The UK’s latest trade strategy, published last week, proposed joining the Pan-Euro-Mediterranean (PEM) Convention to ease post-Brexit friction by simplifying rules of origin and allowing greater flexibility in sourcing components. However, according to the Financial Times, the European Commission has made clear it does not support UK accession, citing concerns that British goods could gain unfair low-tariff access to the EU market.
The decision has frustrated UK trade bodies and is seen as one of the first signs of renewed tension following the UK–EU summit on 18 May, where both sides committed to resetting their relationship.
What is the PEM Convention?
The Pan-Euro-Mediterranean (PEM) Convention is a framework of 25 countries and the EU, designed to harmonise and simplify rules of origin to support integrated supply chains across Europe, North Africa, and parts of the Middle East. Established in 2012 and revised in 2025, the convention allows businesses in member countries to “cumulate” inputs — that is, count materials sourced from other PEM members as local content when determining a product’s origin for tariff purposes. This system gives manufacturers greater flexibility to build international supply chains without losing access to preferential trade terms.
The 25 Contracting Parties to the PEM Convention include the EU, EFTA states (Switzerland, Norway, Iceland, Liechtenstein), countries in the EU’s neighbourhood (such as Ukraine, Georgia, Moldova, and the Western Balkans), and participants in the Barcelona Process (including Türkiye, Egypt, Morocco, and Israel). A transition period is in place until 31 December 2025, during which both the original 2012 rules and the revised 2025 rules apply in parallel. From 1 January 2026, only the modernised rules will be in force. These revised rules are simpler and more flexible, offering improved cumulation provisions, relaxed transport conditions, and broader tolerance thresholds.
While industry groups such as the British Chambers of Commerce support UK accession, not all businesses are in favour. As Politico reported, some sectors fear that competitors could gain an advantage through greater sourcing flexibility. Trade Minister Douglas Alexander acknowledged earlier this year that “some stakeholders” opposed the move, but added that the government remained “open to looking at” PEM as a pragmatic option in the national interest.
Political sensitivities surrounding UK accession
Supporters argue that joining the PEM Convention would provide practical relief from post-Brexit bureaucracy, particularly for manufacturers whose goods rely on complex supply chains. However, as the FT reports, the Commission’s opposition is not just technical. Incorporating PEM rules of origin into the EU–UK Trade and Cooperation Agreement (TCA) would require reopening the terms of that deal; a politically sensitive step.
According to FT sources, the Commission is reluctant to go beyond what was agreed in the “common understanding” reached at the May summit. This is despite the fact that EU Brexit chief Maroš Šefčovič said in January that UK membership in PEM was “something we could consider”.
David Henig, a former UK trade negotiator now at the European Centre for International Political Economy, told the FT that the EU’s position reflects a broader reality. “The EU isn’t united on the importance of the UK reset,” he said, adding that even technically straightforward measures such as PEM can become entangled in political hesitation.
New UK–EU agreement offers partial relief
The PEM setback comes despite recent efforts to rebuild trust and cooperation between London and Brussels. On 19 May, the two sides signed a new trade and cooperation agreement aimed at reducing post-Brexit friction and streamlining regulatory processes. As reported by Trans.INFO, the deal introduces a permanent sanitary and phytosanitary (SPS) agreement, exemptions for UK steel exporters, and a roadmap for enhanced mobility, data sharing, and law enforcement cooperation.
The SPS arrangement is intended to reduce routine checks on animal and plant products moving between Great Britain, the EU, and Northern Ireland, with the UK government arguing that it could lower food prices and improve supply chain efficiency. The agreement also links the UK and EU Emissions Trading Systems (ETS), effectively exempting UK businesses from the EU’s incoming carbon border tax — a move expected to save British firms around £800 million. The combined impact of the SPS and ETS provisions is projected to boost the UK economy by nearly £9 billion by 2040.
In addition to trade, the agreement includes tailored relief for British steel exporters, expected to save the sector £25 million annually, and lays the groundwork for a youth mobility scheme, broader access to EU eGates for UK passport holders, and the reintroduction of pet passports. A new 12-year fisheries agreement maintains existing access arrangements for EU vessels while earmarking £360 million to modernise the UK fishing industry and support seafood exports.
However, unresolved issues remain, particularly in transport and goods movement. The Road Haulage Association (RHA) and Logistics UK welcomed the SPS framework but pressed for clarity on labelling, customs requirements under the Windsor Framework, and the so-called 90/180-day rule that restricts UK hauliers operating within the EU. Industry groups stressed that technical discussions must move swiftly and include meaningful consultation with business.
Northern Ireland rules and compliance pressures
The ongoing dispute over PEM also plays out against the backdrop of continued EU pressure on the UK to fully implement the Windsor Framework. The final phase of the deal came into effect on 1 July, introducing stricter labelling and customs procedures for goods shipped from Great Britain to Northern Ireland. Under this phase, a wider range of products ( including composite foods, fruit and vegetables, fish, pet food, and ready meals) must now carry individual “Not for EU” labels to remain eligible for simplified movement via the Retail Movement Scheme. The requirement applies at the item level rather than solely on outer packaging, with limited exemptions for products such as bread, alcohol, and confectionery.
The UK government describes these changes as necessary to reassure the EU that goods intended for the Northern Ireland market will not enter the Republic of Ireland and the wider single market. Businesses have been granted a short adjustment period, but EU officials continue to raise concerns about inconsistent compliance among major British retailers.
M&S chief executive Stuart Machin described the new regime as “bureaucratic madness”, highlighting that over 1,000 product lines must now carry “Not for EU” labels, with several hundred more subject to customs checks. He called for rapid agreement on a veterinary deal to simplify agrifood checks, but Commission officials told the FT that full implementation of the Windsor Framework remains a prerequisite for any such agreement.
According to the Financial Times, European relations minister Nick Thomas-Symonds convened a meeting with major supermarket chains on 27 June to urge compliance with the new rules. Officials warned that non-compliance could undermine the broader negotiations, including talks on a future veterinary agreement.
