The wide-ranging Free Trade Agreement with zero tariffs proposed by Donald Tusk in March foundered on the supposed problems of the border between Northern Ireland and the Republic of Ireland. In response, the Prime Minister proposed in her Chequers document to bind the UK to a “common rulebook” – really the EU’s rulebook – for goods in order, she said, to ensure continued frictionless trade between the EU and the UK.
This attracted little political support in the EU because it was seen as “cherry-picking” and even less in the UK for leaving us as permanent, non-voting rule-takers. The proposals were rejected on a technical level by the professional customs body, CLECAT, whose 19,000 members handle 80% of European customs transactions. They found that Chequers “would require five to ten years before it can be applied in practice… new/non-existing systems and procedures will potentially lead to more complications.”
Reports this week suggest that the Prime Minister has now gone even further to secure a deal at any cost. Her new “backstop” proposal is for an open-ended customs union. She has ruled out customs union membership 21 times, so this would represent a humiliating defeat. The UK would have submitted to everything the EU demanded, paying them over £40bn for the pleasure and completely ceding our international trade policy to Brussels in clear breach of the Conservative Party’s manifesto commitments.
How has the Prime Minister got into this mess? Her motivation – a seamless border – is well founded, but her premise is that the only way to guarantee this is by some new, complicated customs arrangement. This is simply not true.
Firstly, only 4.9 per cent of Northern Ireland’s sales are with the Republic of Ireland, representing under 0.2 per cent of UK GDP. We should not, surely, give up our law-making capability over a wide area for the sake of that tiny fraction.
Secondly, there is already a border now – for tax, VAT, currency, excise duty and security – managed by technical and administrative procedures. These existing measures provide the foundation to maintain frictionless trade after Brexit. The Heads of HMRC and the Irish Revenue have confirmed this, saying that any additional requirements can be achieved without any new facilities at the border.
To see why, consider the range of simplifications to customs procedures and administrative obligations available under EU law. These are an ideal fit for much cross-border trade, characterised by regular, repetitive shipments – the same milk, from the same cows, from the same farm, in the same tankers, on the same roads, to the same destination. These obligations typically require only a one-off registration and, for regular trade, negligible costs of repetition. Companies already have to report all cross-border trade for VAT purposes, and the current system provides a framework for streamlining customs controls. Even small traders can – and currently do – take advantage of a voluntary registration to claim back VAT.
The agri-food sector accounts for just under half of all cross-border trade. Inspections can be necessary for these products but can, in practice, take place many miles from the physical border. I saw this myself when I visited Rotterdam, Europe’s largest port, this week. The Border Inspection Point is 40km from the docks and deals with 30,000 shipments annually from all over the world, including from outside the Single Market and Customs Union. There, 97-98 per cent of chilled or frozen meat and fish are cleared without physical inspection. Only 2-3 per cent are physically checked, based on intelligence, and 90 per cent of those shipments are cleared well within an hour.
The simplest way to avoid the need for animal checks between Northern Ireland and the Republic of Ireland is by maintaining an all-island biosecurity zone for disease prevention and public health. I visited the facility where inspections already take place for livestock shipments from Great Britain at the port of Larne. There are clear lessons from Rotterdam as to how such checks can be managed efficiently and how intelligence can minimise the need for lengthy inspections.
The Prime Minister’s convoluted customs proposals are unnecessary. Existing technical and administrative processes can ensure that a frictionless border is maintained after Brexit, not as a temporary, cobbled-together “backstop” but as a durable, long-term arrangement which allows for the wide-ranging, zero-tariff trade agreement which Donald Tusk proposed. That, surely, is the optimal solution for all sides.
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