BREXIT: GOOD NEWS, BUT MANY QUESTIONS REMAIN

The recent agreement between the European Commission and the UK on the first phase of the Brexit negotiations is good news. Assuming that Brexit is not reversible, having the best possible understanding on the future relationship is in the interest of the EU27 and its agri-food sector.

The agreement on the first phase opens up the negotiations on the second phase, where the future trade relations will come on top of the priorities.

Should we therefore assume that everything is going smoothly and that the best possible deal is in sight?

I wouldn’t go so fast. It is true that the first phase agreement, under the form of a Joint Report, points to settling a number of important matters – the rights of EU and UK citizens living in the UK and the EU; and the bill the UK should pay on exiting the Union. I would have liked to add that that is also the case on the thorny issue of the soft Irish border, but I’m afraid I won’t go so far.

In a nutshell both parties agreed that they do not want to see a hard border between the Republic and Northern Ireland. They are committed to finding a solution during the second phase of the negotiations that would guarantee such outcome. The UK added that even if no agreement is reached it will pursue “full alignment” with internal market rules, with a view to avoid the need for border controls.

But, and this is the first but, the UK also reaffirms that it will exit the internal market, and the customs union, and that that applies to the whole of the UK (including Northern Ireland).

Let us make a step back before going further. In order not to have a hard border, i.e. border controls, and allow goods to flow freely in Ireland, no customs duties should be applied to imports and exports, nor any form of quantitative restrictions. Incidentally, if no customs duties are applied there is no need for border controls for trade in goods nowhere between the EU27 and the UK, not only in Ireland. In addition goods should be mutually accepted as having either the same standards or equivalent standards.

There are a number of scenarios that would make that possible. The first is for the UK to accept and apply the EU rules, norms and standards. But, and here is the second but, the UK would have to become a willing rule-taker rather than a rule-maker. Do you see the British accepting it, exiting the EU but submitting to its rules without a voice on the decision making? I confess I don’t.

A second scenario would be for “full alignment” to mean mutual recognition across the board of each party rules and standards. Goods could flow freely. But as time goes by the domestic rules would tend to diverge, creating stress on the arrangements for mutual recognition. To give just an example, if the UK were to accept hormone treated beef, would the EU still accept that UK beef enters the EU through the Republic of Ireland unhindered?

In addition, would goods that the UK would have imported from third countries under new Free Trade Agreements flow freely into the EU27 market?

But, and here is the third but of the series, if there is no agreement and in the end there is a hard Brexit? Both parties would revert to their WTO tariffs, and customs duties should be applied to imports to the EU27 and to the UK. How could the UK guarantee no hard border in Ireland? How could the EU27 not re-install border controls in Ireland? The border in Ireland is the EU 27 border. Would the EU 27 accept free circulation of all goods coming from the UK through Northern Ireland? Even those that the UK would have imported from third countries, including under new UK-third countries new Free Trade Agreements? Brazilian sugar and meats, US meats, could flow freely to the EU 27 through the Republic of Ireland?

To conclude, I fail to see how the “full alignment” and other conditions to avoid re-installing a hard border in Ireland can be met if we get a hard Brexit. And even if we get a soft Brexit, free flow of goods to the EU27 through Ireland will become a big problem, in particular for the agri-food sector.

I very much doubt that what I just discussed is news to the negotiators on both sides. As in many difficult negotiations, and Brexit is one, there are issues that cannot be settled definitely. In order not to block progress in all areas of negotiation, formulae are found to accommodate sensibilities – a “fudge”.

In the thorny Irish border issue, yes we may well have to accept the present fudge in the Joint Report, and in the best of the worlds expect a deal that includes broad mutual recognition of rules and no tariffs nor quotas. After, as time goes by, we’ll see…

Meanwhile we have to focus on the trade negotiation side of Brexit. The fact that the UK will be honouring its budget dues till end 2020 gives a strong indication that it will be relatively easy to agree on a transition period to the same extent, giving a precious more two years for negotiators to finalize the deal. It will not be easy. The agri-food sector should however remain vigilant on the conditions that would apply to trade after Brexit, and ensure that it will not be exposed to duty and quota free imports from the rest of the world through the UK.