17 Oct 2018

Chlorinated chicken conundrum. Why the Irish border issue is so hard to fix and what comes next

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If God is an ardent Brexiteer, then he has found a strange way to show this recently. Just as Theresa May had reason to believe that she was close to a solution to the Irish border issue that has been so awkward throughout the EU-UK negotiations, matters appear to have returned, if not quite to square one, then to a place where she did not want to find herself. The stakes have hence been raised even higher for the EU Council where she will make a personal appeal to her fellow leaders this evening.

Why is the Irish border issue proving so fiendishly complicated? What happens if it is not resolved?

The offer and counter-offer

The Irish border issue was the hardest aspect of the outline political settlement secured last December regarding the Withdrawal Agreement (after a false start when the DUP appeared to have vetoed a deal). The ambiguity of language in that deal saved the day then, but political declarations are far easier to keep vague than are legal texts (unless lawyers on all sides are determined to obtain ambiguity), which ordinarily are designed to ensure certainty.

Earlier this year, the EU set out its ‘offer’ on the legal wording for the Irish border issue which stated, in effect, that to ensure that an open border operated acceptably in practice, Northern Ireland would have to stay inside the customs union and the single market as a ‘backstop’ if a final free trade agreement that answered all of the outstanding questions around the border was not reached by the termination of the transition period on 1 January 2021.

As the rest of the UK would, presumably, be shot of both the customs union and the single market at that point, such a formula would mean that there was a de facto border between Great Britain and Northern Ireland. This was completely intolerable to the UK Government and not merely because of the critical role that the DUP currently has in Parliament. Most Labour MPs disliked this proposed division too. Indeed the only MPs who might privately cheer the notion of Ulster being hived off economically in this manner would be the few who advocate a United Ireland, with or without the consent of the Protestant community there (Sinn Fein, who do not sit in Westminster, and possibly the Leader of the Opposition and Shadow Chancellor as well).

What appeared to be occurring in talks over the past month was that the EU was prepared to live with the concept of an all-UK ‘backstop’ as Mrs May insisted upon, subject to a few safeguards. If that had been the case, then her political difficulty would have been how to insert a mechanism into the backstop to prevent the UK being bound unilaterally to it indefinitely if it were ever triggered. In the past few days, though, Michel Barnier and his team seem to have changed tack again, seeking an exclusively Northern Ireland back-backstop behind the all-UK backstop that was being designed.

Why this impasse?

The reason why this is such torture is that the Irish border issue is not, from an EU-27 perspective, solely about the customs union but the single market too. This is best illustrated by an example devised here by BVCA Insight entitled the ‘chlorinated chicken conundrum’. It runs as follows.

Since the mid-1990s the EU and the US have had a beef about chicken (as it were). The US allows for a technique at the end of the poultry production process in which chickens are zapped (washed) via a chlorine-based substance which, according to the American authorities, eliminates micro-bacteria that might be harmful to humans (apologies to any of you reading this edition while having lunch). The EU disputes the absolute effectiveness of this method and argues that even if it works as the US suggests, it discourages farmers from attending to micro-bacteria matters at an earlier stage and this is bad news for the welfare of the chicken (although not as bad as its death, one would postulate).

The issue is this. Imagine we are in 2022. The UK has left the EU with no comprehensive agreement that has settled the Irish border issue, merely a backstop that keeps it in the customs union. It is not in the EU single market. A consignment of US chlorinated chicken arrives at John Lennon Airport in Liverpool. If it were then to be flown on to Dublin Airport, it would be checked, identified as material that is illegal in the EU, and sent back from wherever it had come.

If it went instead to George Best Airport in Belfast and there were a totally open border between Northern Ireland and the Republic of Ireland, it could be unloaded in the Province without examination and driven across the frontier between the north and the south and enter the EU’s single market and food-chain. The only way to prevent this would be inspections of goods moving between the rest of the UK and Ulster. That, in reality, would mean that for at least some goods there would be a new internal border inside the UK.

What will happen then?

This is a rock and a hard place territory. There are three possible outcomes apparent at this stage.

The first is that Mrs May convinces the EU-27 to relent. A plausible bargain would have a series of elements such as (1) a legal commitment by the UK to respect the integrity of the single market, (2) permission for EU inspectors to operate on UK soil at any port of entry (much as there is a passport check by France inside the Eurostar Terminal), (3) provision for UK inspectors to have similar powers within the EU in the event that future regulatory divergence made that relevant, (4) common EU-UK rules on all agricultural standards (as livestock is the most sensitive sector here), and (5) an ‘exit clause’ allowing the UK to afford notice (six or 12 months perhaps) of its intention to quit the customs union while respecting the four other elements of the package. This last aspect would allow Mrs May to contend that if the backstop were activated, the UK would not be tied into it forever.

If something like the above transpired, then Humpty Dumpty would be put back together again and the EU could proceed with its anticipated special summit in mid-November to sign off a Withdrawal Agreement and the Future Framework, which would go to the UK/EU parliaments for their approval.

The second scenario is that some progress is made in this direction but not enough to render holding a special Council next month sensible. Negotiators would be sent away to seal an agreement by the next formal EU Council in mid-December. This would be squeaky timing but it would just allow for the UK Parliament to vote on the final treaty by early January, and the EU Parliament to do the same not long after that. The UK would leave the EU on 29 March 2019 and enter the transition period.

The final outcome is that the Irish border is considered, in the short-term anyway, beyond a solution. The only options which work practically and politically would be either the entire UK staying in the single market and customs union if, as would be likely, the backstop actually materialised, or the UK could reverse its stance and embrace a hard border in the island of Ireland. No comfortable choices.

At this juncture, we would enter ‘no deal’ terrain, except that we almost certainly would not if that is taken to mean the UK crashing out of the EU in to WTO-land in less than 200-days time. The UK is desperate to avoid that situation because of the extreme disruption that it could involve and the EU-27 would not want to witness it either as it would lose €39 billion in UK contributions that it has been counting on (there might be other less crass reasons for wanting to avoid a hard Brexit as well). The search would be on for an alternative interim solution in place of the transition period expected. There are three candidates for this.

One would be extending Article 50. Another would be for the UK to rejoin the European Free Trade Association and through it the European Economic Area for a set length of time (two or three years) to have continued access to the single market and buy time for the best minds on Earth to tackle the chlorinated chicken conundrum. The third (in the abstract) would be to do a Switzerland and be in EFTA but not the EEA and employ that organisation’s free trade agreement with the EU as the short-term solution while the Irish border issue is tackled. By this time next week, BVCA Insight will know if these options deserve further detailed analysis.

Tim Hames
Director General, BVCA


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