A mis­sion im­pos­si­ble?

‘Why there will be no easy so­lu­tions to keep­ing cross-border trade alive in ire­land af­ter eu exit’

Belfast Telegraph - Business Telegraph - - Front Page - By paul macflynn, se­nior econ­o­mist, Nevin Eco­nomic Re­search In­sti­tute @Ner­i_re­search

Whether you voted for or against Brexit, one of the most per­sis­tent com­plaints about the Brexit process has been the ab­sence of de­tail. There have been slo­gans and speeches but very lit­tle sub­stance to back them up. The se­ries of po­si­tion pa­pers pub­lished by the Depart­ment for Ex­it­ing the Euro­pean Union, was meant to change that.

Seven pa­pers have been pub­lished cov­er­ing ar­eas such as per­sonal data, ju­di­cial co­op­er­a­tion and a dis­pute res­o­lu­tion mech­a­nism. For North­ern Ire­land, two of these pa­pers were of par­tic­u­lar im­por­tance, the fu­ture of the border and the fu­ture of cus­toms ar­range­ments. The tim­ing of the pub­li­ca­tion of these two doc­u­ments is im­por­tant.

The cus­toms pa­per came first. That is be­cause the UK govern­ment does not be­lieve that the border is­sue can be re­solved with­out first agree­ing cus­toms ar­range­ments.

The EU dis­agrees. They ac­knowl­edged pub­li­ca­tion of the cus­toms pa­per, but were firmly of the un­der­stand­ing that is­sues per­tain­ing to the fu­ture trad­ing re­la­tion­ship be­tween the UK and the EU are to be dis­cussed in the sec­ond phase of ne­go­ti­a­tions.

On this point, the UK govern­ment are cor­rect. De­cid­ing the fu­ture border be­tween North­ern Ire­land and the Repub­lic of Ire­land with­out know­ing the cus­toms ar­range­ment would be fu­tile.

How­ever, whilst the UK govern­ment can be ap­plauded for recog­nis­ing the cen­tral­ity of cus­toms ar­range­ments to re­serv­ing an open border, their ef­forts to find a so­lu­tion leave a lot to be de­sired.

The UK wants to leave the EU Cus­toms Union so that it can make trade deals with non-eu coun­tries. This is not pos­si­ble from in­side the EU cus­toms union be­cause all mem­bers must ap­ply the same tar­iff on goods that come from be­yond the EU.

The UK and the EU could agree to abol­ish tar­iffs on goods traded be­tween them, but that won’t be enough to avoid cus­toms con­trols. For ex­am­ple, if the UK agrees a trade deal with the US, then goods com­ing into the UK from the US may be sub­ject to a lower tar­iff than in the EU. If there were no cus­toms con­trols, one could im­port the good from the US into the UK and then bring it into the EU, thus avoid­ing a higher tar­iff.

This is the cen­tral con­flict for the Brexit ne­go­ti­a­tions, how does the UK leave the Cus­toms Union but keep an open border on the is­land of Ire­land? The UK govern­ment pa­per seeks to an­swer this in two ways.

The first is to out­line a se­ries of tech­no­log­i­cal in­no­va­tions which would make the whole process more stream­lined. Whilst there are steps that can be taken to ease the process, this only works for those who would seek to play by the rules. Bor­ders are nec­es­sary for those who don’t play by the rules.

The Nor­way-swe­den border has fully elec­tronic cus­toms dec­la­ra­tions, but it still has to stop trucks in or­der to check that what has been de­clared matches what’s in­side.

The sec­ond op­tion is to agree a new cus­toms ar­range­ment whereby the UK would keep the cur­rent cus­toms union ar­range­ment for goods com­ing into the UK that are in­tended for sale in the EU. One of the sug­ges­tions is that goods ar­riv­ing into the UK would pay ei­ther the UK or EU tar­iff rate, de­pend­ing on which was higher. If the goods ended up fi­nally be­ing sold in the ter­ri­tory with the lower tar­iff rate, they could ap­ply for a re­fund.

To say that this would present UK com­pa­nies with lo­gis­ti­cal dif­fi­cul­ties is some­thing of an un­der­state­ment.

This could in­volve im­porters in Great Bri­tain hav­ing to send re­ceipts of fi­nal trans­ac­tions to HMRC in or­der to gain a re­bate on a tar­iff for some­thing im­ported months pre­vi­ously.

If what is im­ported is used as an in­put in an­other prod­uct which is then sub­se­quently ex­ported to the EU, the re­bate would tech­ni­cally be­come sub­ject to rules of ori­gin. This is a recipe for dis­as­ter.

This is not the only part of these doc­u­ments where the pol­icy pro­pos­als strain the bounds of credulity.

There is a sug­ges­tion in one of the pa­pers that up to 80% of trade be­tween North­ern Ire­land and the Repub­lic could be ‘ex­empted’ be­cause it is car­ried out by small firms. It would be con­cern­ing if this pro­posal rep­re­sents the in­tel­lec­tual depth of the UK govern­ment’s re­sponse to Brexit.

The UK govern­ment doc­u­ment also states that the UK would seek to keep all of the EU’S ex­ter­nal trade ar­range­ments dur­ing the tran­si­tion pe­riod in or­der to avoid a cliff-edge sit­u­a­tion.

This would en­tail the UK tech­ni­cally leav­ing the EU Cus­toms Union but act­ing as if it were still a mem­ber.

This sounds al­most far­ci­cal but it ac­tu­ally rep­re­sents the only way in which the UK could leave the Cus­toms Union and keep an open border.

The best hope is that what is pro­posed as a tran­si­tion deal stays with us for the fore­see­able fu­ture.

The prospect of a hard border be­tween North­ern Ire­land and the Repub­lic is not wel­comed by all

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