25 Apr 2018

Signal and Noise. The Irish border issue, the Customs Union question and the ‘end state’ matter

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After a month in which domestic politics have been dominated by the Salisbury nerve agent attack, the charge of anti-Semitism against the Labour leadership, the air strikes on Syria and then apparent incompetence by the Home Office in the case of the Windrush immigrants and their families, the seemingly forgotten question of Brexit has finally made its reappearance.

If not exactly the chance to welcome back an old friend, it is at least an indication that the matter that has dominated UK politics since the referendum is soon to resume its overwhelming importance.

The past few quiet weeks would probably have occurred even if other events had not rushed to provide the media with alternative material. There was bound to be something of a lull between the agreement on the transition arrangements struck last month and the movement towards formal deliberation on the future relationship between the UK and the European Union, particularly as there are some large loose ends still to be addressed before the actual withdrawal accord is fully done and fully dusted.

It is this that initially forced Brexit back in to the headlines. There were a set of stories last week that the EU remained unconvinced by any of the various schemes that the UK had put forward to ‘solve’ the issue of the management of the Irish border after the transition expires at the end of 2020. As it would have been something of a surprise if this hot potato had cooled so sufficiently to be swiftly disposed of, this was not much of a revelation to be honest.

A more interesting flurry took place when it was suggested (always improbably) that Theresa May was about to engage in a really major revision of policy and seek some means of remaining if not within ‘the’ Customs Union than allied to ‘a’ Customs Union. Perhaps distracted by the Windrush embarrassment, Downing Street was a day or so too slow to crush this notion with the consequence that it looked as if the Prime Minister had mulled a fundamental change in stance only to be driven back by the Brexit camp in the Cabinet.

So what is really happening here? And, crucially, what is the link between the Irish border issue, the Customs Union controversy and the ultimate ‘end state’ to be found between the UK and the EU?

The Irish border issue ‘impasse’

Winston Churchill famously defined Russia as “a riddle, wrapped in a mystery, inside an enigma”. He did so in 1939 (before becoming Prime Minister) and in the context of the short-lived Nazi-Soviet Pact (not the emergence of Stalin as a partner for Britain after Hitler’s invasion of the Soviet Union). In a similar spirit, the Irish border issue and Brexit might be described as ‘a bluff, wrapped in a blackmail, inside a hypocrisy’. It has become an ‘impasse’ not because it is innately one, but at this stage of proceedings (and possibly for some time further), it is convenient for the EU to make it so.

The brutal and candid truth is that the Irish border issue is as complicated or as easy as the parties want it to be. If minded to minimise its impact, this could be achieved in the way that the EU has done in other similar circumstances, such as Norway’s border with the EU, Switzerland’s border with a number of EU nations and a patchwork quilt of arrangements that exist in the Balkans.

If, on the other hand, determined to be awkward about the dispute, it can be turned into a deal-breaker of a sort that could lead to the whole dialogue collapsing and the UK leaving the EU in little more than 11 months’ time with no settlement with the EU-27.

As the result of this would be the hardest of hard borders, such an outcome would hardly be a triumph for the Dublin Government (hence the ‘a bluff’ aspect in the preceding paragraph). Thus, in the end, a deal will be done here.

The one serious challenge is that much of the cross-border traffic in this instance relates to animal livestock and there are limits to the extent to which bar codes and other technological wheezes can assist the situation. Yet even on this one, symbolism, not substance, is of the essence. The EU wants the UK to state that it will obey by the rules established by Brussels on animal livestock. The UK, by contrast, wants to assert that it is sovereign in this domain but will choose to enact standards that are at least as exacting as those of the European Union, but could be more imposing. The practical difference between these two positions is minimal. The political presentation distinction is sizeable.

‘The’ Customs Union, ‘A’ Customs Union, ‘No’ Customs Union etc

The resurrection of the argument about the Customs Union, triggered (sort of) by a completely predictable but non-binding vote in the House of Lords (there are, literally, more Brexit backers in the European Parliament than the Upper House at Westminster) is a rather curious incident.

The accusation is that Mrs May was on the verge of a U-turn on the question, but as such a switch would be less a U-turn than driving her premiership off a cliff at 200 miles per hour to certain death, this seems unlikely. The Customs Union is the very spine of the EEC/EC/EU. It has been its essence since the outset whereas the Single Market did not arrive in fledgling form until about 35 years later. Leaving the EU but staying in the Customs Union is possible but is wildly strange. Even a keen (but not fanatical) Conservative Remainer would find it hard to reconcile with departing.

What appears to have happened is increased (if ambiguous) concern in the Cabinet that the PM might be swayed by senior civil servants who were enticed by a ‘Customs Union Partnership’. This is an entirely untested and less than specific notion which boiled down to the UK being willing to act as tariff collector for the EU on goods passing through the UK en route to the EU if the EU would do the same for stuff moving through the EU to the UK.

As a concept, it is close to what I learnt when I first started on what was still regaled as ‘Fleet Street’ in the mid-1990s as ‘Fifth Bottle Brilliance’, namely an idea that at some point during the fifth bottle of wine during lunch between two hacks struck both of them as inspired, but was obviously ludicrous to everyone else back at the office. If there was ever any prospect of the ‘Customs Union Partnership’ becoming official policy (which I doubt), it is now in the land of the fairies. The Government will have some awkward moments on the Customs Union in Parliament due to the numbers there but, in the end, it will surely prevail.

So what is really going on in all of this then?

Seek the signal, not the noise. What is really going on is what will be the real struggle over the ‘end state’. Despite the official line from the EU that the UK’s exit from it will render Britain an economic cross between the Dark Ages and the Black Death, the real concern for Brussels is that the UK may opt for a radical course of deregulation - and strike out on trade deals with a strong market/neo-liberal bent to them - that comes to be seen as a new template for such treaties.

It is hence in the interests of the EU negotiators (entirely reasonably from their perspective) to tie any post-exit access to the Single Market to regulatory compliance and post-exit trade terms to self-restraint from the UK as to how it approaches future trade alliances.

The core questions here are: what the wording of such an accord might be (specific, high-level or amorphous?); where they would be enshrined (in the withdrawal text, in a ‘side letter’ or just a ‘Gentlemen’s Agreement’?); and what mechanisms the EU would be able to employ in terms of withdrawing access to the Single Market and the Customs Union if it felt that the UK was acting to undermine the operational integrity of either of them.

Crudely put, the more intense the ‘non-aggression pact’ the ‘better’ the bargain the UK can strike with the EU but the more limited its autonomy over de-regulation and on free trade agreements thereafter. That this is toxic territory in Conservative Party politics is obvious. It is the real dilemma that lies ahead for the PM. Once the withdrawal text is secured, it will be omnipresent.

Tim Hames
Director General, BVCA


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