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Friday 18 August 2017

Tom Ferris is a Consultant Economist specialising in Better Regulation. He lectures on a number of PAI courses and contributes blogs regularly to PAI. He was formerly the Department of Transport’s Senior Economist.

The Brexit position papers published by the UK Government this week are to be welcomed. They focus on the unique circumstances of Northern Ireland and the Republic of Ireland in the context of the UK’s planned withdrawal from the EU. But while the papers are quite comprehensive, they fail to provide a clear-cut answer to the most fundamental question: how can there be a free and frictionless border between Ireland and the UK if the UK leaves the EU Customs Union?

The position papers published this week by UK Government are as follows:

  1. Northern Ireland and Ireland: Position Paper, available here.
  2. Future customs arrangements: A Future Partnership Paper, available here.

Northern Ireland and Ireland – Position Paper

The UK sets itself a huge challenge in the first paragraph of the position paper on Northern Ireland and Ireland,

“As we leave the European Union and therefore the EU Customs Union, the Government seeks a new customs arrangement that facilitates the freest and most frictionless trade possible in goods between the UK and the EU … ”

If the UK leaves the EU Customs Union then there has to be a customs arrangements put in place for trade between the EU and the UK. Only EU Member States can benefit from membership of the EU customs union, whereby goods circulating within the EU are exempt from customs duties, quotas, and paperwork.

The UK Position Paper does suggest two broad approaches that might be adopted to meet the challenge of putting in place customs arrangements:

“A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on EU trade as possible”;

And:

“A new customs partnership with the EU, aligning our approach to the customs border in a way that removes the need for a UK-EU customs border. One potential approach would involve the UK mirroring the EU’s requirements for imports from the rest of the world where their final destination is the EU”.

As regards the first proposal, it is not clear what a ‘highly streamlined customs arrangement’ actually means. The second proposal suggests the introduction of an unprecedented approach. Not only would it be challenging to design and implement, but time would be needed for the UK to explore this proposal with business and the EU. It seems unlikely that this latter proposal can be developed into practical customs arrangements in the short time remaining for the Brexit negotiations.

 

Future customs arrangements – A Future Partnership Paper

The position paper on future customs arrangements contains many policy statements that are to be welcomed. The paper contains proposals for four areas insofar as Ireland and Northern Ireland are concerned:

  • Upholding the Belfast (‘Good Friday’) Agreement in all its parts;
  • Maintaining the Common Travel Area and associated rights;
  • Avoiding a hard border for the movement of goods; and
  • Aiming to preserve North-South and East-West cooperation, including on energy.

As regards the avoidance of a hard border, the UK position paper states that dialogue with the EU should, at the earliest opportunity, focus in particular on the issues most critical to delivering as frictionless and seamless a border as possible: customs arrangements; and checks and processes on particular goods, such as sanitary and phytosanitary measures for agri-food. To assist this dialogue, the UK proposes that potential models for the land-border should be developed on the basis of nine key principles and criteria – see Table 1.

Table 1: Potential models for a Land Border – Key Principles and Criteria

1.       Recognise the crucial importance of avoiding a return to a hard border for the Peace Process in Northern Ireland. This must mean aiming to avoid any physical border infrastructure in either the United Kingdom or Ireland, for any purpose (including customs or agri-food checks).

2.       Respect the provisions of the Belfast ‘Good Friday’ Agreement in all its parts, with particular reference to: the three-stranded constitutional framework set out in the Agreement; the need to respect and treat equally the identity, ethos and aspirations of both communities; and the importance of promoting sustained economic growth in Northern Ireland.

3.       Recognise the unique nature of the land-border, in particular: its history and geography; the cross-border movements of smaller traders, farmers and individuals; the need to protect everyday movement of goods; and the integrated nature of the agri-food industry.

4.       Prevent the creation of new barriers to doing business within the UK, including between Northern Ireland and Great Britain.

5.       Address other regulatory and customs-related barriers necessary to deliver as frictionless a land-border as possible, including waivers from security and safety declarations, and ensuring there is no requirement for product standards checks or intellectual property rights checks at the border.

6.       Address the transit of goods to and from Ireland to the rest of the European Union via the United Kingdom – in line with the European Commission’s directives – through UK membership of the Common Transit Convention.

7.       Consider how best to protect the integrity of both the EU Customs Union, Single Market and trade policy, and the new independent UK customs regime, internal market and trade policy, in the context of finding flexible and imaginative solutions, while recognising that the solution will need to go beyond any previous precedents.

8.       Take account of the importance of trade between Ireland and the UK and aim to avoid economic harm to Ireland as an EU Member State.

9.       Agree at an early stage a time-limited interim period, linked to the speed at which the implementation of new arrangements could take place, which allows for a smooth and orderly transition.

Source: Future customs arrangements: A Future Partnership Paper, UK Government, August 2017

 

Some concluding remarks

The Irish Government welcomed the publication of the two UK Position Papers. It also noted that,

As these papers are inputs to the negotiation process between the UK and the EU27, the Government will also engage closely with the European Commission, the Barnier Task Force and our EU27 partner Member States regarding them. The immediate focus for the coming rounds of negotiations remains on advancing the issues identified for phase one of the negotiations, including citizens’ rights and the financial settlement, as well as issues specific to Ireland”[i].

 

This statement underpins the point that the UK position papers only present the policy issues that represent UK interests. Ireland’s interests will not always coincide with those of the UK. The Irish Government will need to continue to work hard to protect and promote Ireland’s interests. Putting flesh on the UK’s vision of a frictionless trade regime for when the UK is outside the EU will be extremely challenging.

 

Notes


[i] Government Statement regarding the Papers, available here.

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