Michael Johnson discusses the implications of Brexit on road transport across the channel, and subsequently the impact that this can have on trade between the UK and the EU.
Large lorries registered anywhere from Vilnius or Gdansk to Lisbon or Athens are a familiar sight on United Kingdom roads. The goods they transport – food, domestic equipment, clothes and industrial components – are vital to daily life in the UK. This multifarious trade will be affected by whatever new trading relationship between the UK and the European Union emerges at the end of the Brexit process. That is because transport activities operate within a framework of agreements that have helped to liberalise the sector across the EU. In particular, these agreements open up access to national transport markets to operators across the EU, and help to harmonise regulations that underpin transport operations,
Yet the transport issue is barely considered in the general public discourse surrounding Brexit, which focuses mainly on customs tariffs and procedures, regulatory systems, jurisdictional issues and immigration controls. If the British public thinks about cross-Channel transport at all, it is probably in the hope that Brexit may remove some of the big foreign trucks from congested motorways.
True, there have been periodic horror stories about the possibility – or likelihood – of queues of trucks being immobilised by new border procedures and stretching back for many kilometres from ports on both sides of the Channel. The UK Government insists that such fears are unfounded and will be avoided by the “frictionless” border which it seeks to negotiate with the EU.
The fact remains however that if Brexit had the effect of disrupting the two-way cross-Channel traffic Britain would be in serious trouble, because the prompt transport and delivery of goods in both directions is an essential part of the supply chain. It is possible to envisage a Brexit outcome which resolved or mitigated problems relating to the manufacture and sale of goods, but which at the same time failed to resolve issues arising in bilateral transport (for example UK entry procedures for drivers), thereby causing logistical difficulties that would still do severe damage to both UK and EU goods production and trade.
The Chartered Institute of Logistics and Transport (CILT) in the UK is in discussion with the Government about the impact of Brexit on the UK/EU trade which cross-Channel trucks represent. This article draws on CILT’s latest report, published in January 2018, which quotes figures from the Freight Transport Association. The report points out that EU-based hauliers operate 80% of the trucks that pass through the Channel Tunnel (and must therefore account for a similar proportion of the truck drivers), and that such trucks also carry the greater part of UK goods exports to the EU. Transport is a vital issue for everyone, on both sides of the Channel and on both sides of the Brexit debate.
The terms of any eventual Brexit settlement are not yet known, but inevitably transport services for both goods and passengers between the UK and the remaining EU countries will be affected (see our article on Brexit and the Irish Border Issue). This extends to all forms of transport, by road, rail, sea and air. The present article concentrates principally on road transport of goods. What are the central issues?
1. Border controls
Whatever the outcome of Brexit, it seems inevitable that some level of new border controls will be imposed on UK/EU trade (even if a completely “frictionless” free trade agreement were to be negotiated, it would require new checks on both sides to verify compliance). Anything that imposes extra procedures at ports, including new customs inspections, may cause delays that will increase journey times and costs. This would be highly damaging in the case of just-in-time delivery arrangements for components, and for the transport of highly perishable products such as cut flowers (whose Europe-wide distribution is centred on the Netherlands). Increased delays and longer journey times would effectively reduce the carrying capacity of the existing freight fleet, risking a vicious circle of further delays and capacity reductions.
The seriousness of the border issue has been underlined by the Chief Executive Officer of the Port of Rotterdam who made known in a BBC radio interview on 22 February 2018 that without waiting for details of a Brexit outcome, Rotterdam was “preparing for the worst” and already putting in place resources and procedures to administer extensive new checks on EU/UK trade, including hiring “several hundred” extra customs officers.
2. Regulatory requirements and standards
UK and EU hauliers are currently subject to the same safety and other technical requirements, agreed at the EU level. If one or other side were to amend regulations so that the two systems diverged, either at the point of Brexit or later, this would lead inevitably to new conformity checks, and conceivably to trucks being denied access to the side applying more stringent requirements. Even if the UK and EU maintained complete regulatory alignment for road haulage, new checks to verify compliance could well be required, either at or behind the border. Impacts on the flow of goods by road could be very serious, affecting both industrial users of goods (such as raw materials and components) and supplies to end-consumers.
3. Supply chains
In the increasingly integrated European market (including the UK) many manufacturers source components from subcontractors all over the EU, often on the basis of just-in-time delivery; and many such goods are re-exported in the form of sub-assemblies for further processing elsewhere in Europe, also on a time-critical basis. The issues here are not merely whether UK and EU customs will respectively impose new procedures and documentary requirements: anything which reduces or impedes the movement of consignments, particularly of components, must have a seriously damaging effect on activity of individual undertakings and in the economy more widely. It must be a priority for UK and EU negotiators to develop fast-track procedures to avoid disruption of supply chains.
4. Accreditation of Authorised Economic Operators (AEOs)
AEO (also referred to as “trusted trader”) status permits a haulier whose credentials have been officially checked and verified to transport goods across frontiers without physical customs checks of consignments, on the basis of documentation. In circumstances where Brexit could well lead to the imposition of new checks and delays at UK/EU border ports, AEO status can mitigate those difficulties, for example by relying on post-hoc checks at inland depots and avoiding repeated checks on the qualifications and immigration status of drivers. It is important that wherever possible hauliers on both sides of the Channel apply for and secure AEO status. According to CILT (UK), the UK currently lags far behind in this process: in 2016 there were only about 600 UK hauliers and other transport operators with AEO status, compared with some 10,000 currently approved in Germany.
5. Immigration controls
It was pointed out above that 80% of the trucks (and most likely of their drivers) passing through the Channel Tunnel are based in other EU countries. It is unlikely that many of these drivers, however often they visit the UK in the course of a year, will qualify for any form of residence rights such as have been in the course of negotiation between the UK and EU countries for each other’s nationals. The same applies to UK-national drivers delivering goods to other EU countries. On both sides of the Channel, special permits for haulage operators who repeatedly cross UK/EU borders (chiefly cross-Channel, but potentially also between the Irish Republic and Northern Ireland) will be required in order to avoid repeated visa or other immigration checks. Such checks could at the very least delay trade, and in cases where the entry of individuals to the UK or EU was denied, severely and expensively disrupt it. The indirect effect could be to reduce the carrying capacity of the pan-European haulage industry.
This technical term refers to a transport undertaking (air, sea or surface transport) which is registered in one jurisdiction picking up freight and/or passengers in another jurisdiction and delivering it/them within that same jurisdiction – eg. a UK truck picking up goods in France and delivering them either in France or in another EU country. Cabotage is one of the central achievements in liberalising transport services in the EU. It has also been a contentious issue in many countries because it raises sensitivities as regards fair competition with indigenous hauliers in the host country. It can reduce the numbers of trucks heading home wastefully empty; but foreign hauliers engaging in cabotage are often seen as competing unfairly with local undertakings, eg. by undercutting pay levels so that they can charge lower rates. The EU’s approach to meeting these sensitivities has been to develop common regulatory frameworks, notably regarding safety, in order to ensure that increased competition is balanced with measures that safeguard social concerns
It is an open question whether in a UK/EU withdrawal settlement the two sides will formally agree to allow cabotage to continue, for example whether the UK would still allow a Romanian-based truck to pick up goods in Edinburgh for delivery in Leeds or London. The EU has concluded cabotage agreements with other parties, notably Switzerland. But it is unlikely that cabotage agreements will be possible without a common regulatory framework.
7. Pay and conditions of hauliers
There is evidence that many of the EU-based truck drivers plying to and from the UK are paid less than their British counterparts, including in some cases below the UK living wage. In the case of cabotage, this discrepancy has an obvious impact on competition between UK and EU hauliers. Brexit negotiations may present a chance for the UK Government to regularise to UK standards the pay of foreign hauliers operating on UK roads; but this would obviously have some impact on costs and on haulage rates.
In the United Kingdom much of the public debate, particularly among supporters of withdrawal from the EU and with just over a year to go until the set date for Brexit, is still conducted under the banner of “Taking Back Control”. This is expressed through generalised propositions about national jurisdiction, parliamentary sovereignty and the UK’s historical and present-day international role. In the end however the success or failure of Brexit will be determined, not by assertions of high principle, but by the hard practical facts on the ground., for example whether a British engineering firm can still get conformity approval to sell into the EU, whether a manufacturer in Swindon or Birmingham can get essential components on time from suppliers in Essen or Turin and whether consumers on both sides of the Channel can still freely get their favourite foods when they want them. That is why what will happen under Brexit to cross-Channel transport is so important.