Brexit Views 8 March 2018

Ireland is once again at the centre of the Brexit debate following a week of key publications and speeches from both the UK and the EU. Last Wednesday, the EU stirred debate with the publication of its draft Withdrawal Agreement. This 120 page text aims to provide a legal underpinning to what was agreed by both parties in last December’s Joint Report. This is a draft text that has been sent to the Council for discussion and will then be sent formally to the UK for negotiation. The Agreement features six sections including introductory provisions, citizens’ rights, other separation issues such as goods placed on the market before the withdrawal date, the financial settlement, transitional arrangements, and institutional provisions. In addition to the main text, the agreement also includes a Protocol on Ireland / Northern Ireland which puts on a legal basis the commitments made to ensure there will be no hard border on the island of Ireland post-Brexit.
 
The Protocol on Ireland received most attention in both the lead up to, and the fall-out from, the publication of the draft. It sets out in legal terms how “Option C” would work should agreement fail to be reached on Options A (border avoided through comprehensive future trade model) and B (UK proposed technical solutions to avoid a border). Brexiteers are up in arms at the prospect of Northern Ireland retaining full alignment with the rules of the EU’s Internal Market and the Customs Union which are integral to North-South cooperation, the all-island economy and the protection of the Good Friday / Belfast Agreement. However, despite the Prime Minister’s claims that ‘No UK prime minister could ever agree to it’ this was exactly what she agreed to when she signed off on Paragraph 49 of the Joint Report last December in order to reach the sufficient progress threshold that was needed to open the way to discussions on the future trade agreement. On that occasion, the UK also signed off on Paragraph 50 which stated that should option C come into play, the UK would ensure that no barriers would emerge between the UK and Northern Ireland. While Wednesday’s text does not address Paragraph 50 as the EU sees this as an internal UK commitment, the UK Government has also failed to address this commitment instead criticising the Commission for ensuring that the UK would be held to the commitments made in December should no alternative solution be found.
 
It should also be noted that the draft agreement includes a clear deadline for the end of the transition period of the 31st December 2020. Further discussion on this point should be expected. In the UK’s Draft Text For Discussion: Implementation Period, it was proposed that no date be set for the end of the Transition Period but that “the Period’s duration should be determined simply by how long it will take to prepare and implement the new processes and new systems that will underpin the future partnership”.
 
Despite the fallout from the Protocol, its publication has led to increased focus on how to solve the border issue. We agree with both the UK and Irish Governments that the solution for the island of Ireland should be found through a comprehensive future framework for trade. Expectations were high that the Prime Minister would set out how she proposes to resolve the issue in her speech on the UK’s future Economic Partnership with the European Union, which she delivered in London’s Mansion House last Friday. The speech was more conciliatory in tone than her previous landmark addresses on Brexit and contained some harsh realities for the British public on what Brexit will actually mean (less access to the EU’s internal market and loss of Financial Passporting just two of those mentioned), although it was still lacking in some of the detail that is now critical to moving forward. There was a welcomed section on services, a sector which has largely been overlooked in the debate so far. As mentioned already, Mrs May conceded that the UK will lose financial passporting rights, however she has set out an ambitious vision for services trade acknowledging the labour mobility requirements for such an arrangement.
 
The Chancellor provided further clarity yesterday on how the UK sees trade in financial services operating after Brexit yesterday when he delivered his Speech on Financial Services at HSBC. In his speech he called for financial services to be included in the future trade agreement between the UK and the EU. He proposed that this can be achieved through mutual recognition of regulations, with comprehensive cooperation between supervisory authorities, overseen by an independent arbitration mechanism.
 
On the same day the EU Council published its Draft Guidelines  for negotiating the future trade relationship between the UK and the EU. In its guidelines, the Council proposes that the UK and EU sign a comprehensive Free Trade Agreement that would maintain zero tariffs on trade of goods in all sectors. The guidelines also covers other areas such as maintenance of existing reciprocal access to fishing waters; customs cooperation; measures on technical trade barriers and sanitary and phytosanitary standards; services, including mutual recognition of qualifications; and protection of intellectual property rights, including geographical indications. The Council also proposes that the future deal includes provisions on air transport and continued access for the UK to EU programmes (e.g. education, research & innovation and culture) where this will be of mutual benefit to both parties. It further proposes that protections on shared personal data should continue to governed by EU rules.
 
The past eight days has produced a lot of literature on Brexit to be dissected by all concerned with this issue. While the UK has provided greater clarity on its position, there is still a lack of detail in many areas and this is most acutely seen on Ireland / Northern Ireland, which dominated the Brexit debate in the days leading up to the Prime Minister’s speech. The speech contained little new on how the UK Government expects to meet its commitments on the border with the Prime Minister referencing the Government’s previous papers on Customs and Ireland as containing the solution. These proposals have already been dismissed by the EU as unrealistic. The EU’s draft guidelines do little to address the border issue and would seem to plan for Option C coming into play unless the UK puts forward more concrete proposals on this issue.
 
While the dial has moved on the realities of Brexit in some areas, the fallacy that the UK can trade independently while having a frictionless border on the island of Ireland seems to remain within the UK Government. With Brexit moving ever closer, it is incumbent on all of us with skin in the game to talk openly and honestly about what deals are on offer for the UK as an independent trading nation. This is the last stumbling block to achieving what truly could be a close and ambitious trading relationship that would indeed become the Option A for the Ireland / Northern Ireland conundrum and with much greater benefits for all beyond this.  A comprehensive new Customs Partnership is the best solution and the Chamber is working hard to bring this about.