Last Updated on Thursday, 10 March, 2022 at 1:14 pm by Andre Camilleri
“A category of goods that has been impacted more than any other is medicines”
The Malta Business Weekly spoke to Special Commissioner for Economic, Financial and Trade Relations with the United Kingdom, Dr Mario Vella, regarding the state of play one year after the post-Brexit transition period. He explained that during 2021, significant changes occurred in Malta’s imports of goods from the United Kingdom. Research carried out by his Office shows that in several areas, such as motor vehicles, pharmaceuticals, wearing apparel and footwear and foodstuffs, a significant decline has been reported, even as total imports of goods show a slight increase.
As these changes coincided with the end of the transition period and the Covid-19 pandemic, it is hard to disentangle their respective effects.
We asked the Special Commissioner about the impact of Brexit on inflation, a theme that has featured heavily in the media from December 2021 onwards. In fact, the Relative Price Index (RPI) has been increasing month-on-month at an accelerating pace. Importers and distributors vociferously claim that Brexit is one of the key reasons for these increases. He said: “Our Office has carried out a detailed study of the exposure of the RPI to UK imports, with a view towards answering the question of whether Brexit has had a significant impact on our inflation. All indications thus far have been that the RPI is not as exposed to the United Kingdom as we may have thought.”
Dr Vella added that there were specific goods or categories of goods that did not necessarily have a significant impact on the RPI but which had seen considerable price increases, particularly in cases of foodstuffs incorporating ingredients of animal origin. In these cases, Malta’s Customs Department was obliged to carry out all necessary checks as mandated by the EU Customs Code, and followed strict guidelines concerning which documentation was and was not acceptable. The sourcing of these goods from UK suppliers, particularly when those suppliers were distributing goods of EU origin, had proven disruptive to supply chains, undeniably causing the added expenses of obtaining and processing the necessary documentation.
A category of goods that has been impacted more than any other is medicines due to the exit of the UK Medicines and Healthcare products Regulatory Agency (MHRA) from the EU pharmaceutical acquis. Although the European Commission has extended a temporary arrangement whereby Northern Ireland, the Republic of Ireland, Cyprus, and Malta are permitted to continue to issue emergency marketing authorizations covering goods registered and quality tested in the UK for an additional three years, this does not cover every possible situation. It will take time for the Maltese market to adapt, especially considering the small size of the market, the fact that that our prescribing practices emulate those of the UK, the fact that that many medicines used in Malta are not available from elsewhere in Europe, and the often-extravagant price differential between EU and UK suppliers. Furthermore, EU rules which allow for the exhaustion of trademarks on pharmaceuticals placed on the market – which means that a supplier in Malta may buy from a UK supplier without the permission of the manufacturer in order to place that manufacturer’s goods on the market indirectly – no longer apply to the UK.
The situation is further complicated by the fact that the outcome of discussions at EU level on the medicines and foodstuffs issues alike tie into the extremely sensitive issue of Northern Ireland. In the present political circumstances, Dr Vella observed, discussions relating to the UK-EU relationship more generally and to Northern Ireland specifically seemed to have been relegated to the back burner, including decisions concerning whether the UK would continue to participate in Horizon Europe or not, in practice and not just in principle. Our educational institutions have historic and significant links with their UK counterparts, and this is an issue on which they are undoubtedly waiting for a resolution.
Finally, on the export side, exports of goods to the UK grew at a healthy rate both in value terms and relative to global exports. The UK continues to be an important market for Malta, with exports continuing to do well, indeed reversing years of decline, especially in pharmaceuticals and printed matter sectors. So far, and bar some teething troubles, most exporters seem to be coping with the phasing-in of customs checks on the UK border.