Written by Graham Gudgin 

 

 

This article was published in Briefings for Britain (but see note below) and we republish with their kind permission

 

~~~   ***   ~~~ 

 

East-West Trade

Avoiding customs checks on outgoing trade from NI has always been the easy part for the UK. The real difficulties are on trade into NI from GB and the success of the Cabinet Office paper will depend on just how light touch these can be made.

Article 5 of the Protocol states that goods travelling from GB to NI are deemed by default to be “at risk” of entering the EU (and therefore subject to EU tariffs). The Government’s paper states, “We will not levy tariffs on goods remaining within the UK customs territory. Only those goods ultimately entering Ireland or the rest of the EU, or at clear and substantial risk of doing so, will face tariffs.” It highlights that Article 4 of the Protocol is clear that Northern Ireland remains in the UK’s customs territory, and adds that the removal of internal tariffs is “fundamental” to the nature of a customs territory.

The Government acknowledges that some new processes and formalities will be needed. For example, there will be electronic import declarations and other administrative processes on industrial goods travelling from Great Britain to Northern Ireland. However, these processes will be implemented without any new customs infrastructure in Northern Ireland except for food products expanding existing checks for food of animal origin.

The role of the Joint Committee and its NI Specialised Committee are important in all of this, deciding for instance which goods are at risk of entering the Republic from NI. The EU has tended to take the view that all goods are potentially at risk and that special ‘facilitations’ can be applied to reduce bureaucracy. Facilitations might for instance include trusted trader status for businesses like supermarkets delivering direct into the NI market. Decisions in the Joint Committee are subject to independent arbitration, with the ECJ ruling on matters of interpretation of EU law, so the UK cannot guarantee that its preferences will prevail.

The existence of a system of customs declarations for all goods is extraordinary. It is difficult to think of another case among western democracies where customs declarations are needed between regions of the same state. The Government attempts to play these down saying that they will be used to prove that these goods are exempt from tariffs, but it is clear that the real purpose is to enforce an EU customs border.

We do not yet know what these declaration procedures will be, and Government should work with businesses to ensure they are the least burdensome possible. There appears to be an ongoing debate within government with one view that firms should not have to fill in forms themselves. Instead existing information from VAT returns and other forms could be reprocessed to provide a record of what is moving into NI from GB. The other, and perhaps dominant, view is that some direct basic reporting by firms will be needed but HMRC will help to minimise the cost and inconvenience to firms. If an approach without direct declarations from firms themselves is possible this should be the way forward.

The Government will need to formalise this objective of avoiding tariffs on internal UK trade by agreement with the EU in the Joint Committee. The aim appears to be to agree further exemptions in order to narrow the definition of an “at risk” good in Article 5 as far as possible. The Government points out a number of examples of goods crossing from GB to NI where the practical risk of diversion to the EU is very low. The question of tariffs in the Protocol depends to a degree on the outcome of separate UK-EU negotiations on the future trading relationship. If a zero-tariff agreement between the UK and the EU is reached, it will be easier to implement the Protocol in the light-touch way the Government has outlined.

Conclusions

Even with the minimalist interpretation contained in the Government paper, the Protocol clearly sets Northern Ireland apart from the rest of the UK. Distinctive provisions for NI are nothing new but adding to them in a context of continual nationalist pressure for a united Ireland will inevitably be interpreted by many unionists as yet another weakening of the union. In one sense this reaction is correct, Northern Ireland will be less integrated into the UK than it was previously, but for the average voter we need to ask how much the new arrangements will be noticed or will matter.

The answer to this question will depend heavily on whether or not the UK negotiates a free trade agreement with the EU. Under an FTA there will be few tariffs or quotas and in this case less need for customs declarations or checks on goods crossing from GB into NI. Importantly there will also be less gain to NI business since tariff-free access to the EU would no longer depend on the Protocol itself. It would come as part of the UK-wide FTA. The main gain to business would be a lack of checks at the Irish land border but to secure this NI is subject to a raft of EU regulations over which it would have no say. NI businesses would also have to complete some form of customs declarations to import from GB and see their goods subject to checks, albeit infrequently. Since trade with GB is much larger than with the Republic of Ireland it is not obvious that this deal more advantageous to NI business than the alternative of checks at the Irish border.

In the case of an FTA the whole exercise can be seen as a way of avoiding inconvenience for border residents and small traders and importantly of meeting nationalist demands for maintaining a border-free island with a feeling of an all-island economy. This is why it is so important that unionists should feel that the arrangements are not a step en route to the Irish Unity that many nationalists say is inevitable. Whether the democratic constraint built into the revised Protocol is essential in this context is another matter. The get-out clause for a NI Assembly vote after four years was a masterstroke of innovative thinking by No.10 (significantly not the NIO). Given the electoral balance in NI it is perhaps unlikely to be invoked but it is nevertheless there if the unionist parties wish to make a case for dismantling the arrangements and are able to convince a majority.

Has all of this been worthwhile? The UK conceded the EU’s demand to settle the Irish border question before beginning negotiations on an FTA in order to secure a transition period and to proceed to negotiations. If the UK fails to secure an FTA with the EU, the transition period may be seen as having been of limited value. Some will then argue that the Withdrawal Agreement was conceded for little gain. The Government Paper argues that in the context of the UK leaving the EU the proposed arrangements are in the interests of all of Northern Ireland but it is understood that independent legal advice has been sought on alternative approaches if no FTA emerges.  Much is still to play for, but it is clear that within the constraints it inherited, the Government has made large strides in ensuring a light touch regime.

 

~~~   ***   ~~~

 

This article was first published on the Policy Exchange website at https://policyexchange.org.uk/a-border-once-again/

Print Friendly, PDF & Email