Northern Ireland and the Irish border
Many of the possible effects of ‘no deal’ on the Irish border and trade with Ireland are the same as those that would arise from UK – EU trade in general and at other ports/entry points for goods traffic.
But there are two unique characteristics that make the Irish border more complex. The first is the nature of that border – it is the only land border the UK shares with the EU.251 The border is currently “invisible and seamless across its 310 mile/500 km length”.252 The second is the history of violence and conflict in the region, which was largely brought to an end with the signing of the 1998 Belfast/Good Friday Agreement. This means there are particular sensitivities about the erecting of border infrastructure and implementing checks on goods crossing the border. This is why the UK government has committed to “no new physical infrastructure at the border and no new checks or controls at the border”.253
The EU and the UK Government share a commitment to avoiding a hard border between Ireland and Northern Ireland. Although the two-sides have yet to reach an agreement on how best to avoid checks and infrastructure at the border, the types of solutions suggested, which include the use of technology, some degree of regulatory alignment and some sort of customs agreement, are likely to be absent in a no-deal scenario.
8.1 Customs checks
If the UK implements a new customs regime under WTO rules, what checks at the Northern-Irish border would it be required to conduct and could it waive some or all of them? The EU has consistently said that checks would be required on the Irish border if the UK leaves the Single Market and customs union. Michel Barnier said in February 2018, that such checks would be “unavoidable”.254
It has been reported that the Irish Prime Minister, Leo Varadkar, suggested in July 2018 that even with ‘no deal’, checks and infrastructure at the border would not be required. The Irish Times reported:
Mr Varadkar said that such a “doomsday scenario” would mean that the “commitments of others” would be relied upon to prevent a hard border. […] “Also, president Juncker and my EU colleagues have on many occasions said that they wouldn’t require us to put in place a
251 Gibraltar shares a land border with Spain but is a British Overseas Territory, and the UK’s Sovereign Base Areas in Cyprus have no customs posts or frontier barriers, the UK government has committed to maintaining this status and the EU has largely agreed to ensuring this happens. See CBP 8269 pp 81-5 for more detail.
252 HM Government Northern Ireland and Ireland- Position Paper, 16 August 2017
253 See, for example, the Secretary of State for Northern Ireland, Karen Bradley’s evidence to the European Scrutiny Committee, EU Withdrawal, 16 May 2018, HC 763, Q326.
254 BBC News, ‘Michel Barnier: Irish border checks ‘unavoidable’’, 9 February 2018
physical infrastructure and customs checks on the Border between
Northern Ireland and Ireland,” he said.255
However, the Irish Revenue Commissioners subsequently confirmed that they were making preparations for “full customs checks” on UK-Irish trade “in case no deal is reached on Brexit.”256
The Prime Minister’s EU Advisor Oliver Robbins, in oral evidence to the Exiting the EU Select Committee on 24 July, acknowledged the European Commission’s position that checks and controls would be necessary (Q2451) and said that if it came to that situation, there would be a “strong debate between the two sides as to what was necessary there”, that both sides would “have to reflect on their responsibilities and make the appropriate measures and preparations”.
Seamus Leheny, Northern Ireland Policy Manager at the Freight Transport Association, has written about the possible effects of customs checks on goods traffic crossing the Northern Irish border:
Commercial goods vehicle traffic across the Irish border was estimated at 4,677,772 vehicle movements for the year 2016, according to analysis of TII data by Irish Revenue & Customs This works out at a staggering 12,788 commercial vehicle movements daily across the border.
It’s also worth highlighting that compared to 2014, commercial vehicle traffic across the Irish Border has increased by 21.4%. This clearly demonstrates that both economies, north and south, continue to become more reliant on one another as our supply chains become more entwined.
Even if customs checks were to be imposed on cross border traffic at the minimum 1% level, then, we would see around 128 physical inspections of goods vehicles daily. The impact of such checks would be additional costs for transport operators, delays and missed schedules.257
He also describes how the logistics of goods transport adds further complexities:
Many cross-border freight movements are consolidated loads: for example you could have one lorry carrying forty different consignments, each one unique with different points of origin and destination. This could mean a check on one pallet of goods on a truck could have consequences for dozens of other businesses.258
The reason most trade experts believe the UK will need to impose customs checks on goods coming into Northern Ireland is because of the MFN principle, which applies to all WTO agreements (see section 6.1 above).259 Countries can side-step this principle if they sign free trade agreements with each other or form customs unions, as the WTO permits those as ‘exceptions’ to the MFN rule.
255 Irish Times, EU calms Varadkar’s fears of physical Border checks after Brexit, 19 July 2018.
256 Irish Times, Revenue preparing for full customs checks post-Brexit, 6 September 2018
257 UK in a Changing Europe, Making Northern Ireland a bridge between the UK and the EU, Seamus Leheny (Freight Transport Association), 18 June 2018
258 UK in a Changing Europe, ibid
259 See WTO, Principles of the trading system
One proposal to avoid infrastructure and checks on the Irish border in a no-deal scenario is for the UK to waive checks on goods as they enter Northern Ireland. However, if there is no deal, there is also no UK trade agreement with the EU, so many trade experts have argued that if the UK applied no customs tariffs or checks to EU goods coming across the Irish border, MFN requirements mean it would have to do the same for all goods coming in from other nations. Aoife O’Donoghue, Professor of International Law at the University of Durham, told Channel 4 News:
If the UK chooses not to impose any tariffs on goods coming across the [Irish] border… that would mean that the UK is giving the EU (because Ireland is the EU in this context) complete open access. So its most favoured nation tariff is zero. That means it would have to give a zero tariff access to every single country in the WTO.260
Dr Lorand Bartels, an international trade academic, gave evidence to the European Scrutiny Committee (ESC), and was asked what would happen if the UK did waive all customs and regulatory checks at the Northern Irish border. He suggested that while this would be a problem legally, the UK might receive a waiver from the WTO:
I can only speak about what that would mean legally. It would be something of a problem, essentially. The reason is that it would be granting the EU preferences that would not be shared with other WTO members. I do not think, I should say, that the WTO should in reality present this as a major problem. First of all, I have to insist as a WTO lawyer that WTO rules are binding and are law.
However, the reality is that it takes a long time to enforce them. It requires countries to complain. They might not see any value in complaining. More importantly, though, it would be appropriate to ask for a waiver of the WTO to cover this sort of situation, and there is a very good chance, given the circumstances of the Northern Irish border, that that waiver would be forthcoming. It is a technical problem but one that is relatively easily solved. Again, I do not know what this actually means on the ground.261
Federico Fabbrini, Professor of European law at Dublin City University, has suggested that the EU could use a previously unused provision in the General Agreement on Tariffs and Trade (GATT) to remove the need for customs checks (but not regulatory checks) in Northern Ireland:
In the event of a hard Brexit, therefore, contingency plans would need to be put in place from the EU side to deal with the sudden emergence of a customs border between Ireland and Northern Ireland. […] [A]n option that the EU could consider … would be to trigger Article XXIV(3) GATT, which introduces the so-called “frontier traffic exception” from the MFN principle. Under this never-used clause of the GATT, ordinary WTO customs rules “shall not be construed to prevent: a) advantages accorded by any contracting party to adjacent countries in order to facilitate frontier traffic”. Pursuant to this reading, the EU could declare the entire territory of Northern Ireland to be a frontier zone to the EU customs union;
260 Channel 4 News, Fact check: What are the options for the Irish border after Brexit? 29 November 2017
261 European Scrutiny Committee Oral evidence: EU Withdrawal, HC 763, 27 June 2018, Q539
thereby removing the need for customs controls (at least on the EU side) but not the need to SPS checks. Clearly this solution would not be problem-free, as it would create a loophole in the impermeability of the EU external customs border, which could be exploited for illegal purposes. Nevertheless, it should remain in the armory of the EU to deal with a thorny issue…. 262
The ESC also asked Dr Bartels about this exception. He thought it could not be extended to the whole of Northern Ireland, as that was not its original intention:
The frontier travel exception is another one [exception] but it does not take you very far. The discussions on the frontier traffic exception at the time that the rule was drafted made it fairly clear that, where we were talking about situations where you had had a border running through a city, the traffic that counts as frontier traffic is about goods that are produced and consumed within a small distance of that border. The figure that was given by the United States, which drafted this provision, was 15km either side of the border. Essentially what we are talking about is market traffic.
[…] It is not designed to cover whole territories. It is really just for market traffic on the border in those sorts of special circumstances. It is not really anything more than that. With all due respect to my colleague, what he has said has been somewhat misunderstood and too much reliance has been placed on it.
[…] Quite clearly, the frontier traffic exception is of no particular use here except, if you really wanted to push it, to actual frontier traffic that extends in a very, very small zone either side of that frontier.263
David Collins, Professor of International Economic Law at City University, London, also told the ESC that this exemption could not cover the whole territory of Northern Ireland, but he did say it could help alleviate some issues for local goods traffic, explaining: “this is the basis for the discussion in some circles about having a two-tier checking system, one for local traffic and then another for larger traffic that might have an international destination”.264
Sabine Weyand, the EU Commission’s Deputy Chief Negotiator, told the Exiting the EU Committee in September, that such a border zone would not satisfy EU concerns about the integrity of the single market:
You referred to the exemption from MFN provisions in the WTO. Now this refers to tariff issues. Indeed you can create an economic zone 20 km around the border or wherever, but that does not address the issue we face on the island of Ireland.
Here we are talking very practically about—imagine—an import of shrimps from an Asian country where they treat shrimps with antibiotics, which are prohibited in the EU because they can lead to blindness. Now this shipment arrives in Liverpool and is destined for the market in Northern Ireland and also the EU27. At what moment and how do we check that there are no residues of prohibited
262 European Parliament Constitutional Affairs Committee, The Institutional Consequences of a Hard Brexit, Professor Federico Fabbrini, May 2018.
263 European Scrutiny Committee Oral evidence: EU Withdrawal, HC 763, 27 June 2018, Q532
264 Ibid
antibiotics? A 20 km zone does not address this issue. That is one example. The second example is bicycles imported from China on which the EU levies anti-dumping duties. Maybe the UK in the future decides not to have such anti-dumping duties because you want to have your own system on this, so how can we ensure that bicycles, arriving in Liverpool again or somewhere else, do not end up undermining the anti-dumping duties that the EU is levying? How can we avoid that this becomes an entry point into the single market? Again, WTO rules on exemptions, of 20 km, do not address this issue.
The third issue—and a very important one—is VAT. How can we ensure that VAT is levied correctly? That is a major source of revenue for all our member states and is also a major source of fraud in the EU but also in the UK. Therefore, we will need to have a system where we can protect the integrity of the single market and the customs union, in a situation where we do not have a hard border between Ireland and Northern Ireland.
It is on these very precise and concrete issues that we need to find a solution.265
In the same evidence session, Michel Barnier said that not only were checks unavoidable, but there was no neat distinction between customs and regulatory checks:
In the light of your Government’s decision to leave both the single market and the customs union, it is obvious that we need to find ways and means to set in place a number of checks on goods entering Ireland. Without any checks, that would be a breach in the single market and customs union. Without checks, we cannot guarantee the safety of goods entering into the European Union and circulating in it, and vice versa obviously for the British market, as far as you are concerned, because the external border of your market would be there now.
In the joint report of December and then in a letter from Theresa May in March, the British Government committed itself to respecting the integrity of the single market and the customs union and the place occupied therein by Ireland. On the ground, ladies and gentlemen, it is impossible—this is nothing new—to distinguish between customs checks and other regulatory checks. The two kinds of checks are intrinsically linked in the technical physical organisation of what happens when things are checked on that border for the single market.266
The Prime Minister, in her evidence to the Liaison Committee in July 2018, suggested that the Government would not automatically impose border controls and checks if there were no deal:
Q4 Hilary Benn: Can you confirm that no deal would mean a hard border in Northern Ireland? It’s a very simple question. If there is no deal, there will be a hard border.
The Prime Minister: There isn’t the sort of simple answer to that that you are looking for, if I may say so.
265 Exiting the EU Committee, Oral evidence, ‘The progress of the UK’s negotiations on EU withdrawal’, HC 372, 3 September 2018, Q2546.
266 Ibid Q2537.
106 What if there’s no Brexit deal?
Q5 Hilary Benn: Really?
The Prime Minister: Obviously, if we were looking at the question of no deal, the United Kingdom would need to consider what action we would take in those circumstances, and the Irish Government and the European Commission would need to consider what action they would take in those circumstances.
Q6 Hilary Benn: But you have put a huge amount of effort, including in your White Paper, into coming up with a proposal to avoid a hard border— presumably because, as you said to the House of Commons on 9 July, “The friction-free movement of goods is the only way to avoid a hard border between Northern Ireland and Ireland”. Therefore, if there is no deal, there can’t be friction-free movement of goods, and therefore there would be a hard border, wouldn’t there?
The Prime Minister: If there is no deal, there will be decisions for the United Kingdom Government to take about the action that it takes at its borders. The European Commission is very clear that if there is no agreement in relation to customs arrangements, there will have to be checks at the border, but, as I say, when you come to a circumstance— whatever the circumstances were—we would obviously need to look at the situation in which that deal was being put in place, the arrangements in which that lack of a deal was being put into place, and so forth.
Q7 Hilary Benn: But we are talking about no deal. You have just acknowledged that the Commission has said that checks would have to be put in place on the European side. Therefore there would be a hard border, and that would be the consequence of no deal. I suppose the question is, why would that be worth it? You have often said, “We’re prepared to contemplate no deal,” although you do not want that outcome. Why would that be a price worth paying for Northern Ireland?
The Prime Minister: If I can just recap on what I said, in my first answer in relation to this, I said that if we were in a no-deal situation we would obviously have to consider what action we were taking, not just in relation to the Northern Ireland border but more generally; the European Commission would have to consider what action it was taking with its responsibilities for customs, and indeed individual Governments would have to consider the action that they were taking in those circumstances.
As you know, the proposals that the European Commission have put forward so far have been based on the assumption that, if you do not have that frictionless trade, there is that border in place. What I am saying is if we were in the circumstances of no deal, all the parties concerned would have to consider what action they would take.
8.2 Regulatory checks
With or without a deal, the Government intends to leave the Single Market. The Single Market, as well as removing tariffs and quotas on goods trade between Member States, also removes non-tariff barriers to trade, such as differing technical specifications and labelling requirements (see section 6.2 above).
The Northern Ireland Affairs Committee report on the land border between Northern Ireland and Ireland describes how this regime allows goods to107
pass across the border currently and the possible effects of the UK leaving the Single Market:
To facilitate the free movement of goods, the Single Market operates under the principle of “mutual recognition”. This means that any good lawfully produced in one member state can be sold in any other. To make this work, the EU has adopted harmonised regulatory standards which ensure that all member states observe, at a minimum, the same product standards. We heard that mutual recognition is “more than just having similar rules”, it relies on judicial enforcement and keeping national legislation in each member state constantly in alignment. When the UK leaves the Single Market, it will no longer be bound by the Single Market’s regulatory standards for goods or accept the powers of the EU institutions, which means UK and EU goods could cease to benefit from mutual recognition in each other’s markets. Regulatory differences can create barriers to trade because the greater the variance in regulations the more checks are required on goods traded between countries. For example, if the UK were to diverge from EU prohibitions on genetically modified food or chlorine-washed chicken it would become necessary to ensure that these goods do not cross the border into the EU via Ireland.267
The debate over what would happen to goods traffic crossing the border in a no-deal scenario centres on whether the UK would be treated as a third country by the EU or not. While the UK would not be part of the Single Market, it would have in place all the EU regulatory requirements. But because it would not be legally obliged to maintain those requirements, the EU is likely to insist on checks to ensure compliance. The EU’s preparedness notices assume that the UK will be treated as a third country. The new requirements for businesses seeking to export to the EU, particularly on health and food safety, are extensive.
According to the Institute for Government (IfG), “[c]ustoms checks account for less than half of the border formalities“ and regulatory checks are more “onerous” than customs checks.268 The European Commission has produced a slide showing that most checks and controls on goods entering and exiting the EU are not related to customs duties.
Live animals, food and other agricultural products, are amongst the most regulated goods and therefore have the most rigorous regime of checks and controls. Regulatory checks would have a heavy impact on Irish border traffic because of the large volume of trade in these products across the border.
The Environment, Food and Rural Affairs Select Committee, in their report Brexit: Trade in food, looked at the volume of trade in these goods across the Irish border and the potential impact of a harder border:
111.The trade in live cattle and sheep, and beef and lamb across the Northern Ireland/Republic of Ireland border takes place on a daily basis, with approximately 390,000 live lambs crossing the border annually. The Livestock and Meat Commission for Northern Ireland
267 Northern Irish Affairs Select Committee, 2nd Report – The land border between Northern Ireland and Ireland, HC 329, 16 March 2018, para 43
268 Institute for Government, ‘The Irish border after Brexit’, Tim Durrant & Alex Stojanovic, June 2018
told us that the Northern Ireland sheep industry was particularly exposed to the effects of more complicated border arrangements, with approximately 45% of all lambs born in Northern Ireland exported to the Republic of Ireland each year. In 2016, the value of this live trade was approximately £31.5 million. 112.The dairy industries in Northern Ireland and the Republic of Ireland act as one through the supply chain, and dairy products cross the border several times between the farm gate and the consumer. Republic of Ireland dairy co-operatives own approximately 60% of the processing capacity in Northern Ireland. Exports to the Republic of Ireland were approximately 15% of total sales of the Northern Ireland dairy industry in 2015.
113.Witnesses told us that it was essential that two-way access between Northern Ireland and the Republic of Ireland remained “without tariffs and free from burdensome non-tariff administrative measures”. Dairy UK said that a hard border would be the least desirable option for the dairy industry.269
The report also describes the regime for third countries to export live animals and animal products to the EU:
- Any consignment of animals or animal products from third countries to the EU, may only enter the EU at a designated border inspection post (BIP). All such consignments of imported animal food products are subject to a documentary, identity and possibly physical examination at the first point of entry into the EU, and all consignments must pay a hygiene inspection charge depending upon the type and amount of the commodity being examined. These charges are harmonised, laid down in EU legislation and quite independent of any customs dues payable.
[…] There are no control points at the land border between the Republic of Ireland and Northern Ireland.270
In the event of no deal, if the EU insists on such checks, and in the absence of border inspection posts, it is unclear how such products could enter Ireland from Northern Ireland.
Seamus Leheny explains in more detail the checks on animal products, and the requirements if there were no special agreement between the UK and the EU to bypass them:
Customs checks on things like tariffs is only the tip of the iceberg in terms of checks, and there is potentially an even bigger problem facing supply chain logistics on the Island of Ireland. Council Directive 97/78/EC of 18 December 1997 states that food products of animal origin, including meat, entering the EU shall be subjected to veterinary checks. There are three elements to these checks:
1 – Documentary Checks: Verifying the veterinary certificates and documents accompanying the consignment.
2 – Identity Checks: Check to ensure products in vehicle match those described in documents. This will mean physical inspection of vehicle to check seal numbers.
269 Environment, Food and Rural Affairs Select Committee, 3rd Report – Brexit: Trade in Food, HC 348, 18 February 2018
270 Ibid
3 – Physical Check: Here the consignment is physically inspected, and this can include examining the packaging, checking temperatures, sending samples for to a lab analysis, or even smelling or tasting a product.
The EU stipulates the frequency of checks as follows:
Veterinary checks must take place at the physical point where goods enter the EU so without some special agreement, veterinary checks and the associated infrastructure would have to be put into place at the Irish Border in order to protect the integrity of the European food supply chain. This would result in every such load having to stop to lodge documents, ID checks and potentially a physical inspection.
The UK may also have to reciprocate such checks for goods entering Northern Ireland and Great Britain as potential future trade partners will want to limit the UK market from the supply of similar EU products that they wish to sell us instead.271
Professor David Collins, however, believes that WTO agreements to which the EU are a party would prevent such a regime of checks being imposed on UK exports. He wrote in The Spectator in August 2018:
While EU leaders like to threaten us with hints that our exports would be unsellable in the EU, the fact is that non-tariff barriers such as arbitrary health and safety inspections and borders would be prohibited under the WTO’s Sanitary and Phyto-sanitary (SPS) and Technical Barriers to Trade (TBT) agreements. The UK intends to retain conformity with EU regulations following Brexit, at least for the time being, meaning that the existing low levels of health and safety risks to the public in UK products will not change in the days after Brexit. There would, as a result, be no grounds for the EU to exclude our goods from its markets.
The WTO’s new Trade Facilitation Agreement obliges the EU to maintain borders which are as frictionless as possible, using modern technologies such as pre–arrival processing of documents and electronic payments. Discrimination against foreign products through all sorts of internal regulations is forbidden. These rules are enforced by a well-respected international tribunal which has a high rate of compliance and cannot be overruled by the European Court of Justice.272
Professor Collins’ view is not shared by the majority of trade experts. Financial journalist Therese Raphael disagrees that regulatory goods checks are prohibited by WTO agreements: “Prohibited is a strong word. In fact,
271 UK in a Changing Europe, Making Northern Ireland a bridge between the UK and the EU, Seamus Leheny, Freight Transport Association, 18 June 2018.
272 The Spectator, Why a no-deal Brexit is nothing to fear, 4 August 2018.
the WTO tells members to enter into consultations, but it doesn’t force them to recognize another’s standards”.
273 She also disputes Collins’ representation of what the WTO Trade Facilitation Agreement requires:
Similarly, the WTO’s Trade Facilitation Agreement aims at frictionless borders, but the idea that it could be used to prevent border infrastructure in Ireland after a no-deal Brexit is fanciful. Every developed country has signed up to it, including some famously non-porous borders, which tells you something about its teeth.
While EU members may individually want to recognize British goods as compliant, the EU’s Customs Code imposes more onerous procedures and checks on third-party goods than those member states are subjected to. For example, U.K. exporters would have to complete, among other forms, a Single Administrative Document, with 54 parts, for each declaration. They would lose access to the New Computerized Transit System, the IT system that facilitates trade.
This isn’t the EU deciding to be obstreperous or imposing new barriers; it’s a legal thing — or, as Stojanovic put it in a conversation, it’s literally a case of “computer says no.” The U.K. will be treated like any other outside country.
The U.K. government could take the EU to a dispute resolution body to complain that its standards haven’t been automatically recognized. But good luck with that; the EU would fight any attack on its single market rights vigorously and it would all take a very long time to resolve.274
Dmitry Grozoubinski, a former WTO negotiator for Australia, supports this view and has said:
The SPS and TBT agreements call for technical regulations to be evidence based, to serve a policy objective and to minimally distort trade. They do NOT prevent, for example, the EU from requiring certification by an EU authority (which, absent an agreement, UKs won’t be).
Peter Ungphakorn, a former senior information officer with the WTO Secretariat, looked specifically at what the WTO’s Trade Facilitation Agreement says about checks on goods:
Basically, the Trade Facilitation Agreement is irrelevant to the question of whether the UK and EU can check each other’s goods. […]
The agreement is important. The main purpose is to slash the costs of trading by cutting red tape when goods cross borders. So it calls for streamlined procedures, paperwork handled electronically and as simply as possible, and so on. It also breaks new ground by allowing developing countries to promise to reform their procedures on condition they receive aid to implement it.
Because customs and other procedures in developing countries tend to be slow and cumbersome, it’s these countries that stand to gain the most from implementing the agreement.
But it would be wrong to say the agreement is targeted at only or even mainly developing countries. Far from it. There are important
273 Bloomberg, Computer Says No’ to Jacob Rees-Mogg on Brexit, 9 August 2018
274 Bloomberg, ibid
provisions that developed countries like the EU and UK have to respect or face legal challenges. It’s just that the provisions dealing with electronic paperwork and streamlined procedures don’t fall into that category. They are written in a way that only requires countries to do their best to comply. And what “doing their best” means is left up to them.275
But Dr Bartels’ view (which he acknowledges is not shared by all his colleagues or the EU) is that the UK’s current alignment with the EU’s regulations on goods could mean checks are not technically required straight away post-Brexit:
If on Brexit day the regulations that the UK has are considered by law and in fact the EU to be no more burdensome than necessary to achieve the EU’s objectives, and that is because they are the same as the EU’s regulations, I cannot see how that changes on Brexit day plus one. Down the track, things change, of course, and there are other aspects to this. One has to also look at the rules on checking for regulatory compliance and that depends on trust and there are slightly different rules that apply to that.
Just in terms of the underlying standards, yes, that is my view. I should say that it is an unpopular view, in Brussels and elsewhere and among my colleagues, but that is my view.276
However, he also thought the EU would still probably impose regulatory checks on goods coming into the EU in the event of no deal, saying “you cannot stop that. It is the EU’s border. It is going to protect it”.277
There is no clarity at present as to exactly how goods traffic across the border will be managed in the event of no deal. The UK Government’s own guidance on what would happen has little or no detail at present on regulatory/ sanitary and phytosanitary checks, although it is expected to publish more information in the coming weeks. Currently, there is one section on trading across the Irish border in the technical note on ‘Trading with the EU if there’s no Brexit deal, which reads:
The Irish government have indicated they would need to discuss arrangements in the event of no deal with the European Commission and EU member states. We would recommend that, if you trade across the land border, you should consider whether you will need advice from the Irish government about preparations you need to make.278
VAT would also need to be collected on goods travelling from Northern Ireland to the Republic Ireland, and vice-versa, in the event of a no deal scenario. There is already a VAT border between Ireland and Northern Ireland, as VAT and excise are not fully harmonised across the EU, meaning that both territories apply different levels of VAT to different goods. However, the need for infrastructure at the border has been abolished, by
275 How does the Trade Facilitation Agreement really affect Brexit? Peter Ungphakorn, 16 August 2018.
276 European Scrutiny Committee Oral evidence: EU Withdrawal, HC 763, 27 June 2018, Q544.
277 Ibid, Q540
278 HMRC, Guidance: Trading with the EU if there’s no Brexit deal, published 23 August 2018.
the introduction of an EU common regulatory framework under which businesses can sell goods with 0% VAT on the understanding that it will be paid by the recipient business. This arrangement relies on the VAT Information Exchange System (VIES) via which information on cross-border movements of goods is transmitted between the EU’s national tax authorities. In contrast, customs officials at the EU’s external border have a duty to ensure that the correct Value Added Tax (VAT) is paid on imports.
279 The Government also accepted, in its technical note on the “temporary customs arrangement”, that “to avoid a hard border between Northern Ireland and Ireland, the application of common cross-border processes and procedures for VAT and excise would be necessary”.280
8.3 Impact on trade and the economy
The latest HMRC regional trade statistics show that Northern Ireland exported £2.8 billion worth of goods and services to Ireland – around 33% of the region’s exports – and imported £2.1 billion of goods and services from Ireland – 28% of its imports.281 According to the IfG, agri-food accounts for close to 40% of Northern Irish exports to Ireland.282
The organisation InterTradeIreland283 commissioned the Economic and Social Research Institute (ESRI), an Irish think tank, to conduct analysis of the impact of Brexit on the Irish border. ESRI looked at several different scenarios, including one where trade between Ireland and the UK would be based on WTO rules. The resulting imposition of tariffs and non-tariff barriers in this scenario could result in Irish trade to Great Britain falling by 12%, British trade to Ireland falling by 6%, Irish trade to Northern Ireland falling by 14%, and Northern Irish trade to Ireland falling by 19% – resulting in a total reduction in cross-border trade of 16%.284
However, they also a modelled a scenario where, as well as these trade barriers being imposed, there was a 10% fall in the value of the pound sterling (this is similar to the fall in the pound immediately after the EU referendum). Most economists believe there will be a significant drop in the value of the pound if the UK leaves the EU with no deal. The fall in sterling in ESRI’s analysis would, for British and Northern Irish trade, partly mitigate the effects of the trade barriers being imposed, but it would worsen the outcome for Irish exports to Britain and Northern Ireland.
In this scenario Irish trade to Great Britain would fall by 20%, British trade to Ireland would remain broadly similar ( at +0.3 %), Irish trade to Northern
279 See European Scrutiny Committee report on reform of EU VAT legislation, 28 March 2018, which also covers the implications of the reintroduction of VAT as an import tax on UK-EU trade in goods for Northern Ireland in particular.
280 Cabinet Office, ‘Technical note on temporary customs arrangement’,7 June 2018.
281 HMRC, Regional Trade Statistics, Q1 2018, released 7 June 2018 [accessed 29 August 2018]
282 IfG, The Irish border after Brexit, Tim Durrant & Alex Stojanovic, June 2018.
283 InterTradeIreland are a cross-border trade and business development body funded by both the Irish and Northern-Irish governments. For more information see their website.
284 InterTradeIreland, Potential Impact of WTO Tariffs on Cross-Border Trade, 23 March 2018, Table 4, p 13.
Ireland would fall 21%, and Northern Irish trade to Ireland would fall 11% – so there would be a total fall in cross-border trade of 17%.285
The study also looked at trade of different categories of goods. It predicts that the volume of trade in agri-foods in particular would see large falls. In a no-deal scenario286 they foresee that trade in meat and fish from Ireland to Northern Ireland could fall by 65%, while from Northern Ireland to Ireland it could fall 26%. Figures for dairy products were a fall of 66% and 52% respectively. A few categories of goods could see some increases in trade volumes from Northern Ireland to Ireland; for example, machinery and electrical goods might rise 6%.287
If the Government were to unilaterally waive customs and regulatory controls for goods entering the UK via the land border with Ireland, there would be a potential loss of revenue from the non-collection of import duties, VAT and excise. Jon Thompson, Chief Executive of HMRC, discussed this issue with the House of Lords EU External Affairs Sub-Committee. He talked of the ‘trilemma’ that faced the government for all of the UK’s external borders:
Ministers would need to make a decision about the free flow of trade, the security of the United Kingdom and the raising of revenue, because those are the current three objectives at the border. In the scenario you are setting out [no deal], some choice may have to be made between those three objectives in the run-up to April 2019.288
Mel Stride, financial secretary to the Treasury, acknowledged this trade off to the same Committee.289 Mr Stride emphasised to the Sub-Committee that there were already checks in place at the moment in Northern Ireland away from the border to prevent excise fraud, and this capacity could be used in the event of no deal:
People assume that in Ireland there are no checks or interventions going on with goods going across, but of course there are. There is a substantial amount of trafficking, fuel laundering and tobacco smuggling. There are interceptions inland in Northern Ireland, so it is not the case that we would not have the ability to function in that particular environment, but there would clearly be some very significant restrictions.290
The Financial Times reporting on the Committee’s evidence session said, “the revenue losses have the potential to be large if the UK does not collect taxes at the border”.291
285 InterTradeIreland, ibid.
286 The scenario with WTO rules trade and a pound sterling depreciation of 10%.
287 InterTradeIreland, ‘Potential Impact of WTO Tariffs on Cross-Border Trade’, 23 March 2018, Table 7,p18
288 House of Lords Select Committee on the European Union, Sub-Committee on External Affairs, ‘Brexit: Customs Arrangements’, oral evidence, 19 July 2018, Q87.
289 Ibid, Q114.
290 Ibid
291 Financial Times, ‘UK Treasury ready to relax border tax under ‘no deal’ Brexit’, 19 July 2018.
8.4 Movement of people
The movement of people across the Irish border has remained a relatively uncontentious part of the negotiations and poses fewer issues compared to the movement of goods. This is largely because of the Common Travel Area (CTA) between Ireland and the UK. The CTA allows British and Irish nationals to travel freely within the CTA without being subject to passport controls. The CTA is based on bilateral agreements and domestic legislation in the UK and Ireland that should be largely unaffected by Brexit. Both sides in the negotiations have agreed articles relating to the CTA in the draft Withdrawal Agreement.
Another factor that makes the movement of people simpler in any Brexit scenario is that both Ireland and the UK are outside the Schengen Area.292
Bernard Ryan, Professor of immigration law at the University of Leicester, told the Lords EU Committee that the continuation of CTA arrangements post-Brexit would be compatible with EU law:
There is no apparent legal reason why the Republic of Ireland should not retain the benefit of Protocols 19 and 20 [Treaty on the Functioning of the European Union] after Brexit, so as to permit bilateral co-operation with the United Kingdom outside the Schengen Zone.293
In theory, a no-deal Brexit should not imperil such co-operation. For more information on the CTA see Library Briefing Paper: The Common Travel Area, and the special status of Irish nationals in UK law.
However, the CTA only applies to Irish and UK citizens. Arrangements for non-CTA nationals are more complex. Although there are minimal immigration checks for journeys started within the CTA, non-CTA nationals must have the relevant immigration permission for the country they are seeking to enter.
There is also the issue of frontier workers – EU citizens who live in one Member State and work in another. The Irish journalist Tony Connelly, in his book on Brexit and Ireland, explains how Brexit could affect their status:
For those who are neither Irish nor British citizens, and who live and work on different sides of the Irish border, the prospects are particularly uncertain. Unlike citizens of Ireland and the UK, they are not protected by the provisions of the Common Travel Area. Under EU rules, such people are regarded as ‘frontier workers’. That means they enjoy certain rights, such as access to medical services-including the right to a medical card-on the side of the border where they work. There are similar rights regarding social-welfare and pension payments.
When Britain leaves the EU, those rights will fall. That would mean, for example, Lithuanian lorry drivers or mushroom harvesters who live in the North and work in the South (or vice versa) will no longer be regarded as frontier workers protected by EU rights. It is
292 The Schengen Area eliminates internal border checks on the movement of people between the 26 countries that have joined the zone.
293 Lords EU Committee, Brexit: UK-Irish relations, 12 December 2016, HL Paper 76 2016-17, written evidence of Professor Bernard Ryan (BUI0008)
understood, however, that their particular situation will be looked at during the two-year withdrawal negotiations.294
The draft Withdrawal Agreement protects the rights of frontier workers, allowing EU and UK citizens to exercise their rights up to the end of the transition period (see Articles 9, and 22-24). It also allows frontier workers to exit and enter the UK and Ireland for work without requiring a visa,295 although it does require workers to have either a passport or official identification card to cross borders. But if there is no deal, none of these provisions will be in force, meaning that frontier workers could find themselves in a legal limbo.
8.5 Security concerns
The UK Government’s position paper on the Irish border states that “the invisible and open border between Northern Ireland and Ireland is, as the Irish Government has said, arguably ‘the most tangible symbol of the peace process’”. The paper also notes that the Belfast (‘Good Friday’) Agreement included a specific commitment to “the removal of security installations”.296
George Hamilton, Chief Constable of the Police Service of Northern Ireland (PSNI), said in an interview with the Guardian in February that any infrastructure on the border would become a target for dissident republicans:
“Our assessment is that they would be a target because it would be representative of the state and in their minds fair game for attack. I would assume that that assessment is shared by senior politicians and officials who are negotiating Brexit.
“While I am chief constable I do not want to enter the political debate over Brexit but I still think it’s fair to comment on some of its implications and scenarios. And a hard border from a policing perspective would not be a good outcome because it would a create a focus and a target.”
He said fixed frontier customs and security posts would expose PSNI officers to greater danger than they already face from anti-peace process republican paramilitaries.
“Anything that makes the police presence predictable in places where terrorists are active of course raises the threat and increases the harm to my officers. We deal with risk every day and we are good at it but unfortunately the terrorists only have to be lucky once and get a result with catastrophic consequences. I think it would be a poor use of police resources if we are going to have to protect physical infrastructures at the border.”
Mr Hamilton thought hard border installations “could have a negative political impact” in Ireland and Northern Ireland, “re-emphasising the context and the causes of the conflict” and so creating tensions and challenges that the Good Friday Agreement had helped to dispel.
294 T Connelly, ‘Brexit and Ireland: The Dangers, the Opportunities, and the Inside Story of the Irish response’, 2017, p 260
295 They may be required to apply for a document proving their frontier worker status (see Article 24 of the Agreement).
296 DExEU, position paper: Northern Ireland and Ireland, 16 August 2017
Determined dissident republicans, he said, might regard such infrastructure on the northern side of the border “as a representation of the UK state”. He thought he might need more policing resources:
Asked if his force’s strength of 6,700 officers could properly police the 300-mile Irish border, Hamilton said that unless there were extra numbers recruited resources would have to be taken away from other areas of policing.
“There would be an increased demand due to a hard border and a pull of resources towards that which means either an uplift in police funding or else we would have to have reduced levels of service in other areas.”
In a May 2018 paper on the Irish border, the think-tank Policy Exchange argued that concerns about Brexit affecting peace in Northern Ireland were overblown:
The weak arguments that Brexit somehow endangers peace or undermines the Good Friday agreement have been allowed to take hold. Neither argument bears much examination, but importantly they have received minimal examination – and have been repeated unthinkingly in the British media. Sinn Fein’s Gerry Adams and Colm Eastwood, leader of the nationalist SDLP, have both stated that no general breakdown in peace is likely. Adams instead stresses the dangers to human rights from Brexit although few lawyers appear to agree with him.
The real danger is not any general return to the Troubles but rather that border infrastructure can be attacked, and officials attempting to protect or replace it may be put at risk. It is this risk which motivates the UK Government to promise a border with no infrastructure at all. Of course, the huge attention drawn to the border issue in the media makes it almost inevitable that dissident republicans would attempt some attack. This may however be a short-term danger. Once Brexit is complete, with no-one stopped at the border and with no visible infrastructure, any danger is likely to subside.297
Suzanne Breen, a Northern Irish journalist, argues in the Belfast Telegraph that even if infrastructure were put in place, while it might serve as a reminder of previous partition, the security threat is much reduced from the past:
There are many legitimate concerns around Brexit and its effects on both sides of the border. But claiming it’s a ticking time bomb for the peace process is quite simply scaremongering.
The customs checkpoints which existed along the border for almost half a decade after partition played no part in violence erupting here in 1969.
That IRA campaign was firmly rooted in the denial of civil rights – jobs, housing and political equality. A return to the border as we knew it from the 1970s onwards – with British soldiers in watchtowers on the hillsides above checkpoints – is not on the cards.
297 Policy Exchange, Getting Over the Line: Solutions to the Irish border: Why the UK (including Northern Ireland) can leave the Customs Union, avoid a hard border – and preserve the Good Friday agreement, Graham Gudgin and Ray Basset, 9 May 2018.
Of course, the introduction of any infrastructure will serve as a reminder – and perhaps an uncomfortable one for some – that partition and the border still do exist. But the youth of Ballymurphy or the Bogside will not go out to kill or be killed because of customs controls.
And who exactly are expected to wage any new armed campaign anyway? The Provisionals’ war is over. Dissident republicans are having some success in recruiting young people in working-class nationalist areas, but I guarantee that none of those joining up are citing Brexit and the possibility of customs posts as their reasons.298
The IfG summarised the findings of a May 2018 study from Queen’s University Belfast on Northern Irish attitudes to border checks:
‘There is substantial and intense opposition to possible North-South border checks [of the kind that would be required if the UK were to become a third country with no special arrangements] between Northern Ireland and the Republic of Ireland and to East-West border checks between Northern Ireland and Great Britain.’
The report found that around 60% of people surveyed would support peaceful protests against checks on the border. It also noted that there is little support for violence against border infrastructure, with ‘only 5% of the population as a whole… fairly or very supportive of vandalising border technology’. But the authors found that in focus group discussions, ‘there are strong expectations that protests against either North-South or East-West border checks would quickly deteriorate into violence.’299
8.6 Energy
There has been an all-island electricity market on the island of Ireland since 2007. Although Northern Ireland is a net exporter of electricity (i.e. it exports more than it imports), it still relies on electricity imports from Ireland when there is insufficient local electricity generation capacity.
The Financial Times reported in July that ‘no deal’ could have a significant impact on the energy market in Northern Ireland, and the Government had drawn up emergency plans that could mean electricity generators being requisitioned to provide power for the region:
Thousands of electricity generators would have to be requisitioned at short notice and put on barges in the Irish Sea to help keep the lights on in Northern Ireland in the event of the hardest no-deal Brexit, according to one paper drawn up by Whitehall officials.
That could involve bringing back equipment from far-flung countries such as Afghanistan – where the UK is still part of Nato-led operations – said people familiar with the paper’s contents.300
However, the Single Electricity Market (SEM) is based on bilateral agreement between the UK and Ireland, so according to ESRI, “should the UK leave the EU, the previous bilateral agreements would remain in
298 Belfast Telegraph, ‘Suzanne Breen: Brexit scaremongering chorus grows’, 27 April 2018
299 IfG, ‘The Irish border after Brexit’, Tim Durrant & Alex Stojanovic, June 2018
300 Financial Times, Hard Brexit: the eye-catching contingency plans to stop NI power blackouts, 11 July 2018
force”.301 But some experts say the SEM is, in turn, reliant on the EU’s own Internal Energy Market (IEM – see section 12.1 below), so there could be consequences for the UK. Robert McCormick, general manager of the System Operator for Northern Ireland (SONI) which operates the electricity system in Northern Ireland, told the House of Lords EU Committee that “If GB is not part of the IEM, onward trading [from Northern Ireland] with Europe will be extremely difficult (if not impossible)”.302
Other experts giving evidence to the Committee thought the SEM should be able to function even if the UK was no longer in the IEM.303
If a no-deal scenario did result in disruption of energy supplies across the border, there would be significant impacts on both Ireland and Northern Ireland. A European Parliament report in November 2017 described Ireland’s dependency on UK gas supplies:
Gas supplies are of crucial importance to Ireland because gas plays a central role in electricity generation. Because of this, any interruption to supply could have very serious consequences. Nearly all of the gas used in Ireland comes through the interconnectors with the UK.304
The Government’s position paper on Northern Ireland and Ireland states “the continued ability to trade gas between Great Britain and the island of Ireland is also critical for security of supply and efficient market operation”.305
The UK is a net importer of gas from Europe, so it in turn relies on gas imports from mainland Europe, which could also be threatened by a no-deal scenario.
If there is no deal, tariffs on energy supplies would probably not be imposed by either side. The EP report (see above) stated that “for WTO members the EU has no tariff on electricity or gas imports”,306 but also warned:
Gas and electricity markets are complex service markets, not simple commodities markets, and the EU is in the process of streamlining the interface between national market designs to create a single energy market.307
8.7 Other areas
There are other areas of cross-border cooperation that would be affected by ‘no deal’. The UK and EU Brexit negotiators have conducted a joint ‘mapping exercise’ to identify cross-border policy areas that could be affected by Brexit and have reportedly found 142 of them. These 142 areas are all a subset of the six areas of North-South economic co-operation
301 Economic and Social Research Institute, Scoping the Possible Economic Implications of Brexit on Ireland’, November 2015
302 Lords EU Committee, Brexit: energy security, HL Paper 63, 29 January 2018, para 142
303 Ibid, see paras 141-147
304 European Parliament, Policy Dept A: Economic and Scientific Policy, The impact of Brexit on the EU energy system, November 2017
305 DExEU, position paper: Northern Ireland and Ireland, 16 August 2017
306 EP report, November 2017
307 EP report, ibid
119
identified in the Good Friday Agreement: transport, agriculture, education, health, environment and tourism.
The December 2017 Joint Report says the mapping exercise:
[s]hows that North-South cooperation relies to a significant extent on a common European Union legal and policy framework. Therefore, the United Kingdom’s departure from the European Union gives rise to substantial challenges to the maintenance and development of North-South cooperation.308
In evidence to the Lords EU Committee, Dominic Raab was asked if he would share the conclusions of the exercise. He replied that the “exercise has been going well”, but that he would “need to get a final readout of the timeframes”. This suggests it is still work in progress.309
There is more detail on the effect of no deal on transport across the Irish border in section 12.5.
8.8 Proposal to mitigate ‘no deal’
There have been suggestions in the media and in Parliament that Article 24 of the WTO Treaty would allow the UK to continue to trade with Europe on zero tariffs while it negotiated a free trade arrangement.
But trade law experts have dismissed the view that this Article offers an easy solution to UK trade with the EU in the case of ‘no deal’.
The Prime Minister has said:
The question of GATT 24 is perhaps not quite as simple as some may have understood it to be. […] expectation that it is simply possible to leave with no deal and immediately go into that situation does not actually reflect accurately the situation that the United Kingdom would find ourselves in.
The issues are discussed in a House of Commons Library Insight piece, No-deal Brexit and WTO: Article 24 explained, 4 February 2019.
308 European Commission, Joint Report, 8 December 2017, para 44
309 Lords EU Committee, Scrutiny of Brexit negotiations, Dominic Raab oral evidence, 29 August 2018, Q5
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