By impairing the fluidity of road freight transportation, the two shocks of the Covid-19 pandemic and Brexit have undermined European supply chains.
According to former Belgian diplomat and holder of a PhD in Political Science, Raoul Delcorde, "interdependence trumps sovereignty" in a globalized world. However, this maxim seems to have been somewhat set aside in Europe.
The double shock of the Covid-19 pandemic and Brexit is significantly disrupting European supply chains, slowing or even blocking the transit of goods and people.
Plummeting UK exports to the EU
On the United Kingdom side, the news came as a bombshell : exports through British ports to the European Union fell by 68% in January 2021 compared to the same period last year. Richard Burnett, Chairman of the Road Haulage Association (RHA) told The Observer magazine that, in addition to the drop in exports, about 65%-75% of vehicles that had come over from the EU were going back empty because there were no goods for them to return with. Some British companies have temporarily or permanently suspended their exports to the European Union.
According to figures obtained by the ITV television channel from the Prefecture Hauts-de-France et du Nord, for the week ending 24 January, an average of 3,400 trucks per day travelled from the port of Dover and via Eurotunnel shuttles to the North of France, of which 65% were empty. The data also show that cross-Channel HGV traffic has decreased by 30% compared to normal flows in both directions.
Customs procedures at issue
Burnett believes the fall in trade is mainly due to the "massive increase in paperwork facing exporters" after Brexit. He called on the UK government to significantly increase the number of customs officers tasked with helping businesses, estimating that the 10,000 people currently deployed represent "only one-fifth of what is required".
According to the Belgian newspaper L'Echo, the new VAT rules and red tape are considerably slowing down the flows between Belgium and the United Kingdom. Even companies that had been well prepared ahead of Brexit are impacted by customs delays. Marie's Corner, a manufacturer of chairs and sofas, has suffered significant import delays in the United Kingdom. "We are three or four weeks late," Serge Silber, one of the co-founders, told the Echo. "When you dig a little bit deeper, you realize that the goods were actually shipped, but have got stuck on a customs officer's desk."
A significant financial and human impact
The costs linked to administrative processing have also increased. “The Royal Mail applies a flat rate of £8 to take into account the cost of clearing items through customs and presenting them to Border Force. DHL charges an additional 2.5% to clear customs, with a minimum amount of 11 pounds,” says the Echo. "They are all reviewing their rates because they realize that it is a little more complicated than expected," notes Serge Silber. So, the price to pay for sending a worthless 50-gram sample via FedEx has increased from € 10 to € 51, according to the CEO of Marie's Corner.
This slowdown in border operations is causing a marked deterioration in the working conditions of truck drivers, who sometimes experience a wait of up to 36 hours, according to the German website DVZ.
A survey conducted by the German organization DIHK confirms that following Brexit, a majority of German companies are grappling with customs and logistics problems in their trade with the United Kingdom and expect trade relations to deteriorate further. Many companies want to relocate their investments outside the British Isles.
Bleak outlook for the UK economy
On January 29, the leaders of the five largest UK business groups warned the government that companies were facing "substantial difficulties" in UK ports since Brexit, with the prospect of a "significant loss of business" if the situation is allowed to continue.
As ministers tried to ignore businesses’ concerns over new trade barriers caused by the UK's exit from the single market and customs union, the losses in jobs, investments and tax revenue are quickly creating a crisis in its own right.
“Between April and July 2021, we will have an economy that seeks to break out of lockdown, just as the UK imposes a series of import controls on EU businesses. They may not be better prepared than we are; the supply chain will not be able to serve the United Kingdom. This could well be the biggest crisis of Brexit”, warns Shane Brennan, managing director of the Cold Chain Federation, the organization of logisticians for frozen and refrigerated products.
Germany closes its doors to the Czech Republic and Austria
The Brexit-related chaos almost ended up eclipsing the impact of the Covid-19 pandemic. This, however, has been far from insignificant, as we saw at Christmas, when France demanded tests to try to stop the spread of the English variant. Thousands of drivers then found themselves stranded for several days.
This phenomenon has now spread to the continent. We had not seen such a spectacle for a long time at a former border of the European Union: on the morning of February 15 there were more than 30 kilometers of traffic jams at the passage from the Czech Republic to Germany. The cause of this was the decision without notice by the German Federal Ministry of the Interior, from Sunday February 14th at midnight, to impose a filter to the entries from the Austrian Tyrol and the Czech Republic, due to the explosion in the number of coronavirus cases in these two areas.
More than 7,000 trucks transport goods every day on the North-South corridor passing through the Tyrol, which is roughly the same volume of trucks that use the Dover-Calais corridor. Tens of thousands of additional trucks move along the East-West Corridor to Germany via the Czech Republic, a major transportation lane for Central European logistics.
Trucks are only allowed to pass if the drivers show a negative PCR test of less than 48 hours, first in Brennero, in northern Italy, and then in Kufstein, Austria. Those who do not have one can be tested on site.
After two weeks of procrastination, new restrictions were also introduced at the border with the French department, Moselle, where the circulation of variants is particularly active. "We must prevent any further intrusion as best we can," argues the Minister of the Interior of Baden-Württemberg, a region bordering France. However, it was agreed that the controls linked to these new measures should not create delays at border points.
Strong reaction from the business community
The restrictions imposed by Germany have caused strong concern in the business community. "Let us not fall back into the unilateralist logic of closing borders as in March 2020", is the plea from Axel Plass, the president of the German Federation of Transportation and Logistics (DSLV). Several German car manufacturers have warned of a shutdown of production plants if heavy goods vehicles are stranded for too long at the border. Their spare parts come from the Czech Republic but also from Slovakia, Romania, Hungary and northern Italy. “We work on a just-in-time basis. If the parts do not arrive, the factories stop,” said a spokesperson for the German Automobile Federation (VDA).
The Federation of German Industry (BDI) also warns that the situation at the crossing points risks paralyzing supply chains across Europe. Its managing director, Joachim Lang, urges the federal government to comply with the “Green Lanes” legislation drawn up by the EU during the first wave to maintain the free movement of goods. "Border crossings should remain open to all freight vehicles."
The IRU is also calling on politicians. The International Road Transport Union wrote in January to the President of the European Commission, Ursula von der Leyen, calling for immediate action to prevent obstacles to the free movement of goods, in particular COVID testing requirements for professional truck drivers. A request renewed at the end of February in a letter to German Chancellor Angela Merkel.
A “concerned” European Commission
The European Commission says it is “concerned about recent unilateral decisions”. On February 15, it sent letters to Belgium, Denmark, Germany, Finland, Sweden and Hungary, as these six countries are applying tougher restrictions than those recommended by the EU, including entry bans to their territory, explained a Commission spokesperson. These letters point to the risk of "fragmentation and disruptions to free movement and to supply chains". The restrictions must be "non-discriminatory and proportionate", insists the Commission, calling on the governments concerned to "align" their provisions with the joint recommendations approved four months ago by the Twenty-Seven.
The States concerned must respond to the Commission, which does not rule out initiating infringement proceedings against them.
The vaccination passport?
Despite recommendations from the European Commission, professional drivers must now present COVID-19 tests of less than 48 hours at some borders. The irrationality of these restrictions is leading to disruption and even paralysis of European supply chains.
The solution could come from vaccinations. Voices are starting to make themselves heard in some countries asking to make truck drivers a priority population. This is particularly the case in Poland where the TLP, the leading road employers' union, has officially made a request to the Minister of Health that drivers engaged in the transportation of goods and passengers be given priority for vaccinations. It also wants authorities in other EU member states to stop testing vaccinated drivers. In the United States, the movement is picking up in certain States.
There is no normal functioning of the economy without the proper functioning of transportation. The shortage of vaccines and the resurgence of the pandemic fueled by variants will, however, promise some difficult weeks ahead for the European economy.
Brexit: British business leaders warn of 'substantial difficulties' at UK ports, The Guardian