Monday, 4 December 2017

Brexit: an unhealthy precedent



The past week (spent mostly meeting university deadlines) has been eventful in the world of Brexit. An agreement in principle over the budgetary settlement has been reached and a "narrowing of positions", according to Mr Juncker, has been established on the Irish border front. I am now confident of two things: that we will avoid a no-deal scenario, and that there will be a General Election in 2018. 

It was always obvious that part of the solution to the Irish border problem was a commitment to maintaining regulatory standards. This has always been merely a matter of minimising - though not eliminating - the need for customs checks and paperwork. But the terms on which regulatory harmonisation is controlled is important, perhaps more so for the DUP, who fear political separation from mainland Britain. 

In a meeting with Jean-Claude Juncker today, Theresa May is reported to have offered to keep Northern Ireland aligned to the EU's regulatory architecture, an enormously profound proposal in and of itself. Given Arlene Foster's reaction to today's press conference, it appears she was not informed prior to May's meeting with Juncker about the offer put on the table by Britain. Her statement earlier this evening read:

"We have been very clear. Northern Ireland must leave the EU on the same terms as the rest of the United Kingdom. We will not accept any form of regulatory divergence which separates Northern Ireland economically or politically from the rest of the United Kingdom. The economic and constitutional integrity of the United Kingdom will not be compromised in any way."

She makes a good point. Her insistence on leaving on equal terms is perfectly valid and understandable, especially given the precedents which not doing so would create. If Northern Ireland is given special status as a participating member of the Single Market and remains within the jurisdiction of the Customs Union, then in principle this could be applicable to other parts of the Kingdom. Nicola Sturgeon and Sadiq Khan, ever the political vultures, have already made efforts to exploit this problem.

The SNP leader tweeted earlier that "if one part of UK can retain regulatory alignment with EU and effectively stay in the single market (which is the right solution for Northern Ireland) there is surely no good practical reason why others can’t. The Mayor of London, perhaps more ridiculously, claimed that the Northern Irish proposal meant "huge ramifications for London. These claims are not, I suppose, technically incorrect, but they do appear to ignore the incomparable sensitivity of the Irish border.

Fortunately, there is a way to keep the Irish border as soft as it can be without encouraging any such constitutional fragmentation. It is exactly the solution I have been banging on about at this blog for months, to the great annoyance of quite a number of my fellow Leave campaigners. The EFTA/EEA solution is now the olive branch the nation must accept. Free movement (with unilateral safeguard
measures) must take a back seat. It is a tertiary issue.

The Norway option, as we call it, simplifies the Irish border problem by doing two important things. Firstly, it allows the entirety of the UK to leave the EU and do so on consistent regulatory terms, and in doing so ensures that we avoid exactly the sort of minefield presented by today's Northern Ireland precedent. Secondly, it keeps almost all checks at the point of production and away from a potentially volatile border. Remember, in the Single Market we do not just have regulatory conformity, we have the assumption of regulatory conformity. There is an important distinction here.

With this in mind, I am fully aware that the Norway option does not facilitate a totally frictionless border. Protocols 10 and 11 of the EEA Agreement make no bones of this, outlining measures for mutual cooperation on residual issues like customs cooperation and the disparity in agricultural tariff regimes. The existing systems in place, such as at the Svinesund Bridge, are based on years of integration, information sharing and technological advance. They were not brought to current operation in 1995, when Sweden acceded to the European Union.

The lack of harmonisaton as regards agricultural tariffs would likely stand as the biggest test for the new Irish border. A substantial proportion of cross-Irish trade is produce of animal origin and live animals. As this document
shows, 37% of the UK's beef exports, for instance, go to Ireland. Sanitary (SPS) checks would not be necessary on these goods as the checks would, thanks to Single Market participation, remain at the point of production.

This surveillance and enforcement arrangement eradicates the need to divert food products through Border Inspection Posts (BIPs), which are erected for use by third countries and at current capacity would not be able to deal effectively with the level of trade flow. The competent authorities both sides of the border would oversee the maintenance of standards and the EU's Food and Veterinary Office (FVO) would provide oversight and further inspection.

Given that EFTA/EEA states are parked just outside of the EU's Customs Union, though, tariff differentials would create a new problem. From the Irish side, payment would need to be confirmed in order to release agricultural goods from the north. This more or less emulates VAT procedures when importing from third countries (VAT is a whole other issue by itself). Again, in the case of beef, the EU-wide tariff is 12.8%. Tariff Rate Quotas (TRQs), where a certain quantity of a product is allowed to be imported in at reduced or zero tariff rates, would only have a limited easing effect.

I have never pretended that the Norway option is perfect. But it is normally criticised by people who do not understand it. I am not idealistic about Brexit and believe in informing readers, but I do know that at this stage, the best argument for pursuing it lies in avoiding an unstoppable constitutional unravelling. The EU may be the master of the fudge, but creating precedents based on bespoke arrangements will not sit well with a United Kingdom in desperate need of stability. It is now a question of swallowing a dose of reality.

11 comments:

  1. "In a meeting with Jean-Claude Juncker today, Theresa May offered to keep Northern Ireland attached to the Single Market and Customs Union, an enormously profound offer in and of itself." - did she? Do you know the exact words used? I've seen various voices suggesting there was a promise of some sort of "regulatory alignment", and I note this phrase turned up in the DUP response, is it clear that "regulatory alignment" necessarily means the single market and customs union?

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    1. It's clear that regulatory alignment means being attached to the single market, yes, because the two are synonymous with each other.

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    2. As for the general wording, you are right. I have altered it.

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    3. I rather get the impression that the government, and e.g. David Davis, view the meaning of the phrase "regulatory alignment" differently given comments from Davis in the Commons today and comments from Kwasi Karteng on Newsnight. Is the phrase something the has been given a particular meaning by the EU?

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    4. Regulatory alignment is a funny phrase. It's basically a soft and cunning way of saying 'no regulatory divergence', which we aren't going to say publicly because it will make the UK look weak.

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  2. It seems so easy, so what's the catch? I believe that Norway contributes to the EU budget. Andrew Sentance says "In fact, our payments to the EU budget could increase, because we risk losing the benefit of past rebates negotiated by Margaret Thatcher and others while we have been an EU member" (Telegraph 10/6/16). Is this the catch? BTW is Norway obkiged to accept *all* EU regulations?

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    1. My understanding is that Norway has to accept the regulations pertaining to the single market but isn't bound by other aspects of the EU such as the CAP or the CFP. As I recall, about 25% of EU laws apply in Norway under the EEA/EFTA arrangement. Even then the EFTA court rulings are non-binding and some divergence does occur between the EU and EEA/EFTA countries as a result. Not sure of the details about the budget though.

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    2. Norway pays for two things.
      1) EEA grants - more info at eeagrants.org - which is basically foreign aid
      2) Membership of cross-European initiatives like Erasmus, Horizon 2020. This is absolutely acceptable and reasonable. And something we would continue to do.

      It is absolutely untrue to suggest that Norway pays into the EU budget.

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    3. Good - Sentance has never been my goto person!

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  3. I'm playing devil's advocate because I think the single market option is clearly the best. Indeed because we can always leave EFTA/EEA its not permanent. But here is what Ambrose Evans-Pritchard says today in the DT about the Norweay option which he used to favour:

    Sadly, it is too late. Had Theresa May pushed this after the Brexit vote, she might have carried it. If she were to ask for it now, in desperation and a weakened political condition, the EU would not grant a deal on Norwegian terms. It would contrive a showdown over the Irish border to keep Britain in the customs union, and would push a maximalist position on the ECJ.

    This claimm really derserves detailed comment. Have any EU voices been asked the question?

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