The UK government will seek input from businesses on whether to join the Pan-Euro-Mediterranean (PEM) customs convention to simplify international supply chain rules, as outlined in its new Trade Strategy.
The UK government announced plans to consult businesses on the potential benefits and drawbacks of joining the Pan-Euro-Mediterranean (PEM) customs convention, which aims to relax rules of origin and simplify international supply chains. The move is part of the government’s new Trade Strategy, published Thursday.
According to the strategy document, joining PEM would “increase flexibility for UK exporters where they source their inputs.” The government said it would engage both businesses and existing PEM members to consider the advantages of membership. However, it also noted that “PEM rules could have varying effects on businesses” and committed to assessing whether current trading relationships are being used to their best effect.
The PEM convention covers the 27 EU member states and numerous other countries in the region, including Turkey, Morocco, Syria, Serbia, Moldova, and Ukraine. Membership in PEM is not the same as joining a customs union; the UK would still maintain an independent trade policy, and retain control over its own tariffs and quotas.
For businesses, especially manufacturers sourcing components from multiple countries, joining PEM could reduce administrative burdens. Under international trade rules, products qualify for lower tariffs only if they are made in countries that are party to the relevant free trade agreement. “Rules of origin” determine whether a product is considered domestically produced or an import, usually based on where value is added.
The PEM convention allows companies to count inputs from other PEM members as domestic production, providing greater flexibility in sourcing inputs without risking higher tariffs. However, not all businesses support joining PEM, as some fear it could give competitors a competitive edge.
In January, Trade Minister Douglas Alexander acknowledged, “some stakeholders… would argue that there would be disadvantages to sectors of UK business if we were to rejoin.” He added, “It is an issue that we are open to looking at, because we want to take a pragmatic view as to where the national interest lies.”
EU Brexit chief Maroš Šefčovič has said British membership of the convention is “something we could consider.”
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