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In a speech last week, the Irish Taoiseach emphasised the need to establish what UK-EU trade will look like post-Brexit. Open Europe’s Aarti Shankar argues that until trade is discussed, little more progress can be made on the question of the Irish border.
9 August 2017
Recently, the Irish government’s tone on Brexit and border issues has hardened. Irish Taoiseach Leo Varadkar announced last month, “What we’re not going to do is to design a border for the Brexiteers because they’re the ones who want a border…As far as this government is concerned there shouldn’t be an economic border. We don’t want one.” This statement was in response to a report by The Times which claimed Varadkar was eyeing proposals to displace the current Irish border to the Irish Sea – a plan Open Europe’s Dominic Hinde has argued is politically infeasible. Given Ireland will be the most economically and socially exposed of the EU-27 to a chaotic Brexit, Irish concern and frustration is understandable. But Varadkar’s statement was both unhelpful and unsustainable – if changes are to occur on the border, it is wholly in Ireland’s interest to participate in influencing this, but it cannot seek independently to define it.
Yet this was just the latest in a series of examples of greater discord in UK and Irish messaging on the topic of Brexit negotiations. Earlier last month, Irish Foreign Minister Simon Coveney rejected proposals reportedly under consideration in the UK for technology and cameras at the border, telling RTÉ, “That is not going to work.” Irish Agriculture Minsiter, Michael Creed, was also critical of the UK’s stance in the latest round of Brexit talks, saying, “The lack of any coherence [in the UK negotiating position] is a huge problem for us… It appears to me that the instability is spilling over, impacting on the kind of Brexit. There is no coherence.” Tensions between UK and Irish governments may stem in part from complications surrounding the recent confidence and supply agreement between the Northern Irish Democratic Unionist Party (DUP) and the Conservative government.
It is notable then that Taoiseach’s address in Belfast last week took a more pragmatic stance, seeking to emphasise the importance of agreeing new trade and customs arrangements before prescriptively defining future border arrangements. On customs, he said, “If the United Kingdom does not want to stay in the Customs Union, perhaps there can be an EU-UK customs union. After all, we have one with Turkey. Surely we can have one with the United Kingdom?” While the UK government has not formally ruled out establishing a separate customs union with the EU, this option would not fulfil its stated objectives to stop applying the EU’s Common External Tariff (CET) and to adopt an independent trade policy. For instance, Turkey is still required to “align itself” with the CET, and pursue “substantially similar” trade policy to the EU.
On access to the single market, Varadkar said, “If the UK does not want to stay in the single market, perhaps it could enter into a deep free trade agreement with the EU and rejoin EFTA [European Free Trade Association] of which it was a member prior to accession. And if this cannot be agreed now, then perhaps we can have a transition period during which the UK stays in the single market and Customs Union while these things are worked out.” With the exception of rejoining EFTA, which may or may not be under consideration, this comes very close to UK proposals for a “deep and special partnership” and reported cabinet consensus in favour of a transition period.
The purpose of a trade border can be defined in two broad ways: firstly, it ensures customs duties are collected. While duties aren’t actually paid at the border, customs declarations can be checked to ensure the goods are attracting the right duty. However, given that 99% of customs declarations for non-EU trade are currently received electronically by HMRC, this function does not necessarily require the presence of border guards and checkpoints. Nor should it necessarily mean technology or cameras at the border – as Coveney warns against. However, technological solutions away from the border, such as electronic pre-clearance, should be under serious consideration. This offers a way to reduce the need for significant changes to be made in Ireland for the purpose of ensuring revenue collections.
The second purpose of a trade border is to ensure the security of goods trade. A variety of safety and security checks can take place at the border, from verifying the safety of the supply chain, to checking regulatory compliance, and conducting veterinary, phytosanitary or quarantine controls. There is little means to avoid these checks by resorting to technology, but controls become less necessary when both countries agree mutually to recognise each other’s standards, regulations and security enforcement.
Importantly, any change to the Irish border is not expected to impact the movement of people. Free movement between UK and Ireland is protected by the 1923 Common Travel Area (CTA) agreement, which predates both countries’ membership of the EU. The CTA also already includes non-EU territory, given it extends to the Isle of Man.
Until the intended purpose of the Irish border post-Brexit is clear, little headway can be made on how it should be designed. If the UK and EU establish a comprehensive free trade agreement – as both Varadkar and the UK government propose – with agreements for customs facilitation and mutual recognition of product standards and regulations, then the border’s function will be largely limited to ensuring revenue collection. This would require least change and, arguably, no infrastructure at the border. After all, the UK government already accepts a not insignificant loss to the public purse through tax evasion in order to ensure no physical border between Northern Ireland and Ireland. For instance, a 2012 House of Commons’ report found, the UK is potentially already losing excise duty at the Northern Ireland border alone in value equivalent to its entire annual customs revenue. As we set out in our customs report Nothing to Declare, once this is factored in, the economic benefit of implementing a new border for revenue collection appears insignificant.
However, new security controls may be required at the border if the UK and EU only succeed in striking a limited FTA, with no deal on regulatory equivalence. Indeed, mutual recognition of technical standards and regulations will be most likely if the UK agrees not to diverge significantly from the relevant EU legislative requirements. And while it is sensible for the UK to maintain EU standards and regulations immediately as it leaves to minimise economic disruption, this may not be its longer term position.
Varadkar is right to shift the priority, from focusing uniquely on the border, to establishing the future of UK-EU trading arrangements – without greater understanding of what bilateral trade relations will look like, it is impossible to know what the new border must be designed to achieve. As an article in Politico recently argued, this is just one illustration of the impracticality of EU demands to structure the Brexit negotiations in separate phases, with the withdrawal agreement to be addressed before discussions on future trade deals. It is welcome then that the UK government is expected to publish its position paper on a customs agreement and goods and services arrangements in the coming weeks. But the EU should also recognise the importance of addressing trade questions earlier rather than later, especially as it decides whether or not “sufficient progress” has been reached on the border issue. Initially, the Irish border was considered the simplest to manage of the first three topics under consideration – which include citizens’ rights and the financial settlement – given intense political will on all sides to avoid a hard border. But now it must be made clear that, until trade is discussed, little more can be achieved.