20 February 2019

Vox EU: Brexit and the Irish border issue

This column suggests two remedies that could make the European Commission’s initial ‘backstop’ proposal, whereby Northern Ireland would remain in the European Customs Union while the rest of the UK would be excluded from it, acceptable to the UK.

The European Commission’s proposal

The European Commission had proposed a solution whereby Northern Ireland, unlike the rest of the UK, would remain in the European Customs Union and continue to be subject to a large part of the Single Market rules, while the rest of the UK would be excluded from it (Figure 2). The EU proposal was not meant to be the final solution to the border problem, but only a ‘backstop’ that would become operational unless and until a more satisfying solution was reached in the negotiations on the future bilateral relationships.

The UK’s proposal

The British government proposed, instead, the shift of the European customs border to coincide with the British external border through the creation of a free trade area encompassing both the EU and the UK, in order to ensure that no further control would need to be carried out between the UK and the EU (Figure 3).

The EU proposal was viewed as unacceptable from the UK’s standpoint on the grounds that it would allegedly compromise the constitutional unity of the country, as well as the integrity of the UK’s internal market. The British proposal was in turn felt to be unacceptable by the EU side because it would have implied a delegation of the implementation of the EU customs policy to a non-member state, and the free trade area advocated by the UK was held to amount to de facto UK participation in the Internal Market for goods only. The sole point shared by the two parties was their commitment to maintaining the Common Travel Area between Ireland and the UK. 

We now turn to the conceivable remedies that could be put in place to overcome the objections raised to each of the two proposals in their initial formulation. Starting from the EU proposal, the latter could be complemented with two remedies in order to meet British concerns: a) the UK could waive tariffs and customs checks on imports from the Northern Ireland, and b) Northern Ireland companies could be granted a reimbursement of the EU tariffs paid on goods imported from Great Britain and intended for local consumption. In this way, Northern Ireland would not be economically isolated from the rest of the UK. 

As concerns the British proposal, remedies could be found in order to avoid the need for the EU to delegate the implementation of its customs policy to a non-member state by allowing customs checks upon entry to the UK to be carried out jointly by British and EU customs officers, each for their ‘own’ imports. The implementation of the EU policy would then be performed by EU agents and not by UK ones. Other issues raised by the British proposal, however, appear to be more difficult to solve, because they interfere with the fundamental EU legal principle of the indivisibility of the four freedoms and of the Internal Market.

Compatibility of either proposal with EU law and the WTO’s legal framework

From the legal point of view, we need to assess the compatibility of both proposals and their respective remedies with European and international law, with particular regard to the regulatory framework of the WTO.

The EU proposal appears indeed compatible with EU law, since it implies relying on legal tools already familiar in the handling of trade relations with neighbouring third countries (Pérez Crespo 2017). It would also be compatible with WTO rules, since the inclusion of Northern Ireland in the EU Customs Union would appear consistent with the frontier trade exception provided for under Article XXIV, para. 3, lit. a), GATT 1994, and hence it would not trigger the application of the most-favoured nation clause in respect of the EU (Sacerdoti 2018). As concerns the remedies intended to make it acceptable to the UK side, a UK waiver on tariffs and customs checks on imports from Northern Ireland could be analogously considered as supporting frontier trade, while it would not raise significant problems under EU law. The reimbursement of the EU tariffs paid by Northern Irish importers on British goods intended for local consumption would not be an issue under the WTO legal framework, while it might be considered state aid under EU law. Yet, even conceding that the reimbursement of tariffs that were essentially not due might qualify as state aid, there are exceptions under Article 107, para. 3, TFEU, allowing for state aid measures if these aim at supporting the development of a given economic area, such as both the Irish and the Northern Irish economies (lit. c), or at remedying serious economic disturbances (lit. b).

The UK proposal, in turn, would appear compatible with WTO law, since it was based on the establishment of a free trade area (Article XXIV, para. 5, GATT 1994), but it would de facto amount to total freedom of movement of goods between the UK and the EU, separating this from the other three fundamental freedoms. The (partial) remedy consisting of joint EU-UK customs checks at the UK border would be compatible with both EU and WTO rules, but it would not suffice to make the overall UK proposal acceptable in terms of compatibility with the EU legal framework, with particular regard to the indivisibility of the four fundamental freedoms and of the Single Market.3

The compromise solution embodied in the Withdrawal Agreement

Finally, a compromise solution was written into the Withdrawal Agreement as defined at the negotiators’ level on 14 November 2018. Such a solution is intended as a backstop and provides for the conclusion of a customs agreement between the EU and the UK, establishing a ‘single customs territory’ within which the degree of regulatory alignment of Northern Ireland to the EU will have to be greater than that for the rest of the UK. In fact, this solution corresponds to the initial EU proposal, combined with a customs agreement between the EU and the rest of the UK, which avoids the mutual imposition of tariffs (Figure 4) and reduces the amount of customs controls between Northern Ireland and the rest of the UK, limiting them to regulatory checks.

This solution binds, for the indefinite time necessary for the definition of the framework of future UK-EU relationships, the UK’s trade policy to that of the EU, thereby inevitably putting off the achievement of full and effective UK ‘independence’ in trade policy. It is precisely these non-negligible limitations to the achievement of the advocated autonomy in the field of foreign trade that appear to be at the origin of the strong resistance to the agreement that has arisen in the domestic political debate, and that eventually led to the rejection of the Withdrawal Agreement by the British Parliament.

The current impasse and possible way out

Following that rejection, the negotiation has reached an impasse. The Irish backstop, which is an integral part of the Withdrawal Agreement, is not acceptable to the majority of the British Parliament, which has mandated the government to renegotiate it. Yet the EU has indicated its unwillingness to reopen negotiations on the agreement, although the political declaration on the future relationship could be renegotiated if there is a material change in the UK’s ‘red lines’. In this context, a variety of scenarios could arise.

The initial EU proposal for the Irish backstop could be a key element of a successful agreement on the future relationships between the EU and the UK. If combined with the remedies discussed above, that proposal could perhaps be more acceptable to a majority of the British Parliament than the current backstop incorporated in the Withdrawal Agreement, and prevent it from ever coming into force. In fact, those remedies would guarantee that the Irish border will remain open and ensure the economic integration of Northern Ireland with the rest of the UK (at least as effectively as the ‘single customs territory’ envisaged by the Agreement), while the UK would be granted the desired autonomy in its trade policy. For the same reasons, were negotiations on the Withdrawal Agreement eventually to be reopened, it might be worthwhile replacing the current Irish backstop with the initial EU proposal. 

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