TheRetailer_Summer_19

NEWS FROM THE niRC

Alternative Arrangements- Light at the End of the Tunnel or Just a Dead End?

Aodhán Connolly director Northern ireland Retail Consortium

The BRC and NIRC have managed over the past three years to engage with hundreds of MPs, leaders from across Europe, MEPs, the EU Commission and have built up a strong relationship with Michel Barnier’s Article 50 team in Brussels. We will speak to anyone who is trying to make progress in the complicated arena of Brexit and especially on the contentious border issue. That is why we engaged with the Prosperity UK led Alternative Arrangements Commission (AAC), co-chaired by Nikki Morgan MP and Greg Hands MP. We went into to this engagement with open minds but also with a clear idea of the tests that any proposed solutions would have to meet not just for our industry but our supply chain and the business community in general. The background and tests The tests, which were decided with much negotiation among the different industries in Northern Ireland, state that any solution must build on the backstop not take away from it. It must have no new rules of origin complications and it must enable free movement of goods without new VAT implications. It must deal with the Common Travel Convention and the need to scan on both sides of the border. The solution must not have any SPS checks on either side of the border or infrastructure. There must not be an added burden of costs and, of course, it must be acceptable to the EU as well as to the UK. In short, can a business in our supply chain trade in the same way it can today? The answer to this must be positive before the package as a whole can be supported. Northern Ireland is currently part of an integrated market for its goods and services providing access to the 500m consumers within the EU, plus with preferential trade access through 36 free trade and other agreements made on a bilateral or multilateral basis through the EU, and other agreements such as Memoranda of Understanding with current non-FTA partners such as China and the US. In retail, we have complex sourcing and supply chains across these islands, with products containing milk having as many as 6 movements across the land border, and meat for processing as an ingredient in a simple cottage pie on the store shelves involving 7 such movements and there are many more examples. The necessity of maintaining these frictionless sourcing and supply chains is of prime importance to NI retailers and most importantly, to consumers in NI, where discretionary incomes are half those of GB households. It is consumers in NI who would feel the harm from exit on ‘no-deal’ terms the most in terms of per capita percentage reductions in real incomes of anywhere in the UK. GB remains the largest purchaser of NI goods to the tune of £7.6bn per year but this is without prejudice to the island of Ireland economy. 37% of NI’s exported goods were bound for the Republic of Ireland. Put simply the NI economy needs frictionless access to both the GB and EU markets not only to thrive, but to survive. Maintaining frictionless trade East-West and North-South is essential for the supply of goods at competitive prices for the consumer in NI, ROI and GB, as well as availability, choice and quality.

Checks Away from the Border? One of the key points in the AAC report is diverting checks away from the border but this goes against the commitment that was made in the December 2017 Joint Report between UK and EU negotiators in the Article 50 process for no hard border or associated checks. Currently there are a limited number of checks and the Department of Agriculture, Environment and Rural Affairs (DAERA) carry out those checks for free. But they have said that they would have to charge for checks if more are required. The current charge in GB is £200 per check bringing complexity and cost into the supply chain. DAERA estimates it would need to issue 10,000 times the amount of health certificates and undertake over 100 times the checks that it does now. One retailer (and not the largest) has estimated that it would need 35 full time DAERA staff to deal with the amount of checks needed at its distribution centre. So simply diverting checks away from the border while loading businesses and consumers with the costs of new regulatory, customs or indirect taxation frictions simply away from the border is not the right policy choice to make. Technology is the answer? A major thrust of the AAC proposals is that current technology can prevent a hard border. But there are no examples of where this works in practice to the extent required by the UK-EU commitments in the Joint Report and the Withdrawal Agreement. The Northern Ireland Economy cannot be anyone’s experiment. Technology must be proven to work before it can be offered as a complete solution. The case studies used in the AAC report don’t show frictionless technology led soft borders either. In Norway-Sweden technology and mobile teams have mitigated the impact of the border but there is still a average 10 minute delay for the 1300 lorries crossing the border posts which would be a disaster in the NI-RoI context where 13,000 lorries traverse every day. Similarly with Switzerland-EU, there are both customs & VAT borders as well infrastructure at the borders to comply with verification procedures. Furthermore, the only means whereby no SPS checks are involved on Swiss goods crossing into Union territory are because of a commonly-approved regulatory alignment and enforcement mechanism which have taken years to approve. The story is the same with Canada-US and Australia- NZL, infrastructure delays and nothing that fits for Northern Ireland. The proposed technology answers to transit - using Geo tracking, administrative track and trace proof of transport, an app on a mobile phone of the trucker that transports the goods - only work if the driver and company want to be compliant. They are no deterrent to smugglers and illegal trade.

36 | summer 2019 | the retailer