Maritime issues - post Brexit
Shipping Access to the European single market has greatly benefitted the UK shipping industry. Over 50% of the UK’s international trade is conducted with other EU Member States and 40% of goods traded within the EU are moved by sea. UK shipping companies are also active in a global marketplace and have long been seeking consistency in the application of rules to ships from all Flag States to allow companies to compete on a level playing field. This consistency has been achieved over decades through the participation of Flag and Port States in international forums such as the IMO, the ILO, the OECD and UNCITRAL. In this environment the EU’s sometimes unilateral approaches to maritime policy making have been a challenge. UK shipping post-Brexit is likely to be concerned about general policy areas such as employment law, immigration, border controls and contract law. More specifically on transport issues, it is likely to be concerned about the following: •
Freedom to trade: OECD rules could preclude any change insofar as ships being able to call at an EU or a UK port and load and unload cargo or passengers regardless of its flag and regardless of the nationality of its owner. UK-flag ships could, however, lose their right to operate in the domestic trades of those EU Member States who maintain flag-based cabotage restrictions.
Safety and the environment: Vessels and companies operating in EU waters would mostly still have to comply with EU (and IMO) regulations since the EU would continue to apply their rules to vessels irrespective of their flag or ownership.
Tonnage Tax: Corporate tax is a national responsibility, outside the scope of EU law. So the UK tonnage tax regime and those aspects of corporation tax that are specific to ships (chiefly, rollover relief and capital allowances) are unaffected. All the EU does is set a broad framework in which those taxes must fit (i.e. State Aid guidelines – see section 2, above).
Security: The EU’s counter-piracy Operation Atalanta EU NAVFOR is UK-based and -led with an existing mandate until December 2016, albeit with an intention to renew it for a further two years. The renewal under a UK lead will now be more difficult to achieve.
The British International Freight Association (BIFA) has said that container lines are likely to continue to call directly at UK ports as UK volumes are “more than large enough to justify” direct calls with mainline vessels, mainly in the South of England ports. However, their main concern is of potentially losing the benefits of free trade and customs harmonisation with the EU single market. It states that a return to tariffs for UK merchandise exports and imports, if this is the outcome would be “detrimental to UK trade with the EU, and may result in a small reduction in UK-EU maritime volume”.
In evidence to the Transport Select Committee in October 2016 the then Permanent Secretary at the Department for Transport, Philip Rutnam, said that while it was clear that the UK shipping environment would “change in the future with Brexit, … at the moment it is interesting that countries like Denmark or some of the southern European countries have managed to grow their fleet in the shipping register more markedly than the UK. There are things to be learned from a number of places around the world”.
In January 2017 Port Technology summed up the potential costs and opportunities of Brexit for the UK shipping industry as follows: …
Major concerns surround the negotiations for EU workers being able to freely work in the UK. Restrictions on the right of EU workers to work in the UK maritime sector would have a severely detrimental effect on the UK shipping cluster that is reliant on such labour to thrive.
Conversely, some shippers believe that Brexit offers opportunities for more favourable trade agreements to be decided on a bilateral basis between the UK and countries in Asia, Oceania and the Americas. Politicians in Australia have already said that they are happy to discuss a bilateral deal.
At present, over 90% of UK trade is handled by ports and the EU is the UK’s largest trading partner. However, the UK ports sector, being largely privately owned and competitively run, is very different to those of many other EU Member States. Consequently, it has long had concerns about public subsidy in other EU countries distorting competition, particularly between the larger international ports.
The greatest concern for UK ports over the past decade or so has been the repeated attempt by the EU to legislate on port services, which they have argued would impose disproportionate and potentially harmful regulation in an area where the UK is already competitive.93 The proposed ‘Port Services Regulation’ was cited several times during the referendum campaign as a reason to leave the EU.
More generally, Oxera has said that changes to the costs of trade with the EU are “likely to affect the volumes and patterns of freight activity at ports, while the need for new customs checks on imports and exports is likely to cause considerable congestion at UK and mainland European ports”. It suggests that any negative impact could be mitigated through EEA membership or free trade agreements, although delays in negotiations could mean a significant period trading under WTO agreements.
In November 2016 the Centre for Policy Studies published a new paper arguing that EU law “has long held back the potential of British ports” and that so-called ‘free ports’ (i.e. areas that, although inside the geographic boundary of a country, are considered outside the country for customs purposes) could create more 86,000 jobs for the British economy if they were as successful as those in the United States.
Others have cautioned that post-Brexit customs checks could be ‘catastrophic’ for UK ports and lead to a reduction in the volume of trade.98 In April 2017 the MP for Dover, Charlie Elphicke, published a paper arguing that there are seven ‘key priorities’ which would help the Channel ports post-Brexit:
1 The border should be a tax point, not a search point so far as possible;
2 Be in the Common Transit Convention to avoid stops and potentially checks at every EU member state frontier;
3 Mutual recognition of meat;
4 The establishment of a Trusted Trader Scheme;
5 The closest possible working relationship with France;
6 Technology should be used to speed customs processing; and
7 Evolution not revolution by building on existing systems that hauliers and shippers are familiar with.
There may be some positive consequence for UK ports on the east coast if difficulties emerge around Dover and Folkestone due to changes to border controls at Calais.100 This could see an uptick in passenger and freight traffic though London, Grimsby, Tyneside or the Forth, though at present it is far too early to say.
Source. UK Parlimentary Publication 2017