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serious #brexit story alert - companies now starting to see penny drop on what rules of origin does to supply chains (food for example) but Brussels seems deaf to both EU & U.K. pleading. A bellwether? 
Stay with me. 1/ https://on.ft.com/2JOIlMP
So first the problem: its a tad complicated but basically goods that are imported into UK and then 'hubbed' onwards into Ireland or other parts of the EU are facing full EU tariffs - this is particularly bad for food stuffs, which attract high tariffs. Why is this? /2
It's a function of the Rules of Origin clauses that mean that goods have to sufficiently "originate" in the UK to qualify for zero-tariff entry to EU (and vice versa).
But to qualify, you have to do something to the goods - process them or add value - not just punt them on /3
But to qualify, you have to do something to the goods - process them or add value - not just punt them on /3
The brilliant @AnnaJerzewska does a better job than me of explaining, but the important thing is that this is a nightmare for companies that 'hub' /distribute products through the UK - and that's both EU and UK companies /4
So both the @Foodanddrinkfed and EU groups like @CAOBISCO_EU (chocs etc) say they want the EU Commission to fix this with a derogation/waiver that takes into account proximity and interdependence of EU/UK supply chains. /5
Because as @AnnaJerzewska points out, in a usual FTA (say with Japan or Canada) good don't arrive from the EU customs territory (or vice versa) and then bounce straight back across the border. It's a pretty unique situation. /6
It's also tough on Ireland that gets a lot of goods via UK. As Paul Kelly, director of Food Drink Ireland @FoodDrink_Irl the main lobby group for the sector. “Companies are beginning to raise this across the industry." /7
Now. It is true that goods could "transit" through UK to Ireland/EU - so they aren't imported into UK, they're just 'passing through' - but that, it seems, is not how the system currently works. /8
According to both @AnnaJerzewska and @SamuelMarcLowe the Commission could - if it wanted - apply a derogation/waiver sorting this out, based on previous precedents. Per Mr Lowe: “If the EU wants to resolve the issue, it could do so pretty easily with an extra clarification." /9
So what did the EU tell my colleague @Sam1Fleming when he asked officials whether this was going to be sorted?
“You can’t expect Brexit not to have consequences. The UK won’t be a distribution hub for the EU any more. EU businesses will need to stop relying on UK hubs.” /10
“You can’t expect Brexit not to have consequences. The UK won’t be a distribution hub for the EU any more. EU businesses will need to stop relying on UK hubs.” /10
So to translate from the Bruxellois, that means "touch". Brexit means Brexit mon brave. etc etc.
Not exactly clear how you quantify the impacts of this - am told clothing industry also hugely impacted on this - but the EU position seems pretty stark. /11
Not exactly clear how you quantify the impacts of this - am told clothing industry also hugely impacted on this - but the EU position seems pretty stark. /11
We shall see over next year or two whether those who reckoned the barebones deal @DavidGHFrost negotiated is really something to "build on" but this doesn't feel that encouraging! ENDS
