Stephen Booth is Acting Director at Open Europe.
The silence from the Brexit negotiations has been deafening. Before Boris Johnson and Leo Varadkar’s surprisingly positive meeting last week, a deal looked all but impossible. There remain significant political and technical hurdles to a deal being reached, not to mention a very tight timeline for the parliamentary ratification required to take the UK out of the EU by 31st October. However, negotiations between the UK and the EU have “intensified” and the fact that we have had very few leaks, briefings or counter-briefings would suggest that all sides are taking this process seriously in the run up to the European Council later this week, and all are mulling difficult compromises.
The recent talks have focused on the three issues relating to Northern Ireland at the heart of finding alternatives to the “undemocratic backstop”: regulatory alignment with the EU’s rules on agricultural and industrial products; the customs regime; and mechanisms for ensuring that what is agreed has the consent of both communities. The secrecy surrounding this phase of negotiations means we do not know the exact details – and the devil is often in the details of last-minute EU deals – but the general shape of what a revised deal could entail is becoming clearer. The question is, could it fly in Westminster, Brussels, Belfast and Dublin?
Two weeks ago, the UK proposed an “all-island regulatory zone” whereby Northern Ireland would align with EU rules, not only for agricultural products but manufactured goods as well. This would remove the need for regulatory checks between Northern Ireland and the Republic but would require traders moving goods between Great Britain and Northern Ireland to enable checks to satisfy EU concerns that products meet its standards. This would expand, potentially significantly, on the veterinary checks that are currently undertaken on Northern Irish imports of livestock from Great Britain. There would be no regulatory checks on trade in the other direction.
Of the three areas being discussed, the proposals for regulatory alignment most clearly resemble the provisions of the backstop and would therefore be a major concession for the DUP in particular. This is why the UK has suggested that any regime of Northern Irish alignment is subject to the consent of the Northern Ireland Assembly and Executive – the so-called “Stormont Lock” – before it can come into effect and that this consent is renewed every four years. The EU and Dublin have objected, stating that this grants Unionists an effective veto over alignment, yet the rumoured EU counter-offer would have given a similar veto to Nationalists in the other direction.
The second plank of the current negotiations is customs and this is where we have the least information to go on. The UK has been adamant that Northern Ireland must be part of the UK’s customs territory, so that the UK can leave the EU’s customs union as a whole and conduct an independent trade policy. However, the EU appears to have rejected the UK’s proposals for a light-touch Irish border upheld by simplified procedures, exemptions for small businesses and checks away from the border.
Nevertheless, the talks have continued and the speculation is that both sides are considering a hybrid, dual-tariff regime for Northern Ireland, resembling the New Customs Partnership previously floated for the entire UK-EU relationship under Theresa May’s premiership. A dual or hybrid customs regime would remove the need for a North-South customs border and mean that goods for final consumption in Northern Ireland would be eligible for UK tariffs, which could be lower than the EU tariff. Therefore, Northern Ireland could benefit from any UK trade liberalisation post-Brexit. Exactly how the dual tariff regime would be administered is unclear, but it could take the form of a consumer rebate. The obvious drawback would be that goods moving to the island of Ireland from Great Britain would be subject to customs procedures in the Irish Sea.
The EU was fiercely opposed to the dual tariff idea when it was previously suggested, since it would be complex to administer and enforce. But it might be persuaded if it applied solely to Northern Ireland because the risk of border leakage is much smaller than if it covered all UK-EU trade.
However, the idea of customs procedures in the Irish Sea ought to be anathema to the DUP; so why might they consider this idea? Firstly, in contrast to the backstop, the Northern Irish consumer would benefit from independent trade deals struck by the UK. Secondly, Northern Ireland would be subject to a trade policy governed by Westminster in consultation with Stormont, rather than Brussels in consultation with Dublin.
Another potentially significant attraction of the hybrid customs regime to Unionists is that it would provide a much more durable relationship between Northern Ireland and the rest of the UK than under the backstop. A fundamental DUP anxiety has been that, without a clear exit mechanism for the whole UK, a future UK government might be tempted to “ditch” Northern Ireland in the backstop, in order to secure an independent trade policy for Great Britain. Seen in this light, not only is the backstop politically painful for the DUP now, it has the capacity to get significantly worse. If, however, the UK is able to pursue an independent trade policy under this hybrid regime, there would be no need for it to be revisited in future or the resulting uncertainty for Northern Ireland’s status that would inevitably arise.
The final area of negotiation is around the principle of consent in Northern Ireland for whatever arrangements ultimately govern its relationship with the EU and the UK. This is clearly a very thorny area but if Northern Ireland’s customs regime were secured at the outset (with Unionists’ consent), finding a mechanism to deal with regulatory alignment or divergence on food standards or widgets in the future might be a little less contentious.
UK and EU negotiators may be missing a trick by insisting that Northern Ireland has to choose whether to be aligned with the UK or the EU en bloc. Given that the UK is not going to diverge on every or even many rules covering product standards on day one post-Brexit, why not assume that Northern Ireland starts off fully EU compliant but will diverge along with the UK on an ad hoc basis in the future, unless Stormont elects to continue EU alignment? Stormont could then make such decisions with an understanding of the practical implications either way. Any issues or checks arising from any individual instance of divergence could be mediated through consultation between the UK, the EU and Ireland, bringing in a North-South dimension to resolving all-island issues in the future.
Overall, the odds are probably still stacked against a deal in the given timeframe but it does appear that agreement is now possible.