BULGARIA AND BREXIT

What does Bulgaria export (2019)?

There are no obstacles standing in front of the raw materials export - honey, fuels, sunflower. Furniture, clothing, plastics – no export duties and non-tariff barriers. Electronics, electrical engineering, machinery - there are no customs duties, but it will probably be necessary to issue new certificates of conformity, depending on the date and term of the available ones. The World Trade Organization (WTO) rules on non-tariff barriers to trade will apply in these cases. Pharmaceutical products - there are no customs duties, but the registrations will be valid only until the end of their current term, after which a new registration procedure will be introduced. GMP inspection certificates are mutually recognized, but each party has the right to request an on-site inspection.

A specific niche is the export of food and beverages for refilling Bulgarian stores in the United Kingdom (UK). Exports vary considerably - between 40 and 70 million € per year. Characteristically, the variety of goods is large and the batches are small. Although there are no imposed duties, it is expected that their import into the UK will become significantly more expensive, as each batch will be processed separately and will require a separate sanitary or phytosanitary certificate according to the requirements of the UK. Northern Ireland makes an exception, where EU-compliant goods can be delivered. The labeling of the goods must comply with the requirements of the UK.

What does Bulgaria import (2019)?

Similarly, there are no obstacles for the import of chemical products from the UK. Plastics - no tariffs and non-tariff barriers. Machinery, car electronics – no customs duties, but they will probably need to issue new certificates of conformity. Pharmaceutical products - no customs duties, but registrations will be valid only until the end of their current term. Alcoholic beverages will be imported duty free, but according to the rules for importing excise goods from third countries. The case of toys should be further investigated, as probably a significant part of them are of Asian origin, and the rules of origin and cumulation of origin have changed significantly.

What is Bulgaria losing?

Bulgaria and the UK are the two geographical ends of the EU. The intensity of economic ties is not as high as in a number of other Member States (at this stage, Ireland, France and the Netherlands are considered to be the most affected ones). With the exception of some British pharmaceuticals, none of the imports are of the utmost importance. Yet…

1. The UK was a counterbalance of the Brussels administration, which is increasingly mired in rules and procedures. A deepening of the bureaucracy can be expected under the pressure of 1) Poland, 2) Germany, and 3) France, most likely in that order. The voice of the "practical" Scandinavian countries and the Netherlands, to which Austria has joined, will weaken. In general, the transparency of the work of the European structures will decrease in favor of the southern countries.
2. The UK continues to be a symbol of innovative thought in Europe. This, together with the freedom of entrepreneurship, brought positives to the EU. After Brexit, the EU will fall even lower in international rankings related to research and development and innovation. The EU is losing a lot from the pragmatism of the British research. A number of Bulgarian research centers have a close cooperation with those from the UK.
3. The UK was home to about half of all private investors in Europe. In recent years, the drastic gap with the continent has diminished at the expense of newly established EU investment funds in the form of various public-private partnerships. Such funds have also been established in Bulgaria. In BIA we see some negatives in these formations: Funds with partial public funding incur costs to find and support innovative start-ups, and when one of the start-ups gains momentum, it is owned by an individual associated with the fund, not the fund itself, ie the negatives are for a fund under PPP, and the positives (at least some of them) are privatized. There are transfers of private funds from the island to the mainland and their competition will speed up the treatment of children's diseases with public-private funds in the EU.

The listed three negative tendencies seem distant for Bulgaria, but in fact determine the macro framework of our development. There are other potentially negative factors, but these are the most significant in the long run, probably in that same order.

General rules of the agreement

• Since the conclusion of the deal, the public has been flooded with information about agreements, procedures and general provisions. We will try to sort out what concerns most Bulgarian economic operators.
• Lack of tariff and quota restrictions.
• The rules for charging VAT are the same as for trade with third countries.
• The rules of origin of the goods are changed. Goods and materials of EU origin invested in British production will be considered British when exported to the EU and vice versa. The UK has failed to negotiate that resources originating in countries such as China, Turkey and Japan be treated on an equal footing with those in the EU. This provides a competitive advantage of Bulgarian goods such as electronics, electrical engineering, machines, car parts and batteries. The UK has reached a six-year grace period for zero duties on electric vehicles, after which a 10% duty will be required if the content of third-party components exceeds 55%. The EC has developed a tool for self-assessment of the origin of ROSA goods, which is recommended to be used in the initial period after the entry into force of the agreement.
• An agreement was also reached on resolving future disputes over trade rules and standards. For this purpose, a procedure for treatment of such cases has been agreed, and the establishment of a bilateral steering commission is expected.
• An agreement has been reached on the application of minimum environmental, social and labor standards, which does not provide for the automatic imposition of tariff sanctions in the event of non-compliance.
• Existing transport arrangements continue to be valid. The cabotage rights of the British carriers are limited, which may be a good opportunity for the Bulgarian transport companies to occupy this market niche.
• The services are not included in the scope of the agreement. The British economy is heavily dependent on services, as 80% of the country's GDP is generated by this sector. The UK became the first country in the world whose exports of services exceeded those of goods.
• After January 1st, registering companies and opening bank accounts in the UK for Bulgarian entrepreneurs has become significantly more complicated.
• The UK retains its participation in the EU's Horizon and Copernicus programs, as well as its membership in Euroatom. A significant loss for Bulgarian education is the withdrawal of the UK from the Erasmus program, with the exception of the universities in Northern Ireland.
• The agreement also covers data transfer.
• The agreement reached will allow Bulgarian companies to continue exporting to the UK, but the introduction of new export procedures will make the process more expensive. Some sectors such as services and information technology will remain attractive to British investors after Brexit.

Problems

• It is estimated that trade flows after 1.1.2021 are about 50% compared to the normal. Although many European companies have refrained from working for and from the UK, signals of problems have already emerged. The Air Force reports major delays - up to 48 hours, in ports due to the sharp increase in the documentary work. The busiest section is Calais - Dover. Truck drivers complain from the lack of conditions for surviving a forced stay - toilets, water, food.
• It turns out that many traders outside Europe are not familiar with the new rules. Their goods have entered the UK, but do not have the necessary documents to continue for EU countries.
• Couriers such as DPD have cut off deliveries to and from the EU.
• Almost all shipments of goods requiring refrigerated trucks have been suspended.
• The transport of live animals, mainly pigs, has been stopped.
• Economic operators whose activities involve the transfer of sensitive data complain that a number of details are not clarified and are forced to suspend operations in order not to be infringed.
• The Marks & Spencer chain has stopped deliveries to its stores in Northern Ireland due to the so-called red tape - new rules for the movement of goods between Northern Ireland and Great Britain. The chain also reported problems with its supplies to the Czech Republic and France.
• In addition: of the approximately 1,500 trucks that try to leave the UK every day and enter the EU, around 700 have been returned due to a lack of a Covid driver test.