17 July 2019

“Alternative arrangements” still require a great deal of work – and agreement on what they are meant to achieve – before they can feasibly replace the Irish border backstop, says Alex Stojanovic.

The two men competing to become the UK’s next Prime Minister say the Irish border backstop must be ditched. However, an alternative that would both preserve an open border and allow for a fully independent UK trade policy has yet to be found.

The Department for Exiting the EU has announced advisory groups to look at possible options, but Prosperity UK, whose independent commission is chaired by Conservative MPs Nicky Morgan and Greg Hands, has already put forward its proposals. It didn’t take long, however, for bodies such as Manufacturing Northern Ireland to criticise both the cost and feasibility of these “alternative arrangements”.

With traders facing new obligations on customs, VAT and regulations after Brexit, Prosperity UK suggests shifting some of the burden onto customs brokers and moving inspections away from the border region. There are, however, three major issues which need addressing.

1. Behind-the-border checks have logistical and financial complications

Prosperity UK proposes applying an existing customs procedure known as transit to the majority of trade. Broadly put, this allows the trader or a broker to submit customs declarations before and after the goods cross the border. Customs IT systems can then select any high-risk freight to be checked at its source or destination, rather than at the border itself.

However, the increase in inspections and random checks would require new mobile customs teams and co-operation between the police and customs authorities on both sides of the border. Inland checks, while less visible than border posts, still bring risks to the officers and communities involved. And if the UK diverges from EU rules then more checks might be needed to cope with smuggling – a concern that the Police Service of Northern Ireland (PSNI) has previously raised.

The many small traders on the island would also need to employ the services of a customs broker to trade legally. That capacity does not exist at the moment, and micro-businesses may not be able to afford even the lowest flat-fee cost for a simple movement. With the Irish Government determined to resist such costs, any plan that “existentially” impacts the manufacturing sector in Northern Ireland does not seem to be a realistic alternative to the backstop.

2. Special economic zones and exemptions have political and economic consequences

To deal with farmers and traders that criss-cross the border, Prosperity UK suggests that special economic zones – covering border regions such as Derry-Donegal – should be exempt from normal border requirements. There would also be exemptions from customs procedures for traders trading below the VAT reporting threshold.

However, large-scale exemptions for small traders have already been proposed by the UK and were rejected by the EU, not least because they create perverse incentives – companies may try and stay below the threshold in order to benefit from exemptions.

And in solving one border issue – the sensitivity of the Northern Ireland–Republic of Ireland border – these proposals create two more. This could mean big implications for people living just outside the Special Economic Zone, while new border regions would require the Irish Government to create a border inside its territory and the Democratic Unionist Party (DUP) to accept joint economic regions between the North and South. It is far from clear that this would be politically saleable on either side of the border.  

3. Plans for regulatory alignment on food safety look like a political non-starter

Prosperity UK recommends a convoluted – and potentially temporary – route to agreeing common rules on food safety.   

Instead of the UK aligning with the EU food safety regime (which the Chequers agreement had suggested), it proposes that the Republic of Ireland leaves the Single Market regime and forms a new “food safety union” with the UK. If the UK were to diverge from EU law, then the Northern Ireland Executive and Assembly could either opt back to EU rules and align with the Republic or stay with Great Britain and accept checks on the land border.

This looks to be a political non-starter. Why would Ireland want to leave the EU regime – and why would the EU let it? And given the fragile nature of any Northern Ireland Executive (assuming it is up and running), could a power-sharing government of nationalists and unionists really survive a choice between aligning with Great Britain or the Republic?  

The two sides do not agree on what the alternative arrangements need to achieve

The biggest hurdle to replacing the backstop is how the December 2017 joint UK–EU report, which set the original criteria for avoiding a hard border, is interpreted. Prosperity UK argues that the report meant no checks and related controls at the Irish border; the EU and the Irish Government interpreted this to mean no new checks of any kind on the island.

A letter from Donald Tusk and Jean-Claude Juncker to Theresa May, written in January 2019, assured her that “facilitative arrangements and technologies will be considered” and that a customs union would not be required to replace the backstop “provided that the underlying objectives continue to be met.” However, the underlying objectives are a point of contention – and they may yet rule out anything that involves new checks. If so, this inevitably leads to a Northern Ireland-only backstop – with Northern Ireland aligned to the Republic of Ireland – or a soft Brexit which keeps the whole of the UK in a customs union along with significant alignment to the Single Market.

While the “alternative arrangements” have issues that need addressing, there is still no agreement over the issue that the "alternative arrangments" are trying to address. 

Comments

I wonder if the EU can continue to ban the free zone partial solution, if there is a no deal Brexit. And dont forget, Ireland is now under some pressure to come up with its border arrangements, as demanded by the recent letter from six EU states. The border, hard or soft, has always been the responsibility of Ireland, since Britain does not need a border, nor is it obliged to solve ge problem.

Is that final statement correct? Since 1973. If irish VAT or excise duty rates are lower than in the UK, there will be an incentive for UK citizens to buy goods in Eire. Would we be happy to see the undermining of tax revenues by allowing people free transit to and fro? Clearly, if we left the EU in order to allow the UK to adopt lower standards, let's say of food health, e.g. perhaps through an trade deal with the USA, the Irish will haver to set up a hard border to preserve EU food safety standards. It would also become a potential route for smuggling goods subject to EU tariff quotas or anti-dumping duties, where paper/electronic checks or inland checks won't be effective. Any Customs officers will tell you that what's declared isn't necessarily what's in the lorry. Indeed, if you are planning to evade controls, plainly you aren't going to describe the goods for what they are.
And if Eire has a hard border, all the issues for NI businesses (or anyone exporting from the mainland direct to Eire) of complying with EU frontier controls will happen. Whether or not the UK decides to adopt a hard border in such circumstances will be irrelevant. In order to preserve their fundamental principles, the EU will cover the costs for Eire. With a no-deal Brexit, the NILB and the Irish Sea will be part of the EU's border with a third country.
Of course, if the UK decided not to operate controls at the border, that would benefit Irish (and possibly other EU) exporters, while disadvantaging NI/UK exporters. I'm not sure how that would help our trade deficit.
A key point we shouldn't be overlooked is the effect of no deal and the inevitable consequence of a hard border on the Good Friday Agreement. We need to remember that we voted to leave the EU and destabilise the GFA (not mentioned during the referendum campaign - which didn't mention the prospect of a no deal either, of course). So essentially requiring the Irish to come up with a solution which is of our making seems unhelpful and unrealistic.

Point 1: Surely this is exactly the same procedure being employed under the EU's "Union Customs Code"?

Point 2: There are facilities within the various Anglo-Irish Agreements (e.g. the North-South Council and the Intergovernmental Conference) to deal jointly with any cross-border issues - and this WITHOUT any EU input).

Point 3: A temporary alignment by the UK with the EU's Food Safety Regime was actualy prposed by the UK government to cover the priod between tehe accetance of the Witdrawal Agreement and the signing of any future UK-EU FTA.

As te the Joint Report, the idea that "facilitative arrangements and technologies will be considered" is complete nonsense given that both Tusk and Juncker have roundly rejected the idea.

So it strikes me that the (mis)interpretation of what has been agreed is one that can be laid squarely at the feet of EU leaders!

Of course issues will be raised by the Prosperity UK report, including cost of proposals. The same would be true of any proposals. If this report isn’t the way to get the ball rolling towards the agreement within a couple of years the EU itself predicted when it insisted the backstop was a temporary measure, then what better suggestions do the EU have? Or were they lying when they said the backstop was supposed to be temporary?