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Colm McCarthy: 'After the votes are all counted, Brexit will still be there'

Big decisions have yet to be made - by Ireland as well as the UK - if the talks over EU withdrawal are not to end in costly failure, writes Colm McCarthy

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Negotiations: UK Prime Minister Boris Johnson with EU Commission president Ursula von der Leyen earlier this month

Negotiations: UK Prime Minister Boris Johnson with EU Commission president Ursula von der Leyen earlier this month

Negotiations: UK Prime Minister Boris Johnson with EU Commission president Ursula von der Leyen earlier this month

Ireland's next government, whatever its composition, will pursue the same Brexit policy as guided the outgoing administration - namely, damage limitation.

None of the political parties welcomed Brexit and the Government has enjoyed widespread support for the approach pursued, with some ritual condemnation for failure to make unspecified preparations.

With the failure of the pro-Remain forces in the UK to secure a second referendum, the priority was to avoid barriers on the NI land border, accepting that Brexit was going to happen. That has been achieved, at the cost of understandable fears in Northern Ireland about possible trade disruption between NI and Britain.

During the first week of the election campaign the political parties sought to assert their credentials on the Brexit issue, but in truth there is little to differentiate them. The Government can legitimately claim to have handled the issue well, but the opposition parties can claim to have been supportive.

The withdrawal agreement is likely to pass both the UK and European parliaments in time for the UK to become a non-member at midnight European time next Friday week. In March, the UK and the EU will commence negotiations on a long-term trade relationship to be concluded by the end of the year - the UK government has ruled out any further extension of the no-change transition period.

There could be a no-deal outcome, an orderly no-deal rather than the chaotic no-deal that was sidestepped through October's capitulation by Boris Johnson to the EU's insistence that a hard border in Ireland be avoided.

Johnson objected to Theresa May's formula which would have seen the entire UK staying inside the EU customs regime, including a common external tariff. He resigned from cabinet, secured the Tory leadership and accepted a border in the Irish Sea, always on offer from the EU but unacceptable to Mrs May, and went on to win a comfortable House of Commons majority in December.

Now comes the hard bit - for Ireland, as well as for the British government. The Republic's trade with Britain dwarfs north-south trade and will face extra headaches if the UK-EU talks fail. If there is no deal, the UK (minus Northern Ireland) will nonetheless have access to the European market on the same terms as any other member of the World Trade Organisation.

Northern Ireland will retain its current EU access but there could be frictions in trade between NI and Britain.

Virtually every country in the world is a member of the WTO. The 16 exceptions are minnows including North Korea, Tuvalu and the Marshall Islands, which enjoy no automatic rights of access to the European market. But WTO members - a category which includes the UK and all other significant economies - can trade freely with the EU in line with published tariff and quota arrangements applicable to all. As a result of the various WTO multilateral negotiations of recent decades, the tariff and quota terms available will give Britain zero or low tariffs on most categories of manufactured goods and commodities, but not services.

An EU non-member can do better, gaining preferential access via a free trade agreement (FTA) and this is what will be negotiated from March onwards.

The simplest way to think about the upcoming FTA negotiations is to imagine that the EU is a facility with three grades of access.

Gold members are the EU-27, which have full access. The UK, in choosing to quit, loses the gold card - but, as a WTO member, is entitled to the third category, the bronze card available to everyone, which delivers the same trade access as is currently availed of by countries like Russia or Egypt.

But it can seek a silver card, offering superior access.

There is just one type of gold card, EU membership, and one type of bronze card, available to all.

But there are numerous countries with silver cards, all different and negotiated in FTAs which must conform to WTO requirements. These are bespoke agreements rather than cut-and-paste and must be agreed by both parties - bronze card holders have no entitlement to an upgrade and negotiations can fail.

Come February 1, the UK becomes the holder of a bronze card with the loss of gold card privileges deferred until the end of 2020. There is a commitment from the EU to negotiate for a silver card in good faith - but the loss of privileges in 2021, should the talks fail, is automatic, non-discriminatory and does not involve the erection of new barriers against trade with Britain.

The UK was not expelled from the EU. It chose to leave - and that meant bronze card status and the chance to negotiate a preferential deal. There have been many such negotiations, mostly successful, but some have failed, notably an attempted deal with the USA.

A few non-member European countries have silver cards that confer privileges in the EU market that come close to actual membership - Norway and Switzerland are examples - but they have complex deals which tie them to freedom of movement, jurisdiction of the European Court and annual financial contributions.

The UK has ruled out such close ties - and has accordingly constrained the quality of the silver card which it might be able to secure.

In recent speeches, the Commission President Ursula von der Leyen, chief negotiator Michel Barnier and trade commissioner Phil Hogan have stressed that these UK ''red lines'', which were enunciated by Mrs May shortly after the referendum in late 2016, mean that the UK will not be offered a top-of-the-range silver card.

The EU will be alert to the unrealistic expectations in Britain about what is feasible - the EU cannot offer an enhanced deal to the UK, ignoring the red lines, without endangering its FTAs with numerous silver card holders around the world, important trading partners like Canada, Japan and South Korea. All three EU officials have stressed that time is short and that it may not be possible to negotiate any kind of comprehensive FTA.

The talks could go badly wrong. The UK, in addition to seeking trade access comparable to the gold card status enjoyed as an EU member, is also ambitious to conclude new deals with the USA and other non-European partners which would position it as an EU competitor.

Preferential free trade agreements involve level playing field rules about labour, environmental standards and the avoidance of selective state aids to national firms. British resistance to such provisions could mean a very limited FTA, possibly excluding agriculture and food, or no agreement at all.

This matters to Northern Ireland as well as to the Republic - if there is a limited, or no, agreement, the potential frictions to NI's trade with Britain are magnified. Like the Republic, NI's trade with Britain is far more important than cross-border trade.

The Houses of Parliament clock is being refurbished and out of action. On January 31 to mark the United Kingdom's deliverance, there are to be celebrations, and the Daily Express wins the prize for sheer fatuity with last Thursday's front page headline: ''Big Ben must Bong for Brexit.' The bong could still turn out very costly, for the UK and for both parts of Ireland.

Sunday Independent


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