11 June 2018

Alasdair Smith is an Emeritus Professor of Economics and Dr Peter Holmes is Reader in Economics at the University of Sussex. They are both Fellows of the UK Trade Policy Observatory.

On June 7, after prolonged internal discussion, the UK government published its paper proposing the extension to the whole UK of the ‘backstop’ provision in the EU draft withdrawal agreement to incorporate Northern Ireland (NI) into the EU’s customs territory until another solution can be found for the problem of the Irish border. The UK is unenthusiastic about the backstop and hopes it will not be needed, but wants any backstop to cover the whole UK, so as to avoid the need for border inspections of trade between NI and the rest of the UK (GB). Perhaps surprisingly, the government paper does not address the fact that the EU’s proposal is for NI to be included in a ‘common regulatory area’ as well as in a de facto customs union: any backstop needs to deal with regulation as well as customs.

The EU and the UK evidently disagree about the interpretation and implementation of the December 2017 joint report from the Brexit negotiations. Just one day after the publication of the UK government paper, Michel Barnier reaffirmed that the EU wants the backstop to apply to NI alone: “Let me be clear. Our backstop cannot be extended to the whole of the UK.”

The UK government seems to be devoting its time and energy to resolving its internal disagreements when it should be focusing on how to persuade the EU of the merits of a UK-wide backstop.

We have argued previously that the EU should accept a UK-wide customs and regulatory backstop as the appropriate way to safeguard the Good Friday Agreement. But the EU holds the upper hand in the negotiations because a disorderly Brexit without a withdrawal agreement would be an economic disaster for the UK and would not command a Parliamentary majority: the EU can insist on its preferred alternative.

It’s understandable why the EU is hostile to a UK-wide backstop, which would give the UK access to at least some of the single market without accepting the full responsibilities of the European Economic Area (EEA), notably freedom of movement of labour. The EU also wants to agree the long-term UK-EU trade relationship in a second-stage negotiation rather than in the withdrawal agreement. We do not seek to revisit these issues here.

Rather, we are focussing on a practical question – can the UK persuade the EU that a UK-wide solution is the most appropriate way to implement the EU’s proposals for Northern Ireland?

If NI were in the EU’s customs territory and in the common regulatory area, while the rest of the UK deliberately diverged from the EU customs union or from EU regulation of goods, there would have to be inspections at the GB-NI border.

If the UK cut the tariff on cane sugar, for example, there would need to be border inspections of all GB agri-food sales in NI, to impose EU tariffs not only on cane sugar itself but also on high-sugar-content GB food manufactures.

Similarly, if the GB departed from EU regulation on lawn-mowers, industrial chemicals, or chlorine-washed chicken meat there would need to be regulatory inspection of goods to ensure that only lawn-mowers, chemicals and chicken meat satisfying EU regulations entered NI, while goods made in NI would have to be produced in accordance with EU regulation.

Only with customs and regulatory inspections at the GB-NI border, and with the application of EU regulation of production in NI, could goods in circulation in NI be permitted to cross the Irish border without inspection and circulate in the EU market.

The EU would surely not seek to have EU customs inspectors on the GB-NI border, an internal border of a non-member state, so the GB-NI border controls would be under the control of the UK government.  Similarly, it would be the UK government that imposed EU regulatory requirements on the production and sale of goods in NI. The UK would be accepting the jurisdiction of the European Court of Justice (CJEU) over GB-NI border inspections and over the production and sale of goods in NI. There may, of course, be legal reasons why this could require the creation of a body similar to the EFTA Court rather than the CJEU having direct jurisdiction. Some of the arrangements for implementing and overseeing the agreement might well be different from those currently applied in NI as part of an EU member state: for example, assessment of the conformity of goods with EU regulation might have to be done by EEA-based entities.

Since the EU is proposing a NI-only backstop, it must believe that there can be a satisfactory and enforceable legal agreement between the UK and the EU whereby, after Brexit, the UK as the sovereign state with responsibility for NI, can commit to ensuring that GB-NI border inspections and regulation in NI meet the requirements of the EU customs territory and the common regulatory area.

Now suppose that the UK were to argue that the preferred way for the UK to meet this commitment would actually be to ensure that the whole UK conformed with all the requirements of the EU customs territory and the common regulatory area. Necessarily, that would mean that NI, as a part of the UK, would meet those requirements. Most UK businesses would probably be very happy with such a proposal, and the political and security problems of the GB-NI border would be avoided.

It’s hard to see how the EU could argue that this way of ensuring that goods put on the market in NI met the requirements of the EU customs territory and the common regulatory area was in any legal or technical way less secure than the previously described way. The EU has already, by hypothesis, accepted that the UK government, under the direct or indirect jurisdiction of the CJEU, can enforce EU rules at its borders and in NI. Whatever conformity assessment regime is envisaged by the EU as applying to NI under the NI-only backstop can, as a matter of principle and practice, be applicable in the whole UK. Whatever border processes are envisaged at the GB-NI border to enforce the requirements of NI being in the EU customs territory can be implemented at the UK’s external borders.

Inspections at the GB-NI border will not be needed. Goods crossing that border already meet EU customs and regulatory requirements. Inspections at the border between NI and the Republic of Ireland are not needed, for the same reason.

So here’s a simple proposition for the UK government to put to the EU.

‘We accept that your concern is only to avoid a hard border in Ireland and that an NI-only backstop will suffice for that purpose. We will make a commitment that goods entering into or produced in NI satisfy ; that these matters are subject to the jurisdiction of the CJEU; and will be supervised by agencies recognised for this purpose by the EU. We will fulfil that commitment by ensuring that all goods entering into or produced in the UK satisfy EU regulatory and customs requirements. These conditions will be subject to the jurisdiction of the CJEU and supervised by the same EU-recognised agencies as would supervise an NI-only arrangement. Border inspections at the GB-NI border will, therefore, be unnecessary. Indeed, there is no practical or economic reason to have barriers at any EU-UK borders.’

 

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The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.

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