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The European Council approved on Thursday the new Brexit agreement reached earlier by the EU’s negotiators and the British government. The deal will be likely rejected by the UK’s Parliament on Saturday. Yet, if the UK is granted another extension beyond the current deadline of October 31 in order to hold an election, Boris Johnson, an effective campaigner, might just pull it off and sell the agreement to the British public. The deal’s substance, though, differs from the previous, universally hated, Withdrawal Agreement negotiated by Theresa May only in technical minutiae.
The main point of contention? The status of Northern Ireland and its border with Ireland. The 1998 settlement that ended the conflict (also known as the Belfast or Good Friday Agreement) was predicated on the absence of a “hard” border between Ireland and Northern Ireland, i.e. a border involving immigration and customs checks. This was made possible partly through the joint membership of Ireland and the UK in the EU, obviating the need for customs checks, and partly through the creation of a Common Travel Area throughout British Isles and Ireland, scrapping the need for passport controls along the land border between Ireland and Northern Ireland.
For obvious reasons, the UK’s withdrawal from the EU risks jeopardizing the existing arrangements. In particular, a “hard” Brexit requires setting up a hard border in Ireland, which would become the EU’s external border for import and customs purposes.
Politics aside, there is a lot of trade between Ireland and Northern Ireland under the existing, open arrangements. One third of all Northern Irish exports go to Ireland, while around 1.5 percent of the Republic’s exports cross the border to Northern Ireland. Also, out of 758 thousand deliveries from Northern Ireland to Ireland in 2016, the vast majority (74 percent) came from small and micro companies in Northern Ireland, averaging only 10 to 49 employees in size. It is thus not the case that cross border trade is conducted only by large, easily identifiable businesses.
61 percent of the total volume of trade between Northern Ireland and Ireland in 2016 consisted of food and live animals — a vast majority of this trade involves intermediate products, which cross the border multiple times. One quarter of Northern Irish milk, the Financial Times reported, and more than one-third of Northern Irish lamb were processed at plants located across the border. “Northern Irish lambs are slaughtered across the border, while the direction is reversed with pigs. Baileys liqueur is produced in Dublin, but is later sent to Northern Ireland for bottling before finally returning to the Republic for export.”
Keeping such cross-border flows in agriculture open involves not only the absence of customs checks but also the presence of a set of common sanitary and phytosanitary standards. If everything has to be re-inspected every time it crosses the border, many of the currently existing supply and value chains would no longer be viable.
Hence the EU’s — and Ireland’s — earlier insistence on the so-called ‘backstop’ in the Withdrawal Agreement. The original backstop stipulated that (1) the United Kingdom as a whole would remain in a customs union with the EU and (2) that Northern Ireland would maintain a close degree of regulatory alignment with the EU until other arrangements are put in place, presumably through a future free trade agreement.
If the backstop drew so much ire from across the political spectrum, just how different is the new arrangement? Under the modified Withdrawal Agreement the explicit backstop is replaced with a protocol that formally places Northern Ireland into the UK’s customs territory (without forcing the UK into a customs union with the EU) yet ensures that UK authorities comply with EU customs procedures for goods arriving into Northern Ireland from the rest of the UK (or from third countries). For goods that are meant to be re-exported from Northern Ireland to Ireland, that means that the UK’s authorities would be collecting the EU’s customs duties on the EU’s behalf at the point of entry into Northern Ireland. In addition, unlike the open-ended nature of the original backstop, the new agreement would be subject to review by the Northern Irish Assembly at the end of the transition period and every four years thereafter.
However, just like under the original backstop, Northern Ireland would maintain a degree of regulatory alignment in areas in which the bulk of cross-border trade occurs — particularly in agriculture and industrial goods. Overall, the new deal places the effective customs and regulatory border into the Irish Sea, which is why Northern Ireland’s Unionists are as adamantly opposed to it as before.
To ease their opposition, the agreement carves a space for exemptions from such controls, beyond just personal goods (e.g. someone moving from Great Britain to Northern Ireland) to include goods that will not cross the border to Ireland. To administer the arrangement and make common decisions about exemptions, regulatory alignment, customs collection and so forth, a Joint Committee would be set up, just as envisaged in the original Withdrawal Agreement.
A deal that will keep the Irish border open is definitely preferable to a no-deal Brexit, including from a narrow US perspective. The United States is, after all, the largest foreign investor in Northern Ireland. But, more importantly, it is necessary to appreciate the reasons for the difficulty of negotiations that led to the present moment. Those have nothing to do with the EU’s intransigence and or its efforts to somehow punish the UK for leaving. In contrast, they have everything to do with the trade-offs involved in economic and political integration. No tariffs between the UK and Ireland, as well as a common set of regulations, mean more cross-border trade and free flows of people, goods, and services. The introduction of barriers, either in the form of tariffs or divergent standards, will inevitably lead to friction and economic costs — and potentially to worse outcomes in the fragile political environment of Northern Ireland.
Last year, Ms. May made a valiant but ultimately unsuccessful attempt to square the circle. At the EU summit on Thursday, we saw another. But, whatever the final outcome, it is hard to escape the sense of pointlessness of the entire exercise, driven by a plebiscite that should have never taken place to begin with.
A deal that will keep the Irish border open is definitely preferable to a no-deal Brexit, including from a narrow US perspective.
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