9 January 2018

Ireland may be the UK’s best Brexit ally – not a stumbling block

By William Davison

Everybody who wants the UK to make an orderly departure from the EU, minimising its negative impacts, should have welcomed the conclusion of the first phase of withdrawal negotiations last month, which crucially included a series of options to keep the Irish land border invisible.

It sets the stage for discussions of a new partnership and reduced concerns that separation will result in severe economic dislocation.

Much of the coverage since the referendum, however, has been pessimistic or downright ugly. An editorial in The Sun advised the Republic of Ireland’s Prime Minister to shut his gob and suggested Leo Varadkar, in cahoots with Remainers and Eurocrats, was trying to scupper Brexit.

In reality, the reverse appears to be closer to the truth: although he may have played hardball in recent months, Mr Varadkar looks like Theresa May’s key EU ally. “I think in the months and years ahead, Britain will have no closer friend than Ireland when it comes to future negotiations,” he said after the interim deal had been agreed.

An even better indication of the Republic’s stance may be the confirmation last week by the Irish Revenue that it still has no plans to look for potential sites for new customs posts.

This positive Irish stance is at odds with the view of commentators who argue that, to ensure borderless trade between the UK and the Republic of Ireland, the UK must stay within the EU internal market and a customs union, precluding the Government’s stated aims on immigration and trade deals elsewhere­.

Yet despite some mixed messaging Dublin says it respects the UK decision to end current economic integration. The solution could be significant continued cooperation, but under a regime that will tie the UK to EU standards and some of its rules, while allowing it to pursue its own global trade policy. “Britain wants a very comprehensive and very ambitious trade arrangement with the European Union and the Single Market. We want that too,” said the Irish Foreign Minister Simon Coveney.

Since the vote to leave the EU, there has been a tendency to portray the UK stance as underdeveloped and unrealistic. Its proposal in August that high-tech remedies could be implemented to avoid a hard customs border on Ireland was widely derided in the media as “magical thinking”, after comments by an anonymous EU official.

But the Irish government’s broad backing in precisely this area is reinforced by their Revenue’s insistence that modernised EU procedures mean there is no need for new customs posts on the border. This suggests that the pessimistic consensus of experts and media on the issue has been misleading.

The Irish land border, as both an EU frontier and critical to the Irish peace process, is vital for Brexit. Its role as an EU internal market barrier suggests the need for inspections, while its importance as a marker of cooperation between the two Irish states necessitates that it remains invisible. The EU has said it wants “flexible and imaginative” solutions.

As talks progressed, the impression was that agreement on the principles might be enough for the first phase, but, apparently worried by a lack of clarity, Dublin ratcheted up its demands.  According to the Irish national broadcaster RTÉ, that effectively amounted to a request for Northern Ireland to “remain inside, or as close as possible to, the customs union and single market.”  The position had been “carefully choreographed” with Michel Barnier, according to RTÉ’s Tony Connelly.

These events were preceded by a report claiming the Irish Revenue authority believed a completely open customs border would be impossible outside a customs union.

But this was based on the Revenue’s initial thinking in 2016, that was discarded as the possibilities of the EU’s modernised customs procedures became more clearly understood. The Guardian reported the RTÉ story, but did not mention that the Irish Revenue Chairman Niall Cody said as far back as May that the authority’s thinking had moved on and they were not looking at sites for customs posts, as technological fixes and checks away from the border would suffice. Indeed, RTÉ reported that Mr Cody was “almost 100 per cent certain” there would be no need for border posts.

After draft phrasing on the Irish border commitments leaked to Connelly was rejected by the Democratic Unionist Party, the UK agreed that, if the future partnership did not resolve the border issue, specific Irish solutions would be designed. If there were no other remedy, the UK would “maintain full alignment” with Internal Market and Customs Union rules relevant to North-South cooperation, the all-island economy, and the Good Friday Agreement.

The accord immediately attracted accusations of “fudge” that centred on the meaning of “full alignment”. The phrase was presented as evidence that the UK must remain as economically integrated as it is now. However, Varadkar said it meant ensuring there was a “level playing field” in areas like health, environment and labour laws. “The fact that we’re talking in terms of… full regulatory alignment, I think is very helpful. Because whatever new relationship exists between the EU and UK, if we’re going to have free and unfettered free trade, then by definition you’re going to have to play by the same rules,” he said.

This suggests the UK has committed to generally respecting EU standards, and the rules relating to north-south Irish cooperation, but not to reversing a core Brexit policy. The existing UK strategy is to negotiate a comprehensive trade deal to ensure substantial continuity, built on parliament’s adoption of EU regulations and ministerial pledges not to undercut European norms. The government then wants to capitalise on the convergence by remaining part of some EU regulatory systems when possible; striking fresh deals that authorise UK regulators to assess that UK companies meet EU rules; and, hopefully, through the EU agreeing to recognise UK standards as equivalent. There would be joint governing institutions, including a dispute resolution body, all possibly operating under an Association Agreement.

With the possible exception of financial services, the sector that is set to be most problematic is agriculture. Not only is it integral to the Irish economy, but it is the hard part of any trade deal with the EU. Commendably, the EU insists on rigorous procedures to prevent disease and contamination, but it is also protectionist: it imposes relatively steep import duties and still spends around 40 per cent of its budget subsidising farming. Even its closest partners in the European Economic Area are outside this firewalled market and have to pursue bilateral deals. For example, in April, Norway struck its latest agreement for more tariff-free EU agricultural trade.

But there are existing Irish all-island arrangements for animal health and welfare. The DUP wants no new barriers to internal UK trade, but companies exporting cattle from Great Britain are already subjected to checks at the single designated entry point when livestock arrive in Northern Ireland. The all-island system would need to be complemented by a comprehensive EU-UK agreement on trade in agricultural products similar to Switzerland’s, as the British government hinted in an August position paper. That could eliminate the need for otherwise mandatory border inspections, although the UK would also need to update its regulations to keep pace with frequent revisions to the minutiae of EU food standards. This is, however, likely to preclude a major UK-US trade deal because of divergent EU and US approaches to agri-food, at least until Brussels trusts the UK’s new regulatory systems to prevent goods banned in the EU from crossing the border.

These factors demonstrate there are precedents and possibilities for cooperation that will reduce the need for a hard border, though it would still leave the issue of customs procedures. While, even for agricultural products, experts don’t expect tariffs to be re-erected between the UK and EU, there is no precedent for an invisible border between the EU and another customs territory. There is, however, something approaching an invisible customs border on the Norway-Sweden border, where rules of origin and other declarations are electronic and physical checks are at bonded warehouses rather than the border.

The Irish plan seems to be to improve on that system. A Revenue spokeswoman confirms that it is still not looking for new customs posts, while Mr Cody told the parliamentary committee hearing that the north to south trade, mainly in construction materials and agri-food, is not a major threat to the EU internal market.

This means that considerably less than two per cent of goods will be physically inspected and that will occur at warehouses and destinations, he said. Checks on declarations will be digitised, while there will be a large increase of Authorised Economic Operators, including small businesses, that won’t require checks. “We are not planning customs posts,” Cody said. As things stand, enforcement efforts against smuggling already exist away from the border, since the Republic and Northern Ireland have different excise duties on alcohol, tobacco and fuel.

It could be argued that any customs-related facilities near the border, such as warehouses or cameras, contravene the EU-UK pledge not only to prevent a hard border, but avoid “any physical infrastructure or related checks and controls”. The EU Commission might prefer the UK to accept continued free movement and to stay hitched to EU tariffs in a customs union, but the signs are that the Irish government is not seeking to scupper other options, and would be actively supportive of a compromise, if the UK can advance a suitable plan.

William Davison is a freelance journalist.