Financial Times 20 August 2020 - by Peter Foster
© Provided by The Financial Times It is estimated that EU trucks bringing goods into the UK cost about £2.30 per kilometre on average, compared with £2.89/km for UK trucks
The Brexit talks are back on in Brussels this week and the two sides — in the absence of any expectation of progress on the key sticking points of state aid and fishing rights — have found something else to argue about: road transport.
The dispute is over the extent of the UK’s access for truckers to the EU’s single market after the transition period expires on December 31. This includes the right to continue to be able to drop off and pick up loads inside EU member states, known as “cabotage”.
This is one of those classic Brexit issues where you might think that “common sense would prevail”, but it is actually an example of where the politics of Brexit overrides the practicalities of managing freight between the EU and the UK.
Going as far back as the 2016 referendum campaign, Brexiters have forecast that the EU’s surplus in goods trade with the UK would mean that EU capitals would tell the European Commission in Brussels to be flexible on these market access issues, but to little avail.
When it comes to cabotage, from the perspective of EU business interests, commission flexibility makes perfect sense. About 85 per cent of the 10,000 trucks a day that come over the short strait are EU trucks — indeed, the UK government estimates that EU hauliers carry out seven times more cabotage in the UK than vice versa, though in truth these statistics are very hard to make reliable.
On the face of it, therefore, it should make perfect sense for Michel Barnier, the EU’s chief Brexit negotiator, to cut a generous deal with the UK to enable EU hauliers to maintain their ability to pick up loads in the UK as they return to the continent.
The UK is asking for British truckers to be able to do two pick-ups within EU member states — with the UK offering the same to EU hauliers on a reciprocal basis — but Mr Barnier has warned this would be “fundamentally unbalanced” and far too close to pre-Brexit levels of access. In short, it would be seen as cherry-picking.
But to UK haulage groups, the commission’s stance makes little sense commercially or environmentally.
As Richard Burnett, the boss of the Road Haulage Association, points out, trucks running empty on the roads (a consequence of not being able to pick up return loads) drives up costs, wastes diesel and causes unnecessary greenhouse gas emissions.
As an indication of the impact of denying cabotage, Spanish hauliers added about €1,000 to the cost of a journey during the peak of the Covid-19 crisis because they could not find enough return loads from the UK, according to Jack Fleming of Chill-Chain, a London-based freight technology business. Those costs will ultimately be passed on to consumers.
Among Mr Barnier’s additional demands for a road transport deal is that the UK gives level-playing-field guarantees to ensure it doesn’t become a low-regulation outpost for the industry.
That sounds pretty bogus to UK hauliers, who note that the British sector is at far greater risk of being undercut by EU drivers from lower-wage states such as Romania, Poland and Bulgaria.
According to Mr Fleming’s calculations, on a six-month average EU trucks bringing goods into the UK cost about £2.30 per kilometre, compared with £2.89/km for UK trucks. Going the other way — taking goods from the UK into the EU — the European fleets run at £1.04/km compared with £1.28/km for British trucks.
The point is that Brussels’ level-playing-field concerns start to look rather spurious against those numbers, which is why you could be forgiven for thinking — and you’d be right — that Mr Barnier is really using the haulage issue as a lever to extract broader level-playing-field concessions from the UK.
The commission has consulted with EU member states on their attitudes to UK cabotage after Brexit, but as an important piece of context it is worth noting that the EU is introducing a new “mobility package” that will constrain cabotage inside the EU.
This has caused fury in countries such as Poland, Bulgaria, Hungary and Romania, which have called the new rules “restrictive, discriminatory and protectionist”, but it plays well in countries such as France and Italy where drivers grumble about being undercut by their counterparts from the east. Hardly the moment to be granting overgenerous rights to the UK.
Which brings us back to the basic political drivers of the Brexit negotiation. Business interests and “common sense” are not necessarily uppermost in the commission’s mind. Its instinct is to defend the political principle that Brexit must mean reduced access to the single market. All said and done, Brexit really must mean Brexit.
Brexit by numbers
When it comes to practical impacts of Brexit, this paper by the UK’s Food and Drink Federation spells out just how costly leaving without a deal could be for the UK’s largest manufacturing industry.
Applying the UK’s new global tariff to the almost £35bn of ingredients imported from the EU by the industry will inevitably make food products more expensive — indeed there are those in the retail and customs sector who believe untenably so.
But even in the event of a deal, major new costs are coming, despite lobbying by foodmakers on both sides of the Channel for the commission to be pragmatic.
For example, plant and animal products will require export health certificates (EHCs), which the FDF estimates will cost £200 to £800 each. The paper notes the UK agriculture ministry, Defra, knows it will need to increase capacity to issue EHCs fivefold by the end of this year. Vets, who charge by the hour not per certificate, will be at a premium.
Logically, given trade balances, it might make sense for the EU to minimise these requirements by concluding a New Zealand-style veterinary agreement or other easements to reduce physical checks and paperwork, but as the UK heads for an increasingly thin deal, even these kinds of limited easements look ever less likely.
Again, what industry wants is not necessarily what industry will get.
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