Clarity in Brexit Phase 2 Negotiations is Crucial


Published Jan 9, 2018 7:10 PM by Karoliina Rasi

At the European Council meeting on December 15, 2017, European leaders approved Brexit negotiations to move to “Phase 2”, namely to discuss the future trade and economic cooperation and other relationship issues such as security, defense and foreign policy between the E.U. and U.K. It was a long awaited and welcomed move for the European shipowners as well as other industry sectors.

Now, clarity on the framework for the future after Brexit is eagerly expected. 

After Brexit, it is important to avoid regional regulatory measures for shipping more than ever. As a global business shipping needs global rules and common standards, and the European Commission, Members States and the U.K. should cooperate even more closely in the IMO. The future relationship between the E.U. and the U.K. should facilitate close cooperation on global issues, such as trade. Given today’s climate of protectionism, the E.U. and U.K. should speak with a strong joint voice in favor of open global trade.  

To the extent possible, they should aim for conformity in legislation relating to maritime affairs. A strong E.U.-U.K. maritime dialogue should offer the platform to discuss common approaches. If a good dialogue exists, their separate, but in-line voices will strengthen the European views at the level of, for instance, the IMO.  

Shipping depends on global trade and open markets. The principles of global liberalized trade are increasingly put under pressure today. In statements made so far, the U.K. has stressed its open attitude towards trade and its support to a free, global trade environment. Together, the E.U. and U.K. can be a strong and loud global voice in favor of open trade, against the trend of increased protectionism worldwide. 

The shipping community embodies a fundamental acquis of the E.U.: free movement of goods and persons. The current interconnection of companies and citizens should be preserved as much as possible. In this respect Brexit gives, in the short term, rise to concrete priorities for shipping companies that should be subject to discussions regarding transition arrangements and the nature of the future relationship between the E.U./European Economic Area and U.K.
An overall concern for E.U. shipowners relates to their competitiveness, among others in the fiscal area. The E.U.’s shipping policy needs to ensure the E.U. remains a competitive location for shipping companies to do business. Successful shipping centers combine investment in an attractive business climate with investment in quality and skills. Maritime state aid guidelines form an essential part of the E.U. policy framework. It is important that E.U. shipowners have legal certainty in terms of the continuity of the guidelines and a pragmatic approach in applying them, focusing on opportunities for further growth of the maritime cluster. 

In the short term, E.U. shipowners have three immediate priorities that should be given due attention throughout the Brexit process: 1) frictionless traffic by sea between the U.K. and the E.U., 2) free movement of seafarers, onshore staff and passengers and 3) continued  market access to the domestic trades and the offshore sector.  
Firstly, frictionless ro-ro traffic should be safeguarded as much as possible. Around half of U.K. exports and imports are to and from the E.U. In 2015, E.U. 27 imports of goods from the U.K. represented EUR 184 billion. EU 27 exports of goods to the U.K. were EUR 306 billion. Most of these imports and exports are done through ships, and a large part of the goods travel on ro-ro ferries. Ferry transport between the U.K. and the E.U. mainland carry thousands of heavy good vehicles daily. The same goes for the traffic between the U.K. and Ireland. 

Since the removal of customs and health controls at the start of 1993 at U.K. and E.U. ports, traffic volumes across, both over and under, the Dover Strait rose from one million lorries in 1992 to four million in 2015 (a 300 percent increase). Traffic volumes between Ireland and the U.K. and through Dublin/Holyhead rose from 54,000 to 392,000 lorries over the same period (a 630 percent increase). 
The fact that lorries pass through ferry terminals freely, without having to stop and await clearance, is vital for the ports to handle their current volumes of trade. It is also vital to the ability of manufacturers, retailers and other businesses to rely upon just-in-time logistics. 
Imposing extensive border procedures would cause heavy congestion in these ports, that have simply no free space for lorries or trailers to be held pending clearance. Any re-imposition of checks and controls will also have a negative effect across all sectors and on the wider economy of both the U.K. and E.U. Just-in-time supply chains will no longer be able to operate, impacting among others daily exports of perishable goods such as fresh Spanish vegetables or Dutch flowers.  

Returning to the situation previous to the Customs Union would mean that hauliers or ferry companies would be required to prepare cargo declarations. This would seriously hamper the trade. Hauliers or ferry companies today do not possess the information to do a cargo declaration. Their business models are entirely build upon the status of “authorized regular shipping services” which is granted to all ferry routes between the E.U. and U.K.  

Secondly, a key priority for E.U. shipowners is the free movement of their seafarers and their company staff. Seafarers of third countries employed on E.U. or U.K. vessels should be granted easy access to the U.K. Citizens that wish to travel by sea should be allowed to continue to do so in a smooth way, without adding any heavy procedures such as visa applications. A complement to the free movement is smooth procedures with regard to transfer of social rights. Respect of social security rights of seafarers must be guaranteed. 

Based on the free movement of workers principle, the E.U. adopted legislation allowing for mutual recognition of education certificates issued by Member States. This mutual recognition of certificates must continue to be guaranteed. 
Thirdly, no market access restrictions to domestic trades and the offshore sector should be applied. The U.K. abolished all flag restrictions in 1849 and, as an OECD member, is obliged to have its international trades open to free competition. The U.K.’s domestic market is open to ships under any flag. Likewise, E.U. markets are fully open. This reciprocal market access should be preserved. 

However, particular vigilance seems required for the offshore supply sector and regular domestic trades. E.U. companies are very active on the U.K.’s continental shelf and carry out intra-U.K. port calls. These markets should remain open for E.U. companies in the same, straightforward way as they are today. Adding any additional requirements, be it in terms of ownership, crew, documentations or else, would be unacceptable.  
The negotiating guidelines the E.U. Member States adopted for the Phase 2 negotiations refer to a possible transition period of around two years after the U.K. is officially out of the E.U. The transition period should be agreed as soon as possible to give businesses time to prepare for the future relationship. Eventually European shipowners look forward to an agreement which preserves the economic benefits of existing E.U./U.K. trade and trade flows, safeguards shipping services, the employment of seafarers and the value of the wider maritime cluster.

Karoliina Rasi is Director Public Affairs and Communications, European Community Shipowners’ Associations (ECSA).

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.