BREXIT – A LAST CHANCE FOR AN EXIT DEAL?
We are now barely 3 weeks before the (latest) deadline for Brexit, which should concentrate minds, in particular of those with political responsibilities, on how best to unlock a reasonable solution.
The new element is the latest UK proposal, which departs from the previous signed but never approved withdrawal agreement.
The new proposal accepts an all-Irish alignment with the EU norms and standards, in particular on animal and plant health, but extricates the whole of the UK territory from the Customs Union. That entails the need for customs controls between the Republic and Northern Ireland, but according to the new proposal that could be met to a large extent by electronic means and controls outside the border, in order to prevent the unacceptable (to all parties) re-imposition of a hard border.
In my view the right way to approach this new UK proposal is to access its own merits, and then compare it with the appropriate benchmark. This is an important point, as the choice of the appropriate benchmark can go a long way towards accepting the new proposal as a basis for negotiation, or on the contrary to clearly refuse it.
If the benchmark is the signed withdrawal agreement that was not adopted by the British Parliament, this new proposal falls short in terms of guarantees it brings to the EU agriculture sector, as it acknowledges a number of holes in the customs controls, and puts the faith of the whole agreement on the hands of the Northern Ireland’s Assembly.
Before moving further let me be clear: the preferred solution would be … no Brexit. But now with the finishing line at sight, I believe we need less wishful thinking and more realistic and pragmatic solutions.
But if the benchmark is a no-deal Brexit, as the UK Government says, the new proposal should be weighed in its own merits against the effects of a no-deal.
I am aware that the political process in the UK is quite messy, and that political events might change the scenario, namely by the provoking the fall of the current UK Government. But rather than engaging in political speculation, I prefer to keep my comments on what is on the table right now.
On the merits of the new UK proposal, or better on its main flaws, what comes first is the design for customs controls between the EU 27 and the UK in Ireland.
The UK proposes that small firms be exempted, or to put it differently proposes that low-scale smuggling be de facto accepted. As regards more significant trade flows the new proposal bets on a mix of electronic, trusted operators and outside the border controls.
It would become a test for a radically different customs control system. It might control the most significant flows, but it hasn’t been tested.
In the new proposal the obligatory customs declaration would stay, but the means to enforce it would be by electronic tagging of transport and a number of physical controls outside the border. Thus the new system would be less tight.
However I would put that into perspective. Currently our customs controls are done by an obligatory declaration of the goods, and payment of customs duties and VAT as appropriate, but only a small fraction is actually physically controlled.
The other major flaw of the new proposal is that it gives the Assembly of Northern Ireland the right to refuse the agreement, when it would have been agreed by the states – the EU 27 and the UK. That is a highly political issue, but I believe that would have to go if the proposal is to be accepted.
On the positive side, the new proposal gives guarantees on the respect of the norms and standards of our single market, and paves the way to negotiating a Free Trade deal between the EU 27 and the UK.
Now, coming back to the new proposal and the benchmark of a no-deal, what is at stake in my view is accepting a less tight customs controls, and therefore facing to a certain extent duty evasion (on both directions) or bracing for the shock of a no-deal Brexit and a high tariff wall across the Channel. The duty evasion problem, which is real, would however be rendered irrelevant by a large Free Trade deal that would eliminate all tariffs.
I will not come back to the disaster for the EU 27 agriculture sector of a no-deal – Farm Europe has dwelt extensively on that.
To conclude I would hope that the time has come for a last ditch negotiating effort from both sides, eliminating as far as possible the flaws in the latest UK proposal. Rather than betting that a political U-turn in the UK means an end to Brexit, or brings back the previous withdrawal agreement back.