Wednesday, 3 January 2018

A borderline solution


Call me naive but I am going to press ahead with the idea that we will stay in the Single Market. I just do not see us leaving it in any meaningful sense. We can call it EEA associate or attach any number of mathematic symbols we like but we will not escape the logistical implausibility of the UK leaving it. And nor do we need to. In taking advantage of the framework's inherent adaptability we can secure an improved deal on free movement. I also think we owe it to ourselves to stay in. We ought to be proud of our role in creating the most effective reducer of non-tariff barriers in the history of trade.

In the coming months I will focus much of my energy on our participation in the Customs Union, which I think will take centre stage in phase two of the Article 50 process. The reason is that it is here where I think the most interesting debate can be found, particularly around the issue of the Irish border and how we can best work to preserve the maturation of the peace process. If spectators of Brexit thought Ireland played a prominent role in phase one, they are in for a big surprise. The most significant provision (para 49) in last month's agreement will come back to haunt us:

"The United Kingdom will propose specific solutions to address the unique circumstances of the island of Ireland. In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and Customs Union."

The inclusion of the phrase 'the United Kingdom will maintain full alignment' is crucial because it rules out any plan B which focuses on Ireland-specific solutions. The point being that Northern Ireland will leave the EU on the same regulatory terms as the rest of the UK, as it well should, given that the constitutional reform I hope Brexit ignites should not take the form of sharp economic imbalances. Categorically I can tell you the DUP will stand by this red line and if our negotiators attempt to undermine it then all support for the Tories will be pulled.

The other problem with a deal which sees Northern Ireland in the Single Market and Customs Union and Britain outside is that negotiating future trade agreements will be made unbearably complicated, if not impossible. And why would third countries wish to enter negotiations which apply to some parts of UK territory and not other parts? Moving the customs border to the Irish Sea would present us with a whole new world of problems which our government would not have the intellectual prowess to be able to deal with. The only way out is a unified way out and that is that.

As readers will know, this blog has for months been making the case for the Norway option. I have never argued we can replicate the it exactly because that isn't possible. What I mean is that we should open the Norway box and try to carve out the best arrangement we can with the tools we find inside it. Taken literally, though, a Norway deal would not alone suffice in solving the Irish border problem. Peter Hitchens is wrong to claim it would do so 'at a stroke'. The EEA merely gets us close to the finish line. It is, if you'll pardon the pun, a borderline solution.

The Single Market fixes almost every conceivable customs check. This is because the enforcement strategy is peeled back behind the border and aimed at the point of production, where conformity to standards is assessed by a hierarchy of agencies which form the EU's market surveillance programme. The EEA therefore gives us not just regulatory conformity, but the assumption of regulatory conformity, and this point is crucial when one attempts to understand the fundamental structural differences between the Single Market and Free Trade Agreements.

But in any event there would be a few residual issues to overcome. One thing I will not do to readers is expose difficulties with other proposals and then present mine as if it is perfect. It is not and reaching a solution as far goes maintaining a frictionless Irish border will require a certain amount of tampering. Norway's border with Sweden is lightly policed due in large part to its location just outside the Customs Union. Dotted all along the border are customs posts at which lorry drivers must present paperwork. Hauliers tend to outsource and pay specialist firms to produce the paperwork.

Some border crossings require check points on both sides and some on one side. Clearance can be carried out by either country in respect of the rules and on behalf of both countries. Requirements for customs controls at the border are paperwork based because they relate mostly to tariff and VAT issues. In 1995, Norway and the Community came to an agreement on customs cooperation, which is complemented by Protocol 11 of the EEA Agreement, which enabled both sides to develop an administrative framework for activity on the Norwegian-Swedish border.

Truckers transporting goods from one side of the border to the other only have to stop once. At some customs facilities queues can extend to a couple of hours on busier afternoons. The average waiting time for drivers at customs at the Svinesund bridge, one of a number of border crossings used by HGVs, is eight minutes. If I am making a lot of a little here then that is deliberate. The situation I describe is precisely the sort of arrangement we need to avoid in Ireland, where customs facilities will invariably be working with much longer queues given comparatively higher traffic volume.

Physical inspection of goods, such as in the case of plant health rules, is limited to random or exceptional circumstances and even then Article 5 of Protocol 10 of the EEA Agreement provides scope for those checks to be carried out away from the border, such as at the good's destination. It is also often necessary for the purpose of cracking down on smuggling and cross-border crime, which is made especially problematic by Norway's strict domestic regime on the taxation of alcohol. Effectively a huge black market has been created for criminals and this remains an ongoing cause of checks.

Ireland has similar issues with counterfeit goods but I don't imagine alcohol-related crime will be as much of a problem. But the main difference is that for sensitive historical reasons, the Irish border needs to be free of physical infrastructure. Even cameras are pushing it. Norway does not have to grapple with this requirement and so puts up with the bare minimum, which itself can be cumbersome and has been achieved through years of close cooperation and a high level of mutual trust. Starting afresh is quite different and we are better off remaining inside systems we are familiar with.

The negotiating tension looming in phase two will therefore revolve around the need to keep the entirety of the UK inside the, or a, Customs Union. With some reluctance I am beginning to accept that it will be necessary. The ultras won't like it but they will soon realise they are not in the driver's seat. For me it is not the burning red line it ought to be. Outside the EU we can promote trade liberalisation by championing initiatives designed to knock down regulatory, non-tariff barriers, which have emerged as far more potent threats to what we like to call free trade.

The Customs Union is not the be-all and end-all of everything and neither are tariffs. Since the immediate development of Anglo-Irish relations will be critical I can see a good argument for staying in the Customs Union, at least until we have built a satisfactory computerised interface which can deal with a Rules of Origin hurdle (explained here) and the tariff-relevant documentary procedures imposed upon countries exporting into the Customs Union. Until then our time would be best spent diving into existing global mechanisms designed to combat NTBs and learning how we can strengthen them.

In all of this, a worry I have is that some of the needless anti-Irish bigotry will reemerge and intensify. The sort of hatred and snarling which came out of certain political corners towards the latter end of 2017 is what we will need to steer clear from. The Sun's childish attack on the Irish Prime Minister and Gerard Batten's embittered and moronic tweet about Ireland relying on the UK for its existence come to mind. It is so typical of the headbangers that when confronted by reality they will still grab any opportunity to turn the blame on others. Even if their blame is so deeply illogical.

Ireland did not vote for Brexit. It is merely coming to terms with the decision of its neighbour. The enormous progress we have made in the last twenty years does not have to be undone by hotheads incapable of reconciling with a soft Brexit. Surely our relations are worth more than a fiddling with tariff walls (which are slowly being lowered anyway). For the communities in the locality of the Irish border, customs posts are symbolic regression and stand in contradiction to the degrees of openness, access and trust which have been allowed to mature ever since the Good Friday Agreement.

I know what is coming. By the time spring rolls around we will be bombarded by cries from the hardliners about the great Customs Union betrayal. They will demand we walk out and bring the whole thing to an end. But we should spare a thought for the border communities - in some cases our very countrymen - and their warnings of violence and the undoing of progress. It might be better instead to channel any anger into encouraging the development of technological alternatives to Customs Union membership. The zero tariff zealots can't have it all their own way. 

9 comments:

  1. I think there is an insufficient description of the Irish border commitments at the beginning of this post.
    What the Joint Report said is the first UK aim is: 'to achieve these objectives through the overall EU-UK relationship.'
    The second option is: 'Should this not be possible, the United Kingdom will propose specific solutions to address the unique circumstances of the island of Ireland.'
    The third option is: 'In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the allisland economy and the protection of the 1998 Agreement.'

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  2. Northern Ireland's exports to the RoI represents around 1% of total UK exports. I quite take the point that we cannot be careless of our obligations to the GFA, but it does seem disproportionate to advocate remaining in both the CU and the single market, which many will ask, what would be the point of leaving at all? In trade negotiations between the EU and third countries, exactly where does the UK stand in ensuring that the UK interest gets a fair hearing, if we remain in the (a) CU with the EU? Yes, I daresay, we will not resolve this issue in the timeframe presently envisaged, but there must be a pathway to a 'Swiss/Norway' style customs co operation agreement, that will also be satisfactory to the parties on the Island of Ireland.

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    1. I don’t advocate it as such. I don’t really want to be in it. It just looks like we’ll have to. And the EU is about much more than trade.

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    2. Vs a reigniting of the troubles and risk being blown up by an IRA bomb? No thank you. This kind of shows up Englands historical arrogance towards the rest of the UK, it always puts England above everyone else. And this is particularly so over Brexit. Its not a question of NI trade with RoI being 1% of overall trade, life and peace trumps everything else

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    3. Labour have mentioned having a CU with the EU, but aware of the position of Turkey having little influence on EU led FTA negotiations, have suggested that the UK should have the right to a 'seat at the table'. Seems like the usual waffle from Labour, but at least they recognise the problem of a CU as opposed to a CCA.

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  3. So the Eu Referendum now appears to have been asking a question in the full (political) knowledge that it can't seemingly be delivered. I sense that the electorate will start to feel that insofar as EU membership is concerned our politicians are by default stating that we are in fact trapped within the EU having to obey their single market/customs union rules. It's almost as if everyone has forgotten that the electorate voted for leaving the EU i.e. full control of our borders, the ability to have control over our trade policy and above all the UK's laws within the ultimate jurisdiction of our parliaments and not the EU. The reality of being trapped within the EU is a strong motivator in seeking to never be in this position again and political sensitivities should make no difference. I can see Farage making a comeback.

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    1. Farage can come back if he likes, but what would he achieve? The public has had enough of Brexit. Even trade, legal and other policy experts now find Brexit tedious.

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    2. This is always the problem, we are not trapped in the EU "having to obey THEIR single market/customs union rules. "
      We are trapped in the EU "having to obey OUR single market/customs union rules. "
      WE are part of the EU, the EU is US; eliminating US v THEM is the whole point of it. That we alone in the EU have failed to grasp this at a cultural level is where we have failed.

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  4. Hi Oliver - great blog! Would remaining in customs union really give us flexibility to negotiate our own solutions re: NTBs? I thought CU was as much about aligning regulatory requirements re imports from third countries as it was about tariffs / CET? But I'm probably missing something...

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