The government is falling behind in the race to replicate the European Union’s existing network of free trade agreements for use by the UK after Brexit, trade groups and leading analysts have warned.
Liam Fox, the International Trade secretary, promised in October that the UK would replicate up to 40 of the EU trade deals to be ready for “one second after midnight” on March 29, 2019 to ensure that there was “no disruption” to trade.
However, trade groups are privately raising alarm bells over the practicality of “rolling over” the EU agreements into bilateral UK deals, warning of a shortage of capacity in Whitehall to tackle what is turning out to be an increasingly complicated issue.
“There is a lot of work of to do, and we are getting worried that deals are slipping between the cracks in Whitehall, particularly of less high-profile countries,” said a senior Brexit co-ordinator from one institution, which asked not to be named to preserve its relations with Mr Fox’s department.
The source singled out agreements with South Africa, Turkey, Chile, Mexico and Algeria and Algeria as of greatest risk of receiving insufficient attention, given the shortage of bureaucratic bandwidth in Whitehall and the emerging complexities of replicating the deals.
Although only a small proportion of UK exports go to these countries – some 1.5pc to Turkey and 0.6pc to South Africa – individual companies and sectors will be hit hard if arrangements are not in place immediately after Brexit, sources warned.
The concerns emerged as bosses from Ford warned that even a zero-tariff EU-UK trade deal would impose additional costs in managing supply chains and meeting regulatory paperwork.
“Even without tariffs, we would have the potential for goods to stop at a customs border,” Steven Armstrong, Ford’s president for Europe, Middle East and Africa operations told Channel 4 News. “That means less productivity and more costs to the business.”
Ford sends UK-built engines to its Transit van assembly lines in Turkey, while all of the Ford Ranger pickups sold in the UK market are assembled in South Africa, leaving it badly exposed if deals are not in place. Jim Farley, the chief executive of Ford Europe, warned earlier this year that it was “equally important” that the UK did smaller deals with Turkey and South Africa, warning that such deals had not “really been talked about”.
Dr Fox has conceded that it is not as simple as “cut and pasting” the EU’s existing deals to create bilateral UK equivalents.
“We have known for some time that it is not a case of simply copy and pasting the EU’s trade agreements, many of which have important preferential arrangements for UK trade,” said Anastassia Beliakova, head of trade policy at the British Chambers of Commerce. “It is critical that British exporters do not lose market access benefits as the UK Government seeks to roll over existing FTAs.”
The EU has more than 60 different trade facilitation agreements with 36 non-EU countries that British-based companies will no longer be able to use once the UK departs the EU, unless the same or similar terms can be agreed by Dr Fox. Experts say there are three major problems creating sticking points in British attempts to replicate those deals in time for Brexit.
These are the lack of trained staff in Whitehall, the difficulty posed by dividing up existing EU tariff-free agricultural import quotas after Brexit and the impact of future “rules of origin” requirements that are likely to result from the decision to leave the customs union.
“There is a capacity challenge, in that you have got a huge amount of negotiating expertise in Whitehall focused on EU exit and preparing for the future relationship,” said Joe Owen, senior researcher on the Brexit programme at the non-partisan Institute for Government.
“Originally it was portrayed as a ‘copy and paste’ job by the Department for International Trade, but everyone is now realising there are some quite complicated issues sitting in these agreements that aren’t directly transposable.”
Most complex of all is the question of “rules of origin” requirements, in which countries must demonstrate that a certain proportion of a manufactured good is made from components and materials drawn from inside the EU.
For example, if the UK leaves the EU customs union after Brexit, a UK-built car will have an average of 41pc “local content”, when most trade deals require 50pc to 55pc to qualify for exemptions.
Valuable agricultural quotas are another issue. The US, Canada and Australia have already rejected an EU-UK plan to divide up the existing “Tariff Rate Quotas” based on their historical usage.
Andrew Hood, senior EU law specialist at the law firm Dechert who was former legal adviser to David Cameron, added that negotiators were coming up against a host of other issues that were undermining earlier claims that they could be simply subject to a “technical rollover” in a bilateral deal with the UK.
“It could be likened to a football pitch: if I have access to both halves, but can’t pass the ball between the halves, that’s not so much use,” he said.
The Department for International Trade said it had grown significantly since it was established in July 2016 and now has more than 3,590 staff, including a 400-strong “Trade Policy Group” of analysts, lawyers, and officials committed to seeking continuity for business after Brexit.
A spokesman added: “We are having positive discussions with our trading partners about how this can be best achieved, and will continue to look at each EU trade agreement on a case-by-case basis.”