Monday 16 September 2019

Colm McCarthy: 'Points of departure: the Brexit questions with no easy answers'

The people who favour a concession to the UK need to identify one that won't cause even more damage, writes Colm McCarthy

Expansion: Trucks' trailers on the quayside at Dublin Port. Aidan Crawley/Bloomberg
Expansion: Trucks' trailers on the quayside at Dublin Port. Aidan Crawley/Bloomberg

When the United Kingdom departs the European Union, it becomes a ''third country'' in the jargon of international trade, a non-member.

Since the EU is a highly integrated trading bloc, having eliminated tariff and non-tariff barriers for almost all categories of internal trade in both goods and services, as well as full mobility for factors of production, the distinction between members and non-members is dramatic. Within the union, customers and suppliers can be chosen freely and there is essentially no difference, for a firm in Birmingham, between a business partner down the motorway in Bristol or over the channel in France or Belgium.

Since non-members face checks at the external frontiers of the union - it would cease to exist if this were not so - the UK's departure means border controls at all its European borders, not just at the only land border, which happens to be in Ireland. If the form of non-membership chosen by the UK is remote, as is the current intention, there will be hard borders at Calais, Zeebrugge, Rotterdam and at every entry point by sea and air in all 27 countries of the European Union. Even the ''softer'' Brexit options, on offer from the EU but declined by the UK, would require controls. For trade in services, the new barriers will be regulatory rather than physical but barriers there must be, including invisible ones.

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The UK government made the choice, as long ago as the autumn of 2016 and just a few months after the referendum, to exit the customs union, which implied customs checks and tariffs, and also to quit the single market, which implied non-tariff barriers and various controls to ensure regulatory compliance. This die was cast when the prime minister addressed her party's conference at Birmingham in October 2016 and set in stone a few months later when she spoke at Lancaster House in London. The UK government has not deviated from this stance at any stage since.

Some of the EU's neighbours have chosen a relationship which is less remote. Norway has aligned to the single market while Turkey has opted for a close relationship to the customs union, reducing trade frictions in both cases. But there are frontier controls at the Sweden-Norway border and at the Turkey-Bulgaria border, and it has not proven possible to make them invisible through technological manoeuvres.

The most visible and consequential border for Ireland will be at Dublin port, where scarce land equivalent to eight soccer pitches has been earmarked for lorry queues and brand-new customs posts are under construction. The customs authorities in the Netherlands have recruited 920 new officers and are providing parking space for 700 extra trucks (at least 20 acres) at Rotterdam alone. Major construction work and staff recruitment is underway at Calais and several other continental channel ports. Dublin, Rotterdam, Calais and all the others become external borders of the EU's internal market on November 1 next, by automatic operation of Article 50 of the treaty, activated by the United Kingdom at the end of March 2017. The border between Newry and Dundalk is no different, although far less significant in terms of trade volume.

If a technological fix can be found to avoid a hard border between Ireland, part of the internal market, and a UK intent on remote third country status, the same fix can be applied at all the other EU borders with the UK, and endless expense and inconvenience avoided. No such fix has been identified and none is in operation at any of Europe's external borders, or anywhere else in the world.

Hence the backstop, negotiated to facilitate the UK's desire to avoid a hard border, but also to preserve the integrity of the internal market and to respect Ireland's decision to remain in the EU. Given the UK's apparent willingness to crash out with no withdrawal agreement unless the backstop is abandoned, the Irish Government has been accused of intransigence, and of bringing about the hard border which it has striven to avoid. Make a concession, a compromise, back down and a last-minute deal can somehow be salvaged.

But how? The UK wishes to be a third country without a formal connection to the internal market, free to diverge from the regulatory union and to conduct independent trade deals outside Europe. The EU can accommodate trade with unconnected third countries only with frontier checks, or single market and customs union deals with less costly barriers. But no non-member can be offered open borders and frictionless trade as a third country, free of the obligations and constraints which bind EU members. Johnson must know this, which explains why EU leaders think he must be bluffing.

Since the withdrawal agreement contains a self-destruct mechanism for the backstop, they have spotted a second bluff. The UK government expresses confidence that technological solutions will be found, making hard controls unnecessary across the land border. But there is no reason to resist the backstop if you sincerely believe that these solutions will materialise. There is also no case for the Dutch and French authorities to waste so much money at Rotterdam and Calais, where the same technology would surely weave its hassle-reducing magic.

In the immediate aftermath of the June 2016 referendum, it was open to the UK government to seek a Norway-type single market arrangement, close alignment to the customs union, or both. Johnson, indeed, endorsed the Norway option during the campaign. The referendum choice was to leave without a clear ultimate destination, since none was offered. The UK could have left while retaining closer alignment, and hence trading access, to the huge economy on its doorstep.

The course of the Brexit process, including the current spat over the backstop, has followed inexorably from the choice, in the autumn of 2016, to choose the more abrupt, super-Brexit outlined at the Birmingham Tory party conference by Theresa May. May's failure to retain a majority at the 2017 election, creating reliance on the votes of the DUP, prevented the special carve-out, to which the EU had agreed, for Northern Ireland.

There could now be a crash-out Brexit in November and an immediate hard border at Dundalk but also at Dublin port, Rosslare and everywhere else, the least attractive outcome for Ireland. But it is not clear what ''concession'' the Irish Government could offer which would facilitate some better result. The European Union cannot contemplate a UK-sized hole in the external frontier of the internal market and the Republic of Ireland cannot be expected to quit the EU because 52pc of the UK electorate thought it was an attractive choice for them.

The withdrawal agreement favoured by the Irish Government is already a compromise fashioned, with considerable flexibility on the EU side, to meet the requirements of the UK's negotiators. Johnson reminded us all during last week that it has been rejected on three occasions by the House of Commons, neglecting to mention that he voted in favour on the deal's most recent outing. Does not do consistency, our Boris.

Those who favour a concession need to consider two issues. What is it exactly, and why can it be expected to deliver a benign outcome?

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