Brexit Views 12 June 2018

Last Thursday saw the UK Government publish its long awaited backstop proposal for Northern Ireland and the Irish border. The Government’s Technical Note on Temporary Customs Arrangement proposes that the UK as a whole remains in a temporary customs arrangement with the EU until measures are put in place via the future trade relationship that would allow trade of goods continue across the Irish border without border checks. According to the policy paper this arrangement would see:

  • The elimination of tariffs, quotas, rules of origin and customs processes including declarations on all UK-EU trade;
  • The UK outside the scope of the Common Commercial Policy (CCP), except where it is required to enable the temporary customs arrangement to function. This will mean applying the EU’s common external tariff (CET) at the UK’s external border, alongside the Union Customs Code (UCC) and such other parts of the Common Commercial Policy that are required to enable the temporary customs arrangement to function; and
  • The UK able to negotiate, sign and ratify free trade agreements (FTAs) with rest of world partners and implement those elements that do not affect the functioning of the temporary customs arrangement.

Essentially what Prime Minister May is proposing is that the UK as a whole rather than just Northern Ireland would remain in some form of a Customs Union / Arrangement with the EU after the transition period expires in December 2020, thus averting a potential border down the Irish Sea. This differs from what was initially proposed by the EU in its Protocol on Ireland/Northern Ireland included in the draft Withdrawal Agreement, published last February, which put forward that only Northern Ireland would remain in the Customs Union and the Single Market for goods in an effort to ensure the current border arrangements could be maintained.

While the UK’s proposal provides details on the technical customs arrangements that could apply under its proposed model, it fails to address the regulatory conditions that are also critical to solving this conundrum stating only that “Upholding these commitments requires a joint solution on both customs, which is addressed in this paper, and an approach on regulatory standards, which will also need to be addressed.”  

The British Irish Chamber has long advocated for a solution that would see the UK as a whole remain as closely linked to the EU as possible and what is being proposed has similarities to the long-term future framework put forward in the Chamber’s Big Principles for a Strong Brexit Partnership. For businesses across these islands, and for those in Northern Ireland especially, a border in the sea poses as much of a risk to jobs and prosperity as one along the island of Ireland. For that reason, we cautiously welcome what the UK is proposing as a step in the right direction.

However, we are very aware of the challenges facing this proposal.

Firstly, the time limited nature of the proposed Backstop betrays its purpose, namely to provide a last resort, long-term solution on a highly complex issue should all other measures to address the border fail either through the future framework or UK proposed technological solutions. The proposal in its current form does not do this. Furthermore, it also does little to assure businesses and secure jobs. By including dates on its proposals, the UK Government is failing to provide the certainty that business has been calling out for. Instead, these dates only push the prospect of a potential cliff-edge Brexit slightly down the road. This proposal estimates that the future trading relationship will be ready to be implemented by 2021, yet anyone with experience of negotiating trade deals has long said that it could be 5-10 years before the UK and EU are ready to implement a new deal.

Secondly, as stated above it fails to address the non-tariff processes relating to regulatory and standards checks that take place along borders. These are especially important in agri-food trade; the main sector traded across the Irish border. The Chamber has long stated that any deal that aims to maintain the current border would need to include the continuation of both regulatory and tariff alignment between the UK and the EU to ensure that goods could continue to be traded freely across all borders.

Thirdly, without the UK’s White Paper on its future relationship with the EU (publication now delayed until after the June EU Summit), there is no further clarity on what the UK Government is working towards and how this will alleviate the need for the Backstop. Both the Government’s Max Fac (trusted trader and technology) and Customs Partnership (tariff collection and remittance) proposals have been long dismissed by the EU as unworkable. The possibility of either being up and running by 2021 is seen by many as farcical when considered in light of the fact that as of April, DExEU had yet to engage one single company to explore ideas on how technology will solve the border issue (i news report here).

The EU Commission published its response to the proposal yesterday in which it analysed the Technical Note under three conditions:

  1. Is it a workable solution to avoid a hard border?
  2. Does it respect the integrity of the Single Market and Customs Union?
  3. Is it an all-weather backstop?

In its response the Commission has highlighted a number of issues it sees with the proposal including its omission of regulatory alignment; the difficulties around the UK remaining party to EU trade deals with third countries for a limited period of time; and the time limited nature of the Backstop. In addition, there has been speculation around what Michel Barnier meant last Friday when he said: “What is feasible with a territory the size of Northern Ireland is not necessarily feasible with the whole UK” (emphasis added), with many wondering whether there is scope for the EU to change its current Backstop position.

In addition to having to convince the EU of the merits of its proposal, the UK Government is facing further battles at home as the Withdrawal Bill heads back to the floor of the House of Commons this week. Over the course of today and tomorrow MPs will have the opportunity to vote on the 15 amendments made in the House of Lords. These include amendments on UK membership of the Customs Union; EEA membership; and the MP’s meaningful vote on Brexit. At the time of writing, the Government had so far won all eight votes put forward including the meaningful vote amendment. Of all the amendments, this was the one thought most likely to pass but it seems some last minute concessions by the Government may have staved off defeat. The Customs Union amendment is expected to be pushed back until the Customs Bill is debated (expected in July) while a Labour amendment on EEA membership looks like it might risk rebel Tory support. A full list of the amendments being debated, including expected outcomes, can be found on the Guardian website here.

The last week has shown us that significant differences remain between the UK and the EU in their interpretation of what the Backstop and Brexit mean. However, now that the UK has put on paper its interpretation of the commitments made in December, there is at least something concrete to negotiate. This is an important step forward as with the clock ever ticking, it is essential that focus and attention is given to concrete proposals rather than empty phrases and rhetoric. With a proposal now firmly on the table, there is some possible hope that agreement on the Withdrawal Treaty might be reached by October and discussions can then firmly turn to the final future trade relationship. This will need to be comprehensive, focussing not only on goods but also services. This is vital for business, jobs and prosperity not only across these islands but across the EU more generally.