An Offer the EU and UK Cannot Refuse
A Proposal on How to Avoid a No-Deal Brexit
The EU reasonably expects a guarantee that Brexit will not compromise the integrity of its customs and regulatory territory. Hence its insistence on the Backstop. The UK reasonably expects a guarantee that it will not be locked into a permanent Customs (and regulatory) Union with the EU. Hence its rejection of the Backstop. The resulting deadlock is hurling both parties into a No Deal Brexit.
This proposal, which includes features which have never been discussed, will guarantee the integrity and autonomy of the EU’s and UK’s respective customs and regulatory territories, and will require neither a Customs Union between the two unless that is the wish of both, nor a hard border between Northern Ireland and the Republic.
The proposal designed to resolve the Backstop roadblock to an orderly Brexit, may also offer a baseline arrangement for all trade between the UK and the EU should they wish to retain customs and regulatory autonomy in their future trade relations.
It may come into force by a minor tweaking of the Political Declaration and/or a one sentence modification to the Withdrawal Agreement.
The Problem in Brief
1. The Backstop conundrum is the result of two apparently incompatible political and legal exigencies. Once the UK leaves the EU, in principle all goods, whether originating in the UK or imported into the UK from third countries, moving from the UK to the European Union will require EU customs clearance and vice versa. This usually takes place at a point-of-entry hard border. Origin and value are determined, pre-payment of customs duties is verified or assessed and collected and occasionally compliance with regulatory standards is ascertained.
2. However, in the spirit of the Good Friday Agreement and the easing of relations between Ireland and UK as a result of their decades of common membership of the EU, the elimination of a physical border between Northern Ireland, part of the UK, and Ireland, a Member State of the EU was seen by all sides as crucial from the outset. If this borderless reality is to be maintained after Brexit, what would prevent British goods, as well as imports from other non-EU (“third”) countries, from entering the EU via Northern Ireland without being customs cleared by the Union and thus circumventing the EU’s Common External Tariff, or goods from the Union entering the UK circumventing the UK Tariff schedule? And how can one assure that goods so entering will comply with the regulatory regime applicable to goods in place in the EU and the UK?
3. Other than introducing a hard customs frontier between mainland UK and Ireland (including Northern Ireland), the only solution perceived by the drafters of the Backstop is for the UK as a whole to remain part of the EU Customs Union applying the Common External Tariff. This Customs Union is accompanied by a form of Regulatory Union to guarantee not only the integrity of the EU customs territory but also the regulatory integrity of its single market.
4. The Common External Tariff would have been applied to goods from third countries and appropriate duties collected upon entry into the UK, thus entering into free circulation within the entire EU territory.
5. A Customs Union of this nature comes with a price – notably the inability of the UK to conclude independent Trade agreements and to establish its own independent tariff schedule with third countries, as well as potentially an appreciable loss of regulatory autonomy as regards products. The UK would have to enact an array of regulations as they are adopted in Brussels without having participated in their making and would not be able to adopt its own regulations if these were incompatible with the EU regime. This is a price not all Brexiteers are willing to accept, at least not as a permanent arrangement.
6. The current Backstop is presented as a temporary solution pending entry into force of a substantive trade agreement between the EU and the UK. The issue on which most comment has focused was to set a time limit so that these final status talks do not drag on forever. But there seems to be a consensus that once final status talks are terminated, the Backstop could, indeed, disappear.
7. This, inadvertently obscures one very uncomfortable “catch 22” truth. The need for the Backstop will disappear if, and only if, the final status talks result in the UK remaining, one way or another, de jure or de facto, tied to the EU Customs Union and to some form of regulatory union. If the final status talks were to result, say, in a mere Free Trade Area in goods, even of a profound and capacious character, goods from third countries would still enter the UK under UK customs clearance rules and subject to UK customs duties. What is to stop them from entering the EU through Northern Ireland??
8. Back to square one, back to Backstop with the politically unacceptable limitation on the UK having its own tariff schedule (since the premise of the Backstop is that the envisaged Customs Union would apply EU tariffs, not UK tariffs) as well as denying it the freedom to negotiate independent trade agreements with third countries.
9. Regulatory standards on goods, in pursuance of protection of the consumer and the environment and the like also pose a challenge. If there is to be an open border between the North and the Republic, and assuming the UK, outside the Union, may at some point wish to introduce different regulatory standards, what is to prevent the importation into the Union of goods which do not comply with their standards (say, no beef hormones) and vice versa? Normally, in international trade, the regulatory standards of the importing State are ‘none of the business’ of the exporting country. It is up to individual exporters to ensure that their goods destined to foreign markets comply with the standards of those markets and it is the responsibility of the importing State to ensure such compliance, hence the perceived need for frontier controls. A frontier control in this case is excluded because of the Good Friday Agreement.
10. The solution adopted in the current Backstop is to ensure that the Customs Union (either limited to the North, or covering the whole of the UK) would incorporate the Regulatory regime of the Union for goods – in effect a Regulatory Union too.
11. If, under this logic, the regulatory regime of the Union is the law in the North, the border can indeed remain open since presumptively the goods entering will be EU compliant.
12. What is critical here is that the Union will be relying on the power of UK law, coupled with a strict system of implementation, application and enforcement, including the possibility of Union representatives being present in the performance of controls in the UK to ensure the integrity of its customs and regulatory territory. The combination of the deterrent effect of UK law, the consequent assumption that the law would be followed, and the additional compliance mechanisms required by the Union offer that confidence. Since no legal system is foolproof, that is why spot checks and the legal regime of the importing State which forbids putting into the stream of commerce goods which do not comply with local standards, completes the compliance regime. As will be seen, in our alternative solution we will be replicating, and even strengthening these very mechanisms which seem to satisfy the Union under the current Backstop.
13. The limitations of this solution are also evident: It imposes on the North, or on the whole UK, the regulatory standards of the Union. There is a glaring symbolic asymmetry whereby the UK has to adapt to the regulatory policies and sensibilities of the Union and not vice versa (and as we sadly know, symbolism is a potent political potion in this drama) but beyond that it has the effect of denying the UK regulatory autonomy in the area of goods. Since the correct interpretation of regulations is often a matter of dispute, under the Backstop, the Court of Justice of the European Union would be the final arbitrator adding, so to speak, ‘insult to symbolic injury’.
14. Following the debates in the House of Commons it is clear that these limitations of the current Backstop, with no guarantee of a termination date, played an important role in the rejection of the Withdrawal Agreement.
An Alternative Solution
15. We would like to suggest an alternative solution which would achieve the same objectives of the Backstop whilst eliminating these limitations. Our proposal comprises arrangements to deal with regulatory standards and customs duties.
Regulatory Standards – A Regime of Dual Autonomy
16. The Backstop as currently drafted can work because the UK has been a Member of the Union for the past forty-six years which has created a foundation of trust in the UK legal system. Thus, it suffices for the drafters of the Backstop, and rightly so, that the regulatory regime of the Union will be the ‘law of the land’ in the North (or the rest of the UK) even if the UK is no longer a Member of the Union, to trust that goods coming in will be EU-compliant (coupled with the possibility of spot checks away from the border and the law within the Union concerning goods which do not comply with local standards). Furthermore, the current Backstop introduces a strict system of implementation, application and enforcement, including the possibility of EU representatives being present in the performance of controls in the UK. This control system, with strict and close supervision and presence of Union authorities in Northern Ireland/UK, is also part of the current proposal with, naturally, reciprocal arrangements for UK similar controls within the Republic.
17. The variation to the Backstop we are proposing is as follows. The UK and the EU will each retain their regulatory autonomy. In practice we expect, even failing a formal agreement on such, a large convergence between the two regulatory regimes. There might, however, with time emerge different standards in the EU and the UK. Under this proposal it will be a violation of UK Law backed up by severe penalties (including if so wished criminal liability) knowingly to export, through the frontier between the North and the Republic, goods which do not comply with the regulatory standards of the EU. Compliance certification would be completed ahead of time as is already common (see para 22 below) and transporting companies and agents would be required to request such prior to shipment. In effect, UK public law would be backing not only the regulatory standards for goods on the UK market, but also goods destined for export to the EU through the frontier with the Republic.
18. In normal circumstances a double regulatory regime already exists though of a self-regulating character, with the responsibility placed on exporters but quite easily open to abuse. Giving it the backing of UK law and the enforcement mechanisms behind such, will drastically reduce the abuse potential to a de minimis level.
19. Naturally, under this proposal, the Republic would adopt a similar regime. Irish law would make it an offence knowingly to transfer goods into the UK through the North which are not UK compliant.
20. The problem of interpretation would remain, but under this proposal the Court of Justice of the European Union would be the final arbiter on the EU standards (including a preliminary reference to Luxembourg) and the British Courts would be the final arbiter for the UK standards with a similar procedure to be put in place before Irish courts.
21. This scheme reflects how two autonomous legal orders interact in a cooperative way, keeping full regulatory autonomy, but in reciprocal and constructive terms to reach a common goal: compliance with the Good Friday Agreement and a continuum in the flow of trade in goods between the North and the South. The proposal puts two legal orders in interaction but preserving their autonomy, with a premise of mutual trust and sincere cooperation that can only be attained between two countries that have been part of a common internal market for almost five decades. Therefore, the arrangement cannot be replicated with other third countries that have not been part of the of the EU internal market.
22. As regards traffic in goods in both directions, there could be non-frontier spot checks. EU Standard Centres within the UK mainland and the North, and UK Standard Centres within the Republic would be available to certify and mark compliance, not a novel practice in the world of international trade. Furthermore, the current Backstop introduces a strict system of implementation, application and enforcement, including the possibility of Union representatives being present in the performance of controls in the UK. This control system, with strict and close supervision and presence of Union authorities in Northern Ireland/UK, could be replicated under the alternative proposal to ensure compliance of EU regulatory standards by UK producers/exporters that decide to operate within the Irish/EU market with reciprocal arrangements within the Republic.
23. The advantages of this variation to the Backstop are evident. It guarantees the regulatory integrity of both territories whilst allowing them regulatory autonomy. In practice, as mentioned above since it is likely, even without a final agreement, that there will be an overwhelming commonality of regulatory standards for goods, one would be dealing with a limited amount of products. It also ensures reciprocity and symmetry taking care of the symbolic sovereignty issue.
24. The reality of most cross-frontier trade in goods is that custom duties are not in most cases actually collected at the frontier but paid in advance when obtaining an import license, and frontier checks consist of collecting the corresponding certification accompanied by occasional spot checks to verify that the physical goods correspond to those certified.
25. Imagine several EU Centres in Great Britain (both mainland and N. Ireland – the North is very sensitive to being treated differently from the Mainland) and within the Republic where all goods destined for the EU or the UK respectively via Northern Ireland would be processed, including payment of duties and the like, before they actually left British or Irish territory. Once cleared and certified, the need for processing at the frontiers is obviated and the Irish border can remain open as it is today. This would, naturally, apply to imported goods from third countries.
26. What of goods imported from third countries, moving from Great Britain to Northern Ireland and then integrated into products produced there or vice versa? If such goods are, say, appreciably cheaper in the UK because of lower customs duties with the rest of the world, compared to the Common External Tariff of the EU, they would affect the competitiveness of the end product vis à vis competing goods produced in the Union. This Rules of Origin issue is a staple of Free Trade Areas for which there are established solutions. The only difference will be, that these goods would be processed and certified at the same Trade Centres.
27. We should emphasize here that it is widely expected that any future arrangement between the Union and the UK would include at a minimum a tariff-free Trade Agreement, so that in fact there would be no tariffs in trade between the UK and the rest of the Union, including of course the Republic. This proposal is entirely compatible with that desirable situation, whilst not forcing a Customs Union on the parties.
28. The immediate objection that comes to mind is that if there is no physical control between Belfast and Dublin which could physically collect such certification, the temptation would be huge to drive a lorry through without having been processed and cleared in a Trade Centre, or change the cargo cleared to un-cleared cargo.
29. The solution is the same as proposed above for dealing with regulations. Ensuring that proper duties are paid on goods crossing the Frontiers in either direction would not be the responsibility solely of the importing State but of both States. UK public law and Irish public law would make it an offence to export goods without paying the required duties of the importing territory backed with a regime of severe penalties (including criminal liability if so desired) and backed up by non-frontier spot checks by the public authorities on both sides of the frontier. Thus, if knowingly transporting or even possessing goods exported from the UK into Ireland without prior clearance were made a serious criminal offence with correspondingly serious penalties (the way we deal with trafficking in stolen goods), enforced by spot checks anywhere within the territory of the UK and Ireland, compliance would be high and, critically, evasion would not be an order of magnitude different from the levels seen under normal border procedures (which even a hard frontier in the topography of Ireland will not eliminate).
30. This proposal doesn’t need to rely on technological solutions. It is unnecessary because the UK will be enforcing the entirety of EU law through its domestic legal system, including its criminal system, reinforced by strict controls, including EU official presence and participation in control sites. Technological solutions are necessary in a trade context in which there is regulatory asymmetry between two countries and no integration in reciprocal controls. In our proposal, which ensures full enforcement under EU standards in Northern Ireland and integrated checks and controls in production and export through permanent and spot checks outside the perimeter of the frontier, technological solutions are not needed.
31. A particular issue is frontier shopping: People (mostly in the border area) crossing to do their shopping on the other side of the border. This is not a new problem and the Union already has a regulation on movement and taxation of excise goods by individual shoppers. This provides a sensible approach which is to exempt personal shopping (below commercial quantities) from duties altogether in the expectation that it will be a fiscal washout and that, if necessary, certain goods (tobacco, alcohol etc.) could be quantitatively limited within the exemption. Furthermore, instruments under EU law currently allow Member States to enter into bilateral agreements with third countries to facilitate small border crossing. These instruments could be extended and adjusted to the frontier between Northern Ireland and the Republic.
32. Finally, it should be added that the proposal does not “outsource” the customs union in favor of a third country any more than the Backstop does. On the contrary, an arrangement based on reciprocal enforcement, joint inspections and close cooperation is far from being considered an “outsourcing” in a third state. The current Backstop would rely on the UK and UK officials to collect the Common External Tariff of the projected Customs Union and to ensure that UK manufactured goods comply with the EU regulatory standards to give but two examples. In some cases as part of the Backstop the Union has insisted on on-site inspection and supervision by Union officials. That is included in our Proposal too, albeit on a reciprocal basis. In effect our proposal introduces all the cooperation procedures introduced in the Backstop, but it adds further instruments, as well as domestic remedies, including criminal penalties, to ensure effective enforcement. Furthermore, the proposal incorporates a dispute settlement mechanism based on the withdrawal agreement’s enforcement mechanisms. Overall, then, this can hardly be considered to be any more “outsourcing” of the customs union as the Backstop envisages – in fact it is less.
33. International agreements are based on mutual trust, but also on an expectation that, in case of infringement, effective mechanisms will ensure that all parties return to a fully-compliant practice. If the UK or the EU breached the terms of the agreement on which our proposal is articulated, specific provisions on enforcement and dispute settlement arrangements would be triggered, including interim measures to ensure immediate compliance.
34. These provisions should find inspiration in the current enforcements mechanisms provided in the Backstop and the Withdrawal Agreement, which are based on preliminary consultations within a Joint Committee and, ultimately, direct actions before an arbitration panel that shall rule on the legality of the party’s conduct. This mechanism is provided in Articles 167 to 181 of the Withdrawal Agreement, which could be applicable to ensure the compliance of the Irish arrangement (as they do now for most of the provisions of the current Backstop).
35. It is therefore wrong to argue that the proposal is exclusively based on a principle of trust. Although trust is an important ingredient in all international agreements, in our proposal it is reinforced, as we suggest, through an exhaustive array of remedies that the EU and the UK can use in case one of the parties’ implementation of the agreement is not in line with its terms. Furthermore, the combination of criminal penalties, together with a robust enforcement mechanism between the two parties to the agreement, ensures strict compliance by all stakeholders in a way that goes beyond the current Backstop. Finally, the fact that this Proposal ensures parity of rights and obligations on both parties removes an incentive to sabotage the agreement and creates a mutual incentive to see it succeed.
Putting this Proposal into Effect
36. A final sticking point would be to ensure that this proposal would have the force of law.
37. One approach would be a legally binding commitment taken by the EU’s Heads of State or Government (HOSG). The HOSG can take decisions which do not amend EU treaties or legislation, but set out political commitments and understandings about what rules mean in practice and how they should be interpreted. Critically, HOSG decisions can be understood and relied upon as legally binding international agreements. The most recent relevant example is the February 2016 decision recording the agreement reached with David Cameron’s Government, entitled “A new settlement for the United Kingdom within the European Union”, the result of the “renegotiation” preceding the referendum. The UK even registered that HOSG decision as an international agreement in the UN’s depositary of treaties in New York. It has the advantage of binding the national leaders, not just an EU institution, and of adding a gloss to an agreement (in this case the Withdrawal Agreement) without reopening and amending it.
38. Alternatively, this proposal could be introduced as a new scheme in the Political Declaration on the future trade agreement. In order to bind both parties, the Withdrawal Agreement would be amended introducing one paragraph only, in which the parties commit to comply with the provisions of the scheme included in the Political Declaration. The provision could be worded as follows:
“The provisions on Ireland/Northern Ireland provided in Part V, section IV of the Political declaration setting out the framework for the future relationship between the European Union and the United Kingdom shall have the same legal value as this Agreement and shall be amended by the procedures for the revision of this Agreement.”
39. A political agreement on this new proposal would entail the replacement of the Protocol on Ireland/Northern Ireland, but through the means of a new and acceptable arrangement for both parties.
40. It is of course hoped by all that in the ensuing negotiations following Brexit solutions will be found which will obviate the necessity of arrangements to avoid a hard border in Northern Ireland. This proposal is to serve only as an insurance in case of failure of such negotiations.
41. What is proposed here is designed to permit an arrangement which would guarantee the integrity of the respective customs and regulatory territories of the parties, permit tariff free trade between the UK and the Union (Ireland included) but without forcing the UK into a permanent Customs Union should it not desire such, and eliminating some of the other features which impeded approval by the House of Commons.
42. But this proposal could also serve as the basis for a future trade agreement. The proposal’s rationale could be extended to all the trading scenarios in goods for the entirety of the UK with the EU. If the proposal works as a temporary arrangement, only to be triggered in the meantime prior to a free trade agreement between the UK and the EU, it would also incentivize both parties to comply and make a success of it (particularly the UK), in the hope of transforming it, as soon as possible, into a permanent and stable trade arrangement that could work for all the UK, and not only Northern Ireland. In other words, this proposal could be a genuinely transitory solution, a passage between the transitory period and the future trade relation, but also a test case to prove the robustness of the arrangement at a smaller scale that would facilitate access to a future and stable trade relationship in the interest of both parties.
43. It is simply not credible to imagine that three powerful public authorities, the UK, Ireland and the Union itself could not jointly make this approach work and thus remove one huge road block for future EU UK relations.
44. And a No-Deal Brexit, apart from all other woes would compel either the reintroduction of a hard border between North and the Republic or a customs frontier between the Republic and the Union – both far worse options.
Does the proposal create a customs union between the UK and the EU?
No, in contrast with the current Backstop, this proposal does not introduce a customs union between the UK and the EU. The proposal avoids the introduction of a physical border in Northern Ireland, in line with the spirit of the Good Friday Agreement, while it allows the UK to pursue its own trade policy with other countries and to have its own external tariff scheme.
Does the proposal apply to Northern Ireland only, or to the whole UK?
The proposal applies only to traffic in goods entering/exiting the Republic of Ireland through the border with Northern Ireland whatever their origin in the UK. It does not apply to trade between the Republic of Ireland or any other Member State with the rest of the UK. However, the proposal could work as a template for future trade relations between the UK and the EU.
Under this proposal, will goods be subject to customs duties?
Yes, goods crossing the Northern Ireland border would be subject to duties in accordance with UK and EU laws, but without the need to introduce customs controls at the border.
Where would customs controls take place?
Customs controls and payment of duties, would take place at Standard Centres located away from the border in both Northern Ireland and the Republic of Ireland. In addition, spot checks, as envisioned too in the current Backstop and joint inspections (by Irish/EU and UK officials) would take place for specific regulatory matters (eg veterinary controls, food safety) as they do already today.
Is this, as some voices from some EU have argued, just another ‘trust me’ approach?
No. Obviously trust is important and needs to be rebuilt. Under the Backstop as currently proposed, the EU would have to rely on the integrity of the UK legal system, backed up by EU verification procedures.
This new proposal incorporates and builds on the very same procedures. No solution will work without a modicum of trust between the two parties. The British Government objects to the backstop because it is asymmetrical and of indefinite duration, obliging the UK to follow EU rules.
Our proposal is based on symmetrical arrangements between the two sides creating a mutual incentive for ensuring its success.
How would customs and regulatory standards be enforced in the absence of a physical border?
The UK will incorporate EU law on goods as a matter of UK law for this purpose. It will be an offence under UK law to export through Northern Ireland goods which do not comply with EU regulatory standards. In certain cases criminal liability might attach. In the same way, it will be an offence under Irish law to export through Northern Ireland goods not complying with UK regulatory standards. In addition, all the verification procedures required by the EU under the current Backstop will all be incorporated on a reciprocal basis.
Does this mean that someone from the North taking a Christmas present to relatives in, say, Dublin will be subject to criminal sanctions?
Obviously not. The Law is not an ass neither is the legislator. Criminal sanctions we expect would apply to commercial traders and shipping companies who knowingly violate the law. It will be up to both parties to modulate the regime of sanctions in accordance with common sense.
Will the Court of Justice have jurisdiction to resolve disputes?
Yes, but only regarding the interpretation of EU standards, as incorporated into UK law, when applied to UK exports to the EU internal market through Northern Ireland. Also, in order to ensure symmetry between both parties, Irish courts will have jurisdiction to make preliminary references to the British courts on issues of interpretation of UK law (not of Irish law), as applied by Irish exporters sending goods to the UK market through Northern Ireland.
What happens with small frontier traffic between Northern Ireland and the Republic of Ireland?
Quantitative thresholds would be introduced to waive duties on insignificant import/export of goods over the border, in the same way that excise duties are currently waived under EU law for small personal quantities of tobacco and alcohol. Consumers will be able to carry on purchasing goods on both sides of the frontier.
Would the EU be ‘outsourcing’ customs and regulatory compliance to a “third country” under our proposal?
This is somewhat disingenuous. Under the Backstop the UK would be part of a Customs Union with the EU. Who will be collecting the EU duties imported in Liverpool, or London port, or Hull? British customs officials. Is this “outsourcing”? And who will be inspecting and certifying goods for compliance with EU standards? British officials. Is this “outsourcing”? In some cases the EU, in the Backstop, insists on Union representatives for such certification within the UK. Our proposal replicates exactly the same procedures, including the presence of Union officials where that would be requested by the Union. And there is the added security that exporting to the EU non-compliant goods or goods which have not been customs cleared is not just for the Union to detect and deter but also the UK. On a reciprocal basis of course.
How will this work for livestock trade in Ireland?
There are already “all island” rules in place in both the Republic and Northern Ireland, reflecting the fact that their epidemiological status is the same (and different from Great Britain).
What about smuggling? Will stiff criminal penalties envisaged under your plan be a sufficient deterrent?
Smuggling exists along other EU borders. The main interest is not in small time smuggling of a few cigarette cartons or mobile phones, but in large volume trade which causes real harm. The regime envisaged under our proposal will certainly take care of that.
Smuggling occurs when there is a disparity of prices across the border. The principal reason for that is typically differentiated taxation on goods (such as VAT, excise taxes etc.) This differentiated pricing could exist also under the current Backstop and it is simply fanciful to think that simply having a customs and regulatory union with the EU can prevent smuggling.
This proposal deals more effectively with the problem than the current Backstop; making smuggling an offense in both “exporting” and “importing” country will lead to better cooperation between the law enforcement of the Republic and the UK.
Does this proposal require an amendment / repeal of the Withdrawal Agreement which the EU says it will not reopen?
No. There are several ways of enacting this proposal without altering the Withdrawal Agreement (WA) as outlined in our Proposal. Our proposal could be agreed by the Heads of State or Government of the Member States with the status of a legally binding international agreement qualifying the WA and not touching any of its material provisions. . Alternatively, the proposal could be introduced in the Political Declaration, with an agreement that the relevant provisions in the Political Declaration have the same legal status as the WA. Several leading European politicians have already indicated a willingness to modify the Political Declaration. This is the kind of thing that if the lawyers are tasked to find a solution one will be found, as our proposal illustrates.
Could other third countries request a similar treatment in their trade relations with the EU?
No, this proposal can only apply to a third country that has been a Member State of the EU for several decades. Why? Because in order to rely on domestic remedies and joint controls between a Member State and a third country, the EU must have a high degree of trust in the legal system and the officials of that third country. That is only the case of a former Member State with a legal system having effectively enforced EU law for many years.
Is this proposal compliant with WTO obligations?
It is widely expected that, as a minimum, the EU and the UK will agree on a basic FTA in goods for their future relations. This proposal prepares for that agreement and would therefore be covered by Article XXIV GATT. Even absent that, the Proposal does not modify the current terms of trade between the Ireland/EU and the UK (customs duties, etc.) and would not trigger the Most Favoured Nation obligation to extend it to other countries. There are already differences between countries in the procedures in relation to, say, the verification of regulatory compliance of goods entering their territories and this Proposal is unlikely to trigger a credible MFN challenge. The UK and the EU, two jurisdictions whose legal systems have been intertwined for 46 years, can easily justify such differences in procedures given that the terms of trade will be the same for all partners.
This is an updated version of the original text that includes a new section under the heading of „Enforcement“, published on 5/7/19
Thank you, a most interesting read. To the extent that the authors suggest this could be a temporary fix in the absence of a „more formal“ relationship, I am not entirely convinced this would work. The existing draft Withdrawal Agreement seems built around the idea of implementing a regional trade agreement under Article XXIV of the GATT (see Withdrawal Agreement Annex II, art 4(1)). If you do away with the customs union approach and effectively opt for a less formal relationship between the EU and the UK – which is what I understand the proposed plan to be doing -, I wonder if that would still be the case. Because if not, presumably that would spell some trouble going forward as the arrangement would arguably fall afoul of MFN rules. It might thus be worthwhile to explore this issue a bit.
I don’t believe you are correct on the WA being an Article XXIV agreement – it is an international treaty indirectly related to a WTO agreement. Also there is no Annex II, Article 4(1) in the WA. Article 4(1) also does not suggest anything about a regional agreement. Annex II itself refers to Article 41(1) which equally does not imply a Regional Trade Agreement.
@Dan, apologies for my sloppiness, I was of course referring to art 4(1) of Annex 2 to the Northern Ireland Protocol to the WA (which is what the authors of this proposal wish to change rather substantially). Under the protocol, „until the future relationship becomes applicable, a single customs territory between the Union and the United Kingdom shall be established“ (art 6). Article 4(1) of Annex 2 clarifies that „the single customs territory shall comply with the relevant provisions of Article XXIV of the GATT 1994.“ This might be crucial for the whole endavour to work as in the absence of a GATT-compliant regional trade agreement (or an interim agreement leading to a customs union/FTA), the EU (UK) could not favour the UK (EU) over other countries. My concern was (and perhaps: is) that the deal as envisaged in this proposal (1) might not accomplish that and (2) that that is a problem because the EU and the UK /would/ favour each other over third-party countries. (Note, however, that I wrote my comment before the FAQ section – which does provide some relevant clarification to the proposal – was added.)
Thank you for your proposal — it definitely sounds interesting in theory. However, I have strong doubts whether it can actually work in practice:
Your approach strongly relies that a party reciprocally enforces foreign regulations and foreign tariffs, even though it has no direct, intrinsic interest to do so, but instead runs contrary to its own direct interests: Why should UK officers be strict in enforcing EU tariffs (if that only puts additional burden on the UK economy, for no direct gain to the UK), and why should the EU be strict in enforcing UK regulations (if that only puts additional burden on EU businesses)? Under your proposal, there is only an indirect interest (reciprocity) at stake. And the lack of direct, intrinsic interests may very well lead to a lack of actual enforcement (just see the famous Greek Maize case…).
To my mind, this is a very interesting proposal. It seems like a variant of the concept of parallel marketability applied in Liechtenstein (which takes account of Liechtenstein being both in the EEA, and in a customs union with Switzerland).
The problem of the withdrawal agreement’s Ukraine-style imbalanced arbitral tribunal mechanism is another matter which will require addressing.
Are you assuming that the whole island of Ireland would be a single territory from the point of view of phyto-sanitary and veterinary controls? That implies a controlled border btween N Ireland and GB which appears to be unacceptable to the DUP and ERG.
Thank you for your proposal. I agree with Junior that it definitely sounds interesting in theory and doubtful whether it can work in practice. Smuggling and the „dodging of the excisemen and the police“ that it requires are a part of the culture & folklore of the whole of Ireland, those skills have been perfected there from centuries of practice.
I agree with Junior. The benefits of a state to enforce a foreign Regulation system are too small. Furthermore, the whole idea of the Brexit is to retrieve freedom to change regulations. Although both Regulative systems start off being equal they will most likely rapidly disperse. So dual Autonomy means in the long run a doubling of regulations. I do not think companies will be be happy at this forsight. I suggest an amendment. Focus on the companies: they have something to loose and something to gain. My proposal: let each company decide under which Regulative system it will operate. If they choose the foreign system they can export goods to the other side of the border. The decision should be formally registered and controlled by the choosen system. We could call it a Mixed Autonomy on Micro-level.
Thank you for writing such a thoughtful piece. However, I have problems with it. The EU is under this proposal invited to place trust in the UK, which even as a member state of the EU has been found to have failed to comply with the rules of the single market game (https://www.politico.eu/article/eu-warns-uk-again-to-recoup-e2-7-billion-china-fraud-bill/) and which is embarking on a Brexit which is quite openly touted by its right wing cheerleaders as a means to undercut the EU’s standards on product quality, labour standards, environmental and consumer protection. It is one thing to „trust“ a fellow member state, quite another to be asked to trust a leaving member state which is moreover leaving in order to shake off the EU’s requirements. So the proposal, ingenious though it is, cannot be expected to be taken seriously by the EU. It is another variation on the normal Brexiter theme – that, after Brexit, the EU needs to change its rules, so the UK doesn’t need to change any of its. Put another way, I don’t accept the opening premise that „the UK reasonably expects a guarantee that it will not be locked into a permanent Customs (and regulatory) Union with the EU“ – the special status of Northern Ireland recognised by the GFA but ignored throughout by the Brexiters means that the UK has no such reasonable expectation.
An interesting proposals. I have a minor comment and a question.
The minor comment is that I think there is a typo/mistake in paragraph 25. You say „Imagine several EU Trade Centres in Great Britain (both mainland and N. Ireland…“ You should replace „Great Britain“ with the „United Kingdom“ since the former does not include NI.
My question relates to the real substance of the proposal. If the UK leaves without a deal, and without the arrangement you propose, surely it will be illegal under EU law for someone from NI to take non-EU compliant goods into RoI. Why does also making it illegal under UK law (as you propose) make any real difference?
I have to say that reading this proposal remonded me of a rwcwnt Matt cartoon in the Daily Telegraph, in which he suggested the positioning of honesty boxes on the border between Ireland and Northern Ireland.
The rather obvious objection to it is that if it were feasible, surely it would have already been used to replace border checks between Norway, Switzerland, and the EU, for example. The attempt in the paper to head off this objection, by arguing that the proposal is only viable when parties have developed a high degree of mutual trust through long-term membership of a customs union/internal market, seems to be rather feeble. The authors‘ implicit contention is that non-EU firms cannot expect a fair hearing before European courts, and vice versa.
This is probably the most sensible single plan for ‚fractional shared sovereignty‘ to come out of the entire brexit farrago.
It recognises that there already is a single part of the EU with a modicum of shared sovereignty today, that is NI, and it intelligently builds on that treaty from 1998 in effect. It recognises that nobody wants to cancel that 1998 treaty, irrespective of their stance on Brexit.
It is remarkably similar to US Border Preclearance procedures which exist at Irish and British airports today and which are not any kind of threat to anybody’s sovereignty.
My thanks to the proposer and his collaborators but I do so wish they had come up with this sooner before the various loopers started to foam at the mouth proper. I am not sure the presently constituted UK cabinet has the wit to understand this proposal I am sorry to say.
The missing piece in your otherwise highly considered proposal is that’d the cross-border pre-declarations and checks should take place at the SPS checkpoints = the ports. This, plus in/market checks, transit declarations and Country of Origin rules consistent with EU rules would give a very high confidence level that industrial-scale smuggling won’t occur.
As a layman, this seems to me to be a very sensible plan, even if there are some aspects that might need additional work. It indicates that a solution is possible if the will is there. I thank you.
An interesting article competely based on trade arrangments. However another purpose of a border is to control immigration. Freedom of movement allows any EU citizen to travel to the Republic or Ireland. If the UK is implementing a new immigration system then how can this be controlled? At the moment with the countries on both sides of the border being in the EU this isn’t a problem.