ERG Technology Solutions – British Irish Chamber of Commerce Response

On Wednesday 13 September, the Conservative Party Eurosceptic Group, the European Research Group (ERG) published a paper, which it claimed could solve the Irish border conundrum. The paper builds on ideas that have been put forward by the group over the past year that rely on both technology and modifying current arrangements to ensure an open border can be maintained. The ideas within this paper are not new and many have been disputed by the British Irish Chamber before, but what follows are some further points within this paper that the Chamber would disagree with in terms of its feasibility for the Irish border.

As mentioned, many of the proposals in this paper, including the references to Lars Karlsson’s Smart Border 2.0 report, are further workings of points made by the ERG in its Customs Memorandum to Prime Minister May sent in May this year. The Chamber’s criticisms of these points would remain the same as those published by the LSE earlier this year.

Firstly, with regards to the trade figures presented, these only represent final sales of goods between the North and South and do not include the movement of goods that take place on a daily basis as part of the functioning of the all-island economy. According to statistics released by the Northern Ireland Statistics and Research Agency (NISRA), over two thirds of cross border trade involves supply chain activity and this would not be reflected in the figures quoted by the ERG.

In terms of the existing border that is in place for the collection of VAT, excise etc. this border currently exists in the context of both Ireland and the UK being members of the EU where they use the same systems to make declarations under common rules. When the UK leaves the EU it will be a third country and will have to adhere to the current systems as applied to other third countries that trade with the EU. It is true that VAT and Excise controls can be submitted online for intra-EU trade, however this does not apply to trade between EU and non-EU States. One clear difference is in the payment of VAT. The process for third countries entails filing import declarations and paying VAT at the point of entry.

In terms of AEO’s, while this is a viable option for larger companies with a broad international trade network to streamline processes, it is less so for the smaller and medium sized companies that contribute to cross border trade. Nearly 99% of Northern Irish businesses that trade across the border employ less than 250 people while 93% employ less than 50. Applying for AEO status is an expensive and timely process and would not deliver the same benefits for the smaller firms that would be relying on it for trade across the Irish border. Furthermore AEO status does not cover trade in agri-food trade whose trucks would still be subject to agriculture checks at point of import on food products of animal origin. This is obviously critical for cross-border trade on the island of Ireland.

It should also be noted with regards to references to other borders, there is not another invisible border in the world. Even the Sweden / Norway border has very definite physical infrastructure and in that case, Norway is a member of the EEA which allows for the removal of non-tariff barriers. It is also part of the EU security zone which means that no entry or exit summary declarations have to be lodged and that controls from a security and safety perspective do not have to be performed. Furthermore it is part of the EU veterinary zone meaning that when live animals and products of animal origin are crossing the border there is no need to pass a particular border inspection post and make those special controls. It is not proposed that the UK will be a member of any of the above meaning a comparison with the Sweden / Norway border is not comparing like with like. With regards to efforts to streamline this process it was noted by Anne Törnqvist, Director, Customs Clearance Process, Swedish Customs at a Policy Forum for Ireland event in Dublin last February that even in the electronic processing of declarations, infrastructure will still be in place at the point of entry. In even the most advanced mapping of where this process is going, a physical barrier will still have to be lifted at the point of entry.

Another concern with this proposal is how checks on agri-food produce would be maintained. There are no technical answers for the necessity of hygiene inspections, sampling and chemical and microbiological analysis at mandated Border Inspection Posts (BIPs). The Common Biosecurity Zone would only work if Northern Ireland was to maintain full alignment with EU rules in this area even in the scenario where the UK may choose to diverge from these rules. In this scenario, these checks would have to take place between the island of Britain and Northern Ireland. While the UK may accept food from the EU that meets EU standards, the EU may reject UK food should it be deemed as not meeting EU food safety standards in the future.

In fact, on all issues relating to standards and regulatory controls, little information is provided on what systems would be put in place should the UK diverge in the future from current EU standards.

Finally, on the issue of smuggling and border criminality, the examples provided show what is still able to happen even when two neighbouring jurisdictions are within the same regulatory and customs framework. Outside of this, an open border is an invitation to wholesale smuggling into the EU market. Such proposals and requests of trust in the UK system should also be viewed in light of the EU’s claim against the UK for €2 billion in back duties brought about because of a Chinese smuggling ring that was operating in the UK.

The British Irish Chamber has long been of the view that the best way to address the border is through the future trading relationship and adoption of the Chamber’s Big Principles or similar type framework. In the meantime, it is essential that both sides finalise a Withdrawal Agreement, including a backstop arrangement, that will ensure that both sides do not walk off a cliff next March. As the deadline for negotiations looms closer, this should be the priority for all involved.

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