The Supply Chain Matters blog provides a follow-up on the status of negotiations concerning the Brexit transition withdrawal agreement that is scheduled to go into effect at the start of the year 2021.

In our last published update on September 16, we highlighted reports that these talks had turned “tumultuous” after Britain indicated it planned to pass legislation relative to the Irish border that would in-effect break international law by breaching parts of the Withdrawal Agreement signed at the beginning of this year.

As this week begins, the self-imposed deadline for both parties to come to a set of required withdrawal agreement provisions by the meeting of the Eurozone members planned for this coming Thursday, October 15.

Over the last few days, EU Chief Negotiator Michel Barnier met with UK Chief Negotiator Lord Frost with both indicating that progress had been made. According to the latest reports two major issues remain as stumbling blocks: one being rules of state aid given by government to businesses and the other the UK demand to full access to sell fish products, but in return, granting EU countries full access to fish in UK waters, which has been resisted. Regarding the latter stumbling block, reports indicate that France is a prime objector to the existing fishing proposal.  Over the weekend, Prime Minister Johnson reportedly personally spoke with French President Emmanuel Macron.

According to an update reported by the BBC today, UK Prime Minister Boris Johnson has set a deadline of this Thursday after which the UK team is ready to walk away from further negotiations.

Other reports we have read such as one published by The Guardian indicate a Brussels belief that the UK government will not walk out on these talks despite the repeated threats. Thus, the state of brinkmanship, which has been the track record for most of these over three-year efforts now prevails.

Brexit Transition

Multi-Industry Product Demand and Supply Network Implications

The fall back if no formal agreement is consummated is that the UK and the Eurozone sector would conduct business under World Trade Organization (WTO) tariff structures which implies imposition of tariffs on goods. That further implies added tariff documentation and cross-border checks.

In preparation for such a fall back scenario, the UK government’s worst-case assessment is an admission that as many as 70 percent of trucks traveling to the EU may indeed not be ready for such new border controls, which is estimated to be in upwards of 7,000 truck queues. According to a published report by Bloomberg, the warning by Brexit Minister Michael Gove was: “the first time a government minister has put their name to the predictions of significant upheaval at the U.K.-EU border in January.

The latest iteration is the government is now urging transport firms to consider other ports of transit from the UK in order to ease congestion. There are further increasing concerns on the part of logistics and transport firms that governmental systems are also not ready for controlling and administering the WTO fall back tariff scenario.

Overriding the Brexit brinkmanship are the increased infection rates involving COVID-19 now threatening a second major outbreak across the UK, and a further economic impact to various businesses and industries.

It would appear that few would want to speculate as to what conditions would really be on January 1st with both a Brexit fall back and continued high levels of coronavirus and seasonal flu outbreaks.

Lorcan Sheehan, Founder and CEO of highly regarded Dublin and London based supply chain services provider PerformSC-Supply Chain indicates in the firm’s September Newsletter:

As discussions around the potential future relationship between the UK and the EU enter a critical stage, we have also inevitably reached peak political positioning and bluster.

The rhetoric surrounding the future state negotiations has been dialed up and the publication of ‘reasonable worst-case scenarios’ in the UK prepares the groundwork to shift blame to individual companies lack of preparation if with end up with queues of up to 7,000 trucks trying to access the port of Dover.”

The above statement tells it all and thus we share it with our readers.

As Perform SC further indicates, regardless of the political outcomes, companies need to undertake all forms of customs and business simplifications and other technology aided measures that can mitigate a hard Brexit outcome.

Indeed, we have all observed such Brexit posturing for quite some time, and sooner or later, the realities will present themselves. Only this time, the stakes seem far higher.

 

Bob Ferrari

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