Borders and Trade Agreements

The issue of the Ireland/Northern Ireland border proved to be the most intractable. On the face of it, there was no disagreement. The EU negotiation guidelines sought maintenance of the open border and the UK’s announcements consistently committed to the avoidance of a hard border on the island of Ireland. However, the UK determination to leave the customs union and single market made this objective very difficult, if not impossible, to achieve.

A free-trade agreement, with the looser form of alignment desired by the UK, necessitates worldwide, customs processes and checks even where all or almost all customs duties are reduced to zero. They are required for several reasons including in particular, verification of the origin of goods and compliance with regulatory standards.

Without controls on origin, goods might move into the UK on more favourable terms than they might move into the EU and subsequently circumvent the EU higher tariff rate or less favourable requirements whether by way of customs duty or standards by free movement through the UK EU border. Equally, the UK might permit third-country products to enter on the basis that it conforms to UK or trade agreement certified standards which do not meet the corresponding EU standards.

These issues are not unique to the EU and arise across the board in worldwide trade. They are among the key reasons why free-trade agreements still require customs and regulatory controls apply. Nothing short of a close customs union and regulatory alignment/single market is sufficient to enable frictionless trade at orders.

A further reason for border controls relates to the control of immigration and free movement of persons. Happily, in this context and for historical reasons, Ireland, the United Kingdom, the Isle of Man and the Channel Islands maintain the common travel area which allows continued free movement of persons without restriction.

The EU had been determined that an open Northern Ireland border and the corresponding trading relationship would not be used as the template for the future relationship between the UK and EU. Special concessions for frictionless trade on the island of Ireland might be conceded for political reasons, but this was not to be a backdoor for the UK to negotiate arrangements by which it would have the benefits of frictionless EU trade while competing with the EU by setting lower domestic standards and entering more favourable free trade agreements with the rest of the world.

Equally, there was the issue that an open border might be a backdoor into the EU single market. The example of chlorinated chicken was given as to how something permitted by US standards might be prospectively permitted under a US UK trade agreement, might enter the EU single market through the Irish border and thereafter circulate freely.

A further two years would follow during which several attempts were made to square the circle of the UK’s desire to maintain an independent trade policy with the rest of the world while maintaining an open border on the island of Ireland. Ultimately it was recognised not to be feasible, and the Northern Ireland Protocol was agreed.

Development of Invisible Irish Border

The Good Friday agreement had been the basis for Northern Ireland government since 1998 and was largely seen as delivering peace after 25 years of near civil war conditions. It had not mentioned trade nor open borders, but the common EU framework with coordinated rules across many areas facilitated the conditions under which the Ireland / Northern Ireland border became invisible

The opening of borders for goods with the completion of the single market in 1993, the dismantling of the security borders after the paramilitary ceasefires in 1994 and the pre-existing common travel area had led to a fully open seamless border in which cross-border trade prospered. The EU played a supportive role in various funding programmes in particular for border regions. This helped the process under which almost all of the earlier communal violence and terrorist type incidents ceased.

Proposals for technological solutions which would track vehicles and goods were made. The proposals emanated from groups associated with a more hard-line Brexit interpreted the requirement for an open border in a literal way proposing elaborate procedures and controls away from the border so as to allow, goods to move through the border unhindered.

No land customs border in the world avoids intrusive infrastructure. The Swiss border with surrounding countries and the Norway Swedish border were held up as examples of maximum cooperation streamlining and efficiency. However, the position on the ground demonstrated that the trade was far from frictionless. And this was notwithstanding both were or were effectively in the EU single market.

Ultimately most studies showed that the possibility of fully technologically controlled barrier-free borders was still many years away. It was said that some of the technology had not yet been invented. A study by HMRC suggested that the earliest any such technology might be available would be 2030 or later.

Quite apart from the technological challenge, it seemed clear that the installation of physical order structures would not enjoy their consent of the communities on either side of the border. Most border regions in Northern Ireland have a high percentage nationalist voting population who would not readily accept frontier controls which they have not chosen or voted for.

In this atmosphere, the prospect of border control infrastructure being destroyed seemed real. In earlier years during the Troubles, the British Army had closed many roads which had been promptly reopened with significant local support in many places.

The prospect was raised by the Irish government (for which it was strongly criticised in some quarters) that customs posts would soon require security infrastructure in support which might lead in turn to the resumption of terrorist type action and further security reinforcement as so on.

For all these practical reasons, as well as for reasons of principle, both the EU and ultimately the by the UK government interpreted the commitment to a hard border in more expansive terms than the mere presence or absence of structures at or near border crossings. An all-island economy had developed, in particular in agricultural products which is underpinned by the Good Friday agreement and the North-South institutions.

August 2017 UK Proposals

In August 2017, the UK published two position papers on various aspects of the Brexit negotiations and in particular the issue of border arrangements within the island of Ireland.  It set out the UK’s proposals in relation to upholding the Good Friday Agreement in all its parts, maintaining the common travel area and associated rights, avoiding a hard border for the movement of goods and aiming to preserve North-South and East-West cooperation.

The UK government set out two broad approaches for its future customs relationship with the EU, which would not rely on controls or infrastructure at the border. In its paper-Future Customs Arrangement, it outlined proposals for a highly streamlined customs arrangement between the UK and EU simplifying requirements so as to apply as few additional requirements on UK / EU trade as possible. This would aim to continue some of the existing agreements between UK and EU and put in place new negotiated facilitations to reduce and remove barriers to trade and implement technology-based solutions to make it easier to comply with customs procedures.

The alternative proposal was for a new customs partnership with the EU The UK government believed that the UK and EU should jointly consider innovative approaches that could support UK / EU trade outside of customs union arrangement while removing the need for customs processes at the border.

One approach, which the UK wished to explore further with the EU would involve the UK acting in partnership with the EU to operate a regime for imports that aligned precisely with the EU’s external customs border for goods that will be consumed in the EU market, even if they are part of a supply chain in the UK first. The UK would apply the same tariff and provide the same treatment and rules of origin for those goods arriving in the UK and destined for the EU

This approach was proposed to remove or reduce the need for customs process between the UK and EU so that all goods moving between the UK and EU would be treated as before for customs purposes. The UK would be in a position to apply its own tariff and trade policy to UK exports and imports from other countries, destined for the UK market.

It was proposed that there would be complete customs exemptions for traders whose turnover was below a certain level broadly equivalent to VAT registration threshold. This would have been a radical exemption with no equivalent in worldwide customs practice, where customs have no such lower lever, and every item is subject to control.

EU’s Reaction

EU officials were quoted as dismissing the proposals as magical thinking and wholly unrealistic. The fact that the same complex untested and convoluted proposals were made in respect of Northern Ireland / Ireland trade as for UK/GB EU trade suggested that the special solution for the Northern Ireland border would be the thin of a wedge to establish GB EU trade on the same frictionless terms and thereby allow the UK to have both an independent regulatory trade policy with full, unimpeded access to the EU.

On 21 September 2017, the EU Commission published counterproposals on the Northern Ireland border emphasising that the aim should be not only to avoid physical infrastructure but also to respect the proper functioning of the internal market and the customs union as well as the integrity and effectiveness of the EU legal order.

In November 2017 with a view to securing approval at the December EU Council summit for moving to the second phase of negotiations, the UK conceded most of the EU’s requirements in relation to the financial settlement.

The UK sought to use its negotiating strength to persuade the EU that the Irish border issue should not be allowed to hold up jeopardise or even scupper the entire EU UK relationship.  It was alleged that diplomatic efforts were made with EU governments to pressurise the Irish government into accepting postponement of the border issue of the second phase of negotiations

Squaring the Circle

The necessary consequences of the original UK red lines to leave the customs union and single market and jurisdiction of the European courts suggested that a future trade agreement if at all possible would be unlikely to dispense with the need for border checks and infrastructure on the Irish land border. This apparent inevitability together with the manner in which the particular issues with the land border in Ireland might be used to secure a  uniquely favourable trade agreement with the EU lead to the requirement that there be a backstop solution which would apply regardless of the future trade agreement. The EU took the position that the only way to avoid a hard land border was that Northern Ireland would effectively remain in the EU customs union and single market.

Some Unionists had argued that the Good Friday agreement said nothing about continued EU membership of the part of the UK and Ireland, nor did it specifically refer to the absence of border infrastructure and customs controls.Some nationalists and the Irish government argued that the agreement was underpinned by common EU membership and that the basic conditions which had allowed it to succeed would be undermined by hard border controls and its effect on cross-border trade.

This approach emphasised a more expansive view of the Good Friday agreement which provided for extensive North-South cooperation across a range of areas including agriculture, health, tourism, waterways, electricity, tourism, transport and other areas. The EU and UK prepared a report setting out over 150 areas of North-South cross-border cooperation supported by the Good Friday agreement. In the absence of alignment across a range of areas, it was argued that North-South cooperation would be undermined.

The EU declared itself willing to support the interests of a member state against a departing state. This was seen as a signal of solidarity with smaller states while also serving the EU’s interest in ensuring that the UK could not use the Northern Ireland issue to its advantage in later negotiations. On the UK side Boris Johnson, the Foreign Secretary alleged that the issues surrounding the Irish border were being used to frustrate Brexit.

In early December 2017, the EU Council president requested Prime Minister to make a final offer and resolve the Northern Ireland land border issue by fourth December so as to allow the EU Council later that month to consider whether sufficient progress had been made to move on to the second phase of negotiations. It was made explicit that if the offer was not acceptable to the Irish government, it would be unacceptable to the European Union.