From what we know, the scheme is far from straightforward and implementation will take timeby David Henig / October 15, 2019 / Leave a comment
If you’re confused by the latest Brexit plan, which seems to involve Northern Ireland being simultaneously both in and out of both the EU and UK customs zones, then fear not, you are far from alone. For in obscure corners of social media and face-to-face at various trade events in the last few days, specialists have been asking various questions, trying to understand what it is the UK government seems to be proposing.
The outline plan was enough to persuade the EU to enter serious talks, unlike the previous ideas of alternative border arrangements based around technology. It was enough for Leo Varadkar to join Boris Johnson in seeing a pathway to a Brexit summit. There’s obviously something to it, so let’s examine what that could be.
It is worth first recalling the scope for a solution, in other words the red lines that both the UK and EU have set down. For while each side may prefer that the other would change these, they seem well set at least for the current administrations. For the EU this means no border infrastructure or associated goods checks on the island of Ireland, and protection of the single market. UK red lines are that there must be no UK-EU customs union, free trade between Northern Ireland and Great Britain, and some form of consent from Northern Ireland to relations.
As is well known by now, though, every border in the world between countries not in a customs union has infrastructure and associated checks. Therefore any solution based on stated red lines is going to be unprecedented. The Johnson government first suggested checks away from the border combined with surveillance, the so-called alternative arrangements, but this was rejected by the EU due to the perceived threat of smuggling and basic unacceptability of checks on the island of Ireland.
The UK appears to have thus revived an earlier plan from Theresa May’s Chequers document, the Facilitated Customs Arrangement, though to be applied just to Northern Ireland rather than the whole UK as originally conceived. The broad outline of this plan seems relatively simple: goods imported into Northern Ireland from outside the EU would pay the EU’s tariff if they are going on to be exported to the EU, but not if they are remaining within the province. This means customs checks at Northern Ireland ports, on top of regulatory checks already suggested as Northern Ireland stays in the EU single market for goods—stretching UK red lines somewhat, possibly to the extent of losing DUP support.
Complications arise when attempting to understand how the system will work in practice. Some have suggested that EU tariffs will be applied to all goods entering Northern Ireland, to be reclaimed by companies which can prove the product was consumed there. Others have suggested that only goods which will be exported on to the EU, or used in Northern Ireland to make products going to the EU, should pay EU tariffs. Either way, the case of a Northern Ireland manufacturer exporting to both the EU and Great Britain using inputs from the latter seems complex.
But this is just the start of the complexity. In the event of imports from a country with which both the EU and UK have a trade agreement, it is possible that no tariffs are payable on the processing of imports into the UK then exported to the EU, thanks to something known as “diagonal cumulation of rules of origin.” Therefore a company importing into Northern Ireland from Great Britain needs to know the origin of the product.
Then there is trade between Ireland and Northern Ireland. Given there are no checks, we would assume that this must be tariff free. This would seem to imply at the minimum a zero tariff trade agreement between the UK and EU, which could take some years to negotiate. If this isn’t the case then the UK is giving preferential access to EU imports over all others in the world, which would be against World Trade Organisation rules. Similarly the EU would in effect be allowing goods into its market tariff free. Further, both the EU and UK have tariff free quotas of agricultural produce, which seemingly could enter Northern Ireland without tariffs, which might be a problem for local farmers.
There are doubtless many more questions about the exact detail, but there are also questions about how this would be implemented. On the surface such a system could take some years to come into effect, so would presumably need to be covered by some sort of additional transition period, which might also need to include a form of guarantee, as per the original backstop.
Then there is the question of consent, or what happens if in the future Northern Ireland decides not to be part of the EU single market or this customs arrangement. The UK’s original plan for consent every four years was widely seen as providing the DUP with a veto. That was unacceptable to the EU but there has been no suggestion of an alternative.
None of this is to say the plan can’t work. Given existing red lines it may be the only concept that can work for both sides. But being unprecedented it clashes with time constraints, of the UK having to be out by 31st October, immediately negotiating trade deals, and ending the planned transition at the end of 2020.
Not for the first time, a Brexit plan turns out to be highly complex and not quite as originally promised. Perhaps this time the UK government will accept this complexity and explain it to the UK public. That however still seems unlikely.