations to name a few, to say it’s complicated is a massive understatement.
So what does the Brexit future hold?
Brexit: What has been agreed already?
I know I said absolutely nothing is ready, that was a bit of an exaggeration. If I say not a lot, it’s more accurate. The media seems to concentrate on the most contentious points, fishing rights, border controls etc.. But there is much more already agreed or on the pipeline. Big headline grabbers like the UK Prime Minister ready to walk away are there to sell papers and make the government look tough, not to inform the public.
It’s been four years, as much as the press love to make you think that nothing has been done. There are at least minimal plans in place. Take Importing and Exporting. There are some basic plans in place for a transfer of systems when trading with the EU. The systems have been in place for years when trading with non EU countries. Now it’s just a case of logistics and managing the scale.
People have ridiculed the government about the recently agreed trade deals with Japan and New Zealand, the scale of the trade is negligible. But it’s obvious that the smaller, simpler trade deals would get signed off first, especially when these deals are not impacted by current deals with the EU. If you look at talks with Turkey for example, a deal close to our heart, you will see that you have to take into account current customs union agreements. It’s not just a deal between two parties but more a spiders web of deals and counter offers.
Interestingly, looking to the future. The Uk seems to be pushing an idea that has gained traction around the world and is already active in many countries. The idea of ‘Freeports’.
Freeports are an example of globalisation. The idea that you have an area in your country that you designate a ‘Customs free zone’. This means that you can import into this zone without paying customs duties, then you can process, manufacture or store your product tax free. When you are ready, you can either move it into the country you are located in and pay the import taxes. Or exporting and only paying duties on the final destination.
Now there are some pros and cons to freeports. This article sums it up better than I ever could. But this may all be a red rag to the EU, who are particularly opposed to the idea. So this may be one of the first casualties of a Brexit deal.
What about HNF Foods?
Our current situation
We are glad you asked! As an importer of goods from outside of the EU and based in the UK, there should be little disruption for us. We are keeping an eye on any Turkish trade deal as most of our product is imported from there. Also, we do have plans in place for most eventualities.
UK Based companies.
For our UK based companies, nothing much will change. We do not import from the EU so will not see much change in operations. However, there may be a couple of things that may affect us.
The Turkish trade deal – The talks are ongoing for this. As Turkey is a member of the EU Customs union, any new deal cannot be better than the one we have already. The EU just wouldn’t allow it. There are currently some issues with products moving potentially being able to be moved from the EU into Turkey, then sold on to the UK. But our products are all grown, processed and shipped from the country of origin, so further restrictions need not be applied.
The increased delays – In any event, for at least the short term, transport companies, import docks and customs teams are going to be massively overloaded. The government have broken down the transition into three phases. But there will still be delays importing or exporting anything into the UK for a while. This is something that we can try to mitigate and as our products have a long shelf life, we can afford to have extra stocks in our UK warehouse. But, at some point, this may impact all our daily lives, especially fresh produce.
EU Based companies.
For our EU based companies, you can sit back and relax, safe from the madness of the UK.
If a deal is reached and things carry on for everyone as normal, then great, our trade and deliveries will be unaffected.
But as we are living in the real world, and it’s 2020! We are currently in negotiations for a EU based warehouse and will look to trade from a central point in the EU so, again, you can rest easy that your deliveries will be unaffected.
Either way, if you are a UK customer or a EU customer, we have done as much as possible to ensure that your deliveries and your bottom lines will be as unaffected as possible.