Now that the Conservative party and pro Brexit forces in the United Kingdom have won a sizable majority in Parliament, the fact that a break is going to happen seems like a foregone conclusion. But what is unclear is what kind of exit the UK will have from the European Union. Will there be a deal or not? Without a deal, you are likely to see tariffs, more rules, and more stringent trade restrictions. If a deal takes place, both the UK and EU would avoid trade disruptions.
Both economies are important to the other party. John Dye, the president of TIMCON (the UK pallet association) said earlier in 2019, “Nobody knows what is going to happen with Brexit. It is really frustrating. We don’t know if there will be a deal or not.”
Dye stressed the importance of avoiding trade disruptions. He stated, “The UK is the EU’s biggest customer. So, the EU needs the UK probably as much as the UK needs the EU.” Uncertainty is a great way to negatively impact the economies in both areas as well as put strain on international trade.
When Brexit first came out, nobody really thought about pallets. But since then, there have been discussions with the pallet industry, government officials and customers to begin searching for solutions. Also, the pallet industry, especially the poolers have worked to treat more pallets in their system. The good news for EPAL (which operates a large general exchange pool in Europe) is that it went toward heat treating and ISPM-15 compliance for its pool a number of years ago.
Dye explained, “EPAL is in a very strong position to pick up some market share because a lot of its pool is already ISPM-15 compliant.”
The UK pallet industry wants common sense, easy-to-understand rules and would like a reasonable phase-in period of at least a year for any new wood packaging regulations, such as imposing ISPM-15 on shipments between the UK and the EU. Since 2002, the UK and EU have given each other exemptions. The best thing might be for these exemptions to continue. But if they don’t, the pallet industry can cope as long as it has enough time and direction on how the rules would be enforced.
The reality is that ISPM-15 hasn’t really been needed for trade within the EU and UK. Dye commented, “Shipments between the UK and the EU have been exempted from ISPM-15 since 2002. And there have been no major outbreaks of pests except Portugal, where special alternative arrangements have been in place …Wood packaging material is low risk when it comes to pest introduction between the EU and UK.”
Last year, there were some news stories that warned about major supply chain issues if Brexit took place without a deal. Dye called that fear mongering saying that the industry has worked to deal with the situation even though it would like more clarity and certainty. He stated that there might be some short-term supply challenges even if there is no deal. But the industry will work to compensate and supply whatever is needed.
Dye added that plant health officials won’t be checking every pallet moving between the UK and the EU because there are limited resources, and UK officials have already indicated that they want to focus on the areas of highest risk, such as imports from Asia. Dye said that TIMCON has had extensive dialogue with government officials and will continue to work with the new government to ensure its members are kept up-to-date on the latest information and advice.
So, will there be a deal or not? British Prime Minster Boris Johnson has stated that he wants a quick resolution to a deal and will not prolong the negotiation period or the transition phase. Johnson wants a deal nailed down by the end of 2020. According to the Washington Post, “Virtually no one on the European side thinks it is possible to agree to a meaningful trade deal that quickly – meaning either Johnson will have to break a campaign promise by asking to extend the transition, or Britain and the EU could wind up with the same type of sudden break at the end of 2020 that Parliament until now refused to allow.”
EU officials want the UK to closely align with existing EU trade regulations. But it remains to be seen how much Johnson will give into EU demands. He could just push for a no deal exit that would lead to more stringent trade rules, including the imposition of ISPM-15 requirements for pallet shipments between the EU and the UK.
For now, all the pallet sector can do is prepare without breaking the bank and investing too much in kilns that may not be needed in the future.
