23 October 2018

Today the ever well-sourced Tony Connelly of RTE suggests that the EU is willing to commit itself to forming a Customs Union with the UK post-Brexit. However this commitment to negotiate a UK-wide customs arrangement would be included in the Withdrawal Agreement, but the formation of a UK-EU customs union would require a separate treaty (and be subject to negotiation).

At one level, this development could be seen as taking both sides closer to resolving the backstop conundrum. Yet many issues remain. For a start, the EU are not saying this would obviate the need for a Northern Ireland-only backstop in the withdrawal agreement. The UK view is to try to seek to remove the need for the backstop, and if possible to avoid agreeing to one. But it’s possible that this doesn’t achieve that, and so is more of a bridge to a potential future arrangement.

And, given a future UK-EU customs union would be subject to negotiation (which might take some time during the transition), it’s unclear what the UK would have to offer in terms of level playing field and other commitments to secure this whole UK customs union. For example the EU could ask for dynamic harmonisation on employment, environment, and social rights. Furthermore are we now proposing to spend time during the transition negotiating a potential UK-wide customs union to come online after the transition, so detracting from negotiating an actual future relationship?

Speaking on the Andrew Marr Show at the weekend, the Brexit secretary Dominic Raab discussed the backstop and a possible UK-wide customs union. He said: “It would be rather odd if we ended up in that bridging temporary mechanism without a route out,”  adding that it would therefore either need to be “time limited” or have “something which allows us to control how long we’re there for”.

But even if a UK-wide customs union was secured which would (almost) mean no customs border down the Irish Sea, what about  regulatory barriers – which, after all, account for a much larger proportion of at border checks? [See for example this slide from Michel Barnier’s team].

Paragraph 50 of the December Joint Report commits  the UK to ensuring that “no new regulatory barriers develop between Northern Ireland and the rest of the United Kingdom, unless, consistent with the 1998 Agreement, the Northern Ireland Executive and Assembly agree that distinct arrangements are appropriate for Northern Ireland”.

Dominic Raab seemed to confirm  the government’s continued commitment to Paragraph 50 when he told Andrew Marr that “we have to be very clear that Northern Ireland cannot be separated from the rest of the UK in customs or regulatory terms”.  My working assumption was that this would mean that the UK would align its own regulations with the regulations in Northern Ireland (and the EU) to ensure that there were no new regulatory barriers, especially because the Northern Irish political landscape remains deadlocked. This would be consistent with a reading of Paragraph 49 of the Joint Report, which states that, in the absence of agreed solutions, the United Kingdom would maintain full alignment with the rules of the Single Market and Customs Union (rather than Northern Ireland alone maintaining full alignment).

I have speculated previously  that this combination of a UK-wide customs union, plus a Northern Irish regulatory backstop, could potentially lead to the UK  obtaining something approaching a Single Market in goods by the back door of Northern Ireland even if the EU formally rejected such an arrangement.

But my understanding is now that Whitehall’s current working plan is for Northern Ireland to operate some sort of hybrid regulatory regime, while Great Britain (potentially) diverges.  In this scenario, there might need to be regulatory checks, but these would be done via market surveillance and so – the argument goes – wouldn’t constitute barriers to trade. This would potentially tally with another comment of Dominic Raab’s on Sunday: “We wouldn’t accept anything which carved a line down the Irish Sea that separated Northern Ireland from the economic regime that governs the rest of the UK.” There’s a fair bit of wiggle room there for some regulatory divergences which don’t constitute barriers to trade.

It might make sense to devolve regulations for agri-food and energy to Northern Ireland and allow those areas to remain in alignment with the EU, while running a different regime in the rest of the UK. But what would happen if – hypothetically – Northern Ireland chose to not align with the EU? Could that happen? Would the Assembly and Executive really have any ability to not agree to match the EU’s regulations and so allow Great Britain to diverge? Or would they more likely be essentially forced permanently to accept EU rules over which they had no say at all – with no MEPs, no Commissioner and no representation in Council.

All of this is somewhat irrelevant if the Government can’t get a working definition of the backstop over the line with the EU or get them to agree to replace their backstop with this. But if they can, these questions will suddenly come into play. It’s also unclear when any potential regulatory divergence between Great Britain and Northern Ireland would happen. For at least 21 months, the UK will be in the stand-still transition period. But beyond that, whilst there may be a Customs Union for the whole UK, the possibility of regulatory divergence between Great Britain and Northern Ireland slowly opens up.

At one level, this ‘hybrid’ idea may offer a path through the backstop impasse. Yet it also raises the spectre of growing regulatory differentiation between  Northern Ireland and the rest of the United Kingdom – and one which is essentially imposed. There are already precedents for certain  phytosanitary checks between Northern Ireland and Great Britain, as well as other areas where policy is devolved.  However, a wider regulatory divergence could alter the constitutional balance between the regions of the United Kingdom, as well as raising demands for other such privileges to be afforded to Scotland.

Ultimately the overall problem of divergence between Northern Ireland and Great Britain is only resolvable if the EU and UK agree two sorts of relationship – one a wide ranging mutual recognition agreement of the sort the EU side has been clear is not possible, or something approaching Chequers where the UK operates either within EU rules or is allowed (in whole or in part) to operate a dual regulatory regime for goods. No wonder Geoffrey Cox reportedly described the backstop today at Cabinet – according to the James Forsyth app – as Dante’s first circle of Hell.