The Irish Taoiseach, Leo Varadkar, has played a strong hand in the Brexit negotiations, bringing in both the Good Friday Agreement and any possible border friction, real or imagined, to try to keep the UK locked into the EU’s economic structure throughout any transition period and then in perpetuity through a future UK/EU Free Trade Agreement.
So far the EU has backed him. The stakes for Ireland and the UK are very high: in a major paper published today by Global Britain and written by Ewen Stewart and myself entitled The Irish economic miracle – fact or fiction?, we show how Ireland benefits from exploiting bona fide arrangements in the international structure for corporate taxation and the freedoms of the EU, and by how much.
The losers are the UK, the other main EU Member States and the USA.
Ireland’s main economic indicators infer a miracle: annual GDP per head at US$78,800, second only to Luxembourg in the EU and some 40% higher than the Eurozone as a whole, and GDP growth of 39% since 2005, double the UK rate and three times the Eurozone average.
Ireland went through a €85bn financial bailout in 2010 but has rebounded dynamically compared to other bailout countries like Greece, Portugal and Cyprus.
Ireland’s economy is a two-speed one, composed of a sluggish onshore one, based on agriculture, manufacturing and a portion of services, and then the offshore one – handling huge financial flows that come into Ireland and go out again. This part has boomed, is the engine of GDP and employment growth, and is based on Ireland having created a tax-advantaged ‘flag of convenience’, whose benefits to its users go far further than the misunderstood low headline rate of Corporation Tax of 12.5%.
Ireland is increasingly using a series of structures for international companies to dog-leg revenues and profits through Ireland that relate to economic activities primarily in other EU Member States, but in non-EU countries as well. The structures are legal, but have the effect of shifting jobs and investments, revenues and profits into Ireland, leaving more menial activities to be carried out in the other countries, minimising their income and social taxes, and Corporation Tax takings. In other words, Ireland’s model works to the detriment of the UK’s and others’ exchequers, and this detriment is one of the significant hidden costs of UK membership of the EU, its Customs Union and Single Market.
So great is the scale of the operation that we estimate that €130bn or 40% of Irish GDP can be accounted for by ‘flag of convenience’ activity.
Once it becomes apparent how significant these distortions are, it is clear why Ireland needs the UK to be fully aligned to its economy. This does not serve UK interests, however.
Were the UK to diverge from EU rules and defend itself against these practices, there would be no advantage for the likes of Apple – which routes over €100bn of its annual revenues through Ireland – or Google and Dell to dog-leg their UK business through Ireland.
Very few of the sales are for goods, and indeed an even smaller proportion are for goods that need physically to move across the Ireland/Northern Ireland border. The overwhelming proportion of the sales are of services and of licence fees for usage of intellectual property. Ireland’s model deserves to be severely challenged, as it is an example of dog-legging business through Ireland for no other purpose than tax management. Global GDP is not increased or decreased by one cent, but the Irish government is getting a disproportionately large slice of the pie. That slice is being taken directly off the plates of other countries, with the UK in the front rank.
Raising the claim that that regulatory alignment is required to meet the terms of the Good Friday Agreement – and putting the issue of a ‘hard’ border on the island of Ireland so high up the negotiating agenda – are both convenient red herrings, obfuscating the scale and substance of the trade that Ireland is seeking to protect.
Ireland’s ‘flag of convenience’ model is challenged by any form of Brexit, particularly by a “No Deal” one and explains why its government has been so willing to work on the EU’s behalf to frustrate and deny Brexit in any meaningful sense. It’s called a vested interest and it’s high time we all recognised that.
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In all the discussion about the Irish border, most of us can end up feeling pretty bamboozled by the whole thing. However, there are some facts that are worth remembering which actually provide the keys to a future solution.
Firstly, it is worth reminding ourselves of the present situation. The UK and Republic of Ireland have a Common Travel Area which means that there is completely free movement of people between the UK and the Republic. There are different currencies, VAT rates, agricultural support regimes and rates of Excise duty applicable on either side of the border.
If a Northern Irish trader exports something to the Republic, they invoice it without VAT under the despatch code and will then show on their monthly sales list the value sold to that customer in the preceding month. The customer in the Republic will declare the import VAT at the applicable Irish rate on their VAT return for the period in question. This system is policed by the customs authorities on either side of the border and throughout the EU by random inspections and the analysis of submitted Sales Lists and “summary declaration” Intrastat reports.
Interestingly, if the Guinness factory ships a consignment to a customer in Northern Ireland there is not only VAT but also Excise Duty to be paid in Northern Ireland. Excise Duty is not VAT and has VAT charged on it and it is applicable principally to alcohol, tobacco and fuel. This is not collected at the border, as in days of old, but from the customer after the consignment has been received. This is the culmination of a chain of steps that starts with the shipper advising the customs authorities in the Republic that the Guinness is being shipped and its destination. It relies on co-operation between customs authorities on both sides of the border but has been proven to work well. Enforcement takes places with spot checks by customs officials and trading standards inspectors as well as analysis of the traffic taking place as evidenced by the document trails.
Fuel is another interesting one and shows how even with an open border at present, the authorities on both sides have been putting enormous efforts into controlling the illicit use of untaxed Agricultural Diesel. Many have witnessed officials from the Republic stopping cars to check that they are running on taxed fuel.
The Prime Minister has proposed an elegant way of addressing problems raised by the EU and others in order to keep the border open and trade free. However, his plans are really not necessary as even in the event of a “No Deal” their concerns can easily be dealt with.
Firstly the Common Travel Area predates our accession to the EU and therefore means than all non-trade traffic will continue to move back and forth without impediment. Stories of people who work on the opposite side of the border from where they live, being prevented from doing so, is therefore misplaced.
Secondly, there is no – and I repeat no – requirement by the WTO, for either side to install any border infrastructure. What the WTO does require is that the law applicable to goods crossing the Northern Ireland border is the same as that applicable to goods crossing the UK border elsewhere.
The problem therefore boils down to an accounting issue: how do we make certain that the relevant tariffs are paid and that the goods sold by Northern Irish businesses into the Republic and EU Single Market comply with its rules. The vast majority of the traders in question will have turnovers of more than £85,000 and therefore will be registered for VAT, subject to VAT rules and required to make monthly or quarterly VAT returns.
As we saw above, we already have two very good systems for handling the collection of UK and Republic of Ireland Excise duties and accounting for the VAT on cross-border trade. These systems are entirely electronic, require no border infrastructure and are fully tried and tested. Therefore by making a few small changes to the Sales List and Intrastat supplementary declarations, it would be perfectly possible to collect any tariffs due. HMRC has already developed a system along these lines for importers to use in the event of a “No Deal” called TSP, Transitional Simplified Procedures.
Making sure that goods entering the EU Single Market via the Republic meet the applicable standards and regulations of the Single Market is a bit of a non-issue. It is always up to an importer who seeks to sell goods in their market to make sure that those goods meet the requirements of the laws and standards of that market. When procuring goods, they will be aware of this and therefore require of the supplier to only supply the correct versions. At present this is policed by national authorities on the whole as a result of intelligence and away from borders.
Trade is determined by supply and demand. Whether they are seen as hard or soft, open or shut, borders are simply one of a number of steps in the process of the willing seller supplying what the willing buyer wants. I strongly believe that if there were a will from the EU and Dublin to find a way to co-exist with an open border, then there are a number of ways – and the simplest are already being used at this moment by their own officials.
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It’s hard to be surprised by anything surrounding Brexit these days, but sure enough the BBC did their best last week. This time it was the turn of playwright Bonnie Greer to weigh in on the debate as a panellist on this week’s edition of Question Time. What followed was fitting of an Alanis Morrisette song…
Firstly, isn’t it ironic that an American playwright would discuss international diplomacy in the first place? But especially a playwright so uninformed as to talk about the potential for the UK negatively impacting Ireland in the same week that the US did in fact negatively impact all of Europe.
For this week the United States had $7.5 billion worth of tariffs approved that will affect Ireland directly. The WTO approved 25% tariffs on Irish food and beverage products, meaning Kerrygold and Baileys will suffer significantly. This is a given, it’s been approved and it’s happening. However, Greer still feels compelled to comment on hypothetical future deals that may happen between the UK and the US?
However, I will forgive Greer for knowing nothing about international trade deals; after all, she is a novelist. But where she stepped over the line was with regard to the Good Friday Agreement. She incorrectly referred to it as a “truce” before going on to claim the peace process happened after the US and the EU sat the British down and told them to broker a deal. I had to pause at this juncture: was Ms. Greer brainstorming ideas for a sci-fi novel?
How dare anyone take from the peace agreement the tireless work of the Irish, particularly Bertie Ahern, and other unnamed civil servants who worked for years to get peace in Northern Ireland. Furthermore, the work of John Major and Tony Blair was instrumental in this whole process and the Good Friday Agreement should be a beacon of what we can achieve when working together, not a virtue signal for the Americans.
While I acknowledge that Bill Clinton broke ground in visiting Northern Ireland and he certainly helped, Greer’s comments were so far off the mark as to verge on absurdity. Clinton’s work on the peace process was important, but it was as a facilitator and not a heavy-handed US grand intervention. Yet these comments grew traction in the media and so the news cycle predictably lauded her. This isn’t the first time that unfortunate comments about Northern Ireland gained media attention: Leo Varadkar made similarly blasé remarks in January. However, at least Varadkar is relevant to Brexit and knew what he was saying. Bonnie Greer’s comments served no agenda other than her own and that of sensationalist writers looking for a quick puff piece to fill their word count (by the way, thanks Ms. Greer!).
The most spectacularly ironic comment was made by Greer in relation to a Polish friend in London. She told the story of a woman who was afraid to speak Polish with her daughter for fear of being attacked which is certainly sad and in no way right. Yet, this story was just another sign that Greer has no right to be talking about Brexit and Anglo-Irish relations; after all, this past summer Irish people with families and children in the US were forcibly arrested and removed from their families without warning. There was no mention of this from Greer, only an insulting platitude that the Chicago river is dyed green for St. Patrick’s Day. Really Bonnie, what good is that when you won’t be able to buy a Baileys coffee to keep yourself warm?
The reporting on Brexit and Ireland has increasingly become disparaging towards the British and is failing to be constructive. Greer’s misinformed remarks are the latest in a litany of damaging articles and publications on Anglo-Irish relations. What all these pieces have in common is the assumption that we Irish don’t care about the UK or their future or that they owe us nothing. That may be true, many people I talk to don’t care and certainly we don’t owe them anything.
But this monothetic way of thinking is wrong, because we owe something to the nearly 100,000 Irish-born people employed and living in the UK. We owe it to our countrymen and women to be concerned for their futures and livelihoods and misrepresenting the situation in public is not looking after them. Selfishly I want a prosperous Britain for my family in London, a place that I imagined wishfully as my father told stories of a lost summer spent working as a barman.
Let’s not listen to hyperbole from a talk show panellist – whose native country has catastrophic border relations. Let’s work together to maintain a sustainable relationship with Britain and Northern Ireland through this process.
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Further to this piece of 19th September investigating the risk of increased smuggling across the Irish border after Brexit, we set out below a legally operable cross-agency operational plan to be established between the Customs and Enforcement Agencies of the United Kingdom, Ireland and the European Union to protect both the EU Single Market and the UK Border from abuse by illegal activity after the UK leaves the European Union on 31st October 2019. It should be read in conjunction with the Prosperity UK report on Alternative Arrangements for the Irish border, and associated documents.
The draft Withdrawal Agreement and Political Declaration, and the Belfast (Good Friday) Agreement, set out the intention and legal frameworks by which the British, Irish and EU Member States may to work together to protect their respective countries and communities from international organised crime and smuggling, after the UK withdraws from the EU.
Article 43 of the Withdrawal Agreement requires the market surveillance authorities of the EU Member States and the UK to exchange without delay any information on any goods placed on the market during the transition period.
Article 50 of the Withdrawal Agreement allows the UK to have access to relevant networks, information systems and databases for this purpose.
Article 62 of the Withdrawal Agreement provides for ongoing police and judicial collaboration in criminal matters.
Article 63 of the Withdrawal Agreement provides for ongoing law enforcement cooperation proceedings, police cooperation and exchange of information including cross border surveillance.
Belfast (Good Friday) Agreement
Strand 3 of the Belfast (Good Friday) Agreement established a British–Irish Council (BIC) and a British–Irish Intergovernmental Council (BIIC) to facilitate cooperation between all law enforcement agencies in both the United Kingdom and Ireland on security matters.
Paragraph 19 of the Political Declaration recalls the determination of the parties to replace the backstop solution in Northern Ireland by a subsequent agreement that establishes Alternative Arrangements the absence of a hard border on the island of Ireland on a permanent footing.
Paragraph 26 of the Political Declaration states that the Parties will put in place ambitious customs arrangements in pursuit of their overall objectives; including through the exchange of information to combat customs fraud and other illegal activity.
Paragraph 82 of the Political Declaration states that the future relationship will provide for comprehensive, close, balanced and reciprocal law enforcement and judicial collaboration on criminal matters, with the view to delivering strong operational capabilities for the purposes of the prevention, investigation, detection and prosecution of criminal offences.
Paragraph 84 of the Political Declaration states that the future relationship should cover arrangements across three areas of cooperation: data exchange, operational cooperation between law enforcement agencies and judicial cooperation on criminal matters, and anti-money laundering and counter-terrorism financing.
Paragraph 85 of the Political Declaration recognises that effective and swift data sharing and analysis is vital for modern law enforcement; and permits the parties to put arrangements in place to reflect this in order to respond to emerging threats, disrupt terrorism and serious criminality, facilitate investigations and prosecutions, and ensure the security of the public.
Paragraph 90 of the Political Declaration enables the parties to consider further arrangements for the practical cooperation between law enforcement agencies, such as joint investigation teams.
Paragraph 120 of the Political Declaration states that the future relationship should be based upon an overarching institutional framework that allows for specific governance arrangements in individual areas.
In order to mitigate the potential risks of smuggling posed by any tariff differentials in the transition period – and to investigate any evasion of Anti-Dumping Duties into the EU single market – the relevant enforcement agencies in the UK, Ireland and the EU must be empowered to act in accordance with the aforementioned provisions to prevent criminal activities as well as to monitor, investigate, disrupt, deter and prosecute offenders.
Such cross-border activity already exists in non-European jurisdictions such as the US/Canada border – and between EU and non-EU Member States at the Norway/Sweden Border – based on bilateral agreements. In this context, the EU (Sweden)–Norway technical cooperation has several elements that have been in operation for some considerable time, with successful results.
The key to successful law enforcement in disrupting and preventing cross-border crime lies in the timely acquisition of accurate data; and a collaborative approach between customs and enforcement agencies on both sides to analyse and refine it into intelligence packages to inform interventions, which are then shaped and targeted for maximum impact.
The ending of free movement of goods between the UK and the EU – and the consequential access to commercial data through the increase in import and export declarations – on both sides provides significant opportunities for law enforcement agencies to identify risk-based intelligence profiles to protect their respective communities from crime.
Modern-day border checks rely entirely upon intelligence-led interventions, which may take place at various points and timeframes in the supply chain and – with appropriate legal authorities – by agents from multiple jurisdictions. Targeted interventions are far more effective than routine physical stop and search at the border itself. These interventions may take place in facilities at the point of origin, transit or delivery, based on strategic and tactical intelligence assessments.
In order to maximise these opportunities, the relevant law enforcement agencies must be empowered – in so far as the legal framework permits it – to share data and intelligence with each other. Furthermore, the parties should establish a legally operable framework on the island of Ireland which grants cross jurisdictional powers to the customs and border agencies to intervene.
In order to give effect to these measures the parties should establish governance arrangements under the existing BIIC structure, and under paragraph 120 of the Political Declaration, to give effect to a joint border action plan between the parties.
The aim of the joint border action plan would be to establish mechanisms and structures between the customs and law enforcement agencies from all sides to identify new and emerging threats to the border security arising from the withdrawal of the UK from the European Union. This would be based entirely upon the aforementioned provisions of the Withdrawal Agreement, Political Declaration and Good Friday Agreement to facilitate a deep and meaningful international collaborative approach to the investigation, disruption and prosecution of all forms of cross border crime.
International best practice already demands that law enforcement agencies work across borders to investigate and disrupt international organised crime and smuggling. The EU has long established structures for collaboration between Customs agencies from Member States which include intelligence-sharing, officer exchange programmes and a joint interventions strategy. Such arrangements are not restricted to EU Member States; they extend more widely to source and transit countries through third country agreements, and international law enforcement structures such as Interpol and the World Customs Organisation.
Lessons can be learned from other countries on the development and implementation of joint border action plans which do not require membership of a Single Market or Customs Union between the parties.
In North America, the US – Canada “Beyond The Border” initiative established comprehensive arrangements for joint working between US and Canadian law enforcement agencies to disrupt cross border crimes. This includes the development of National Targeting Centres on both sides of the border with information sharing agreements to identify external threats; officer exchange programmes; and integrated border enforcement teams empowered to develop and implement investigations and operations on both sides.
In Europe, the Norway-EU (Sweden) border permits single inspections and cross-border investigations by Customs agents on either side of the border. There is a framework for exchange of intelligence and risk management data, profiles, patterns on all levels – namely strategic, tactical and day-to-day operational level. Both countries work actively to manage and monitor the international supply chain based on agreed objectives; and to share access to all relevant intelligence and risk management data.
Given that the UK and Ireland are starting from a point of regulatory conformity – and that both the EU and the UK have already committed to ongoing collaboration on matters of criminality and security – work should commence immediately on the establishment of a joint border action plan between all the relevant enforcement agencies on both sides.
Terms of reference should include:
- A joint border threat and risk assessment, covering the concerns of both sides including the protection of the integrity of the UK Border and the EU Single Market;
- A deep and comprehensive data-sharing agreement between the parties which respects the EU regulatory framework whilst simultaneously enabling the parties to develop joint analytical units and intelligence packages;
- A joint targeting centre on the island of Ireland comprising of customs and law enforcement agents from both sides, with a joint governance structure aligned to the BIIC and the new joint UK/EU governance structure;
- A commitment that both countries should individually and collectively work together to increase access to relevant intelligence and risk-management data from other partners and the international supply chain; and
- Development of codes of practice for interventions on either side of the border, and at the airports, ports and harbours on the islands of Ireland and the UK, in furtherance of the joint ambition of the parties to protect the safety and security of their respective communities.
We commend these proposals to the attention of the respective negotiating teams, for their attention and consideration.
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The path to a negotiated Brexit deal is now broadly dependent on the statesmanship of one man.
The Prime Minister’s letter to the EU with a new Brexit offer has landed well in the UK with the support of the DUP, the ERG, Remain-supporting Tories, an important number of Labour MPs, even possibly some Liberal Democrat MPs. So there is a path to a parliamentary majority.
In the EU, there has been opposition from Guy Verhofstadt, the European Parliament’s Brexit co-ordinator, but as we now know from his own words, he is an EU imperialist for whom Brexit is an opportunity to acquire new territory on the fringe of his Empire. Hopefully he will remain on the fringe of EU thinking. Wiser EU heads, including Jean-Claude Juncker, Michel Barnier and Angela Merkel, seem to be making more constructive noises.
The key decision-maker now is the Irish Taoiseach, Leo Varadkar. Does he recognise the concessions the UK has made and push forward to more serious negotiations in the tunnel? Or does he reject the offer and open the path to months or perhaps years more of uncertainty which will plague both the UK and Irish economies?
Unfortunately, the Remain lobby in the UK has made the latter path more tempting for him with their efforts to take away the threat of No Deal and so throw Prime Minister Johnson naked into the conference chamber. However, even with the ropes tied around Johnson’s wrists, a failure of the negotiations at this stage would carry significant uncertainty for both Ireland and the EU.
Mr Varadkar has said he is pleased with the concession that Boris Johnson has made in goods alignment, taking Northern Ireland a long way towards a full alignment with the Single Market.
Two major issues remain. First, Mr Varadkar is not comfortable with the DUP’s wish to remain part of the UK’s customs arrangements. If and when the UK negotiates differential tariff rates there is a risk of an increase in smuggling rates. Prosperity UK have written on this extensively. Three types of smuggling risks already exist on the Irish border: human smuggling, prohibited goods (like drugs, firearms etc) and restricted goods where there is already regulatory divergence on excise duties (e.g. alcohol tobacco, fuel, oil and gas). Adding the risk of tariff variance to this can surely not be a deal breaker. Is Mr Varadkar really worried about the undetected smuggling of cars across the border should the UK operate on a zero-tariff basis instead of the EU’s 10% wall?
As Tony Smith, former Head of both UK and Canadian border controls made clear at our recent Alternative Arrangements Commission conference in Dundalk, borders are no longer physical frontiers, they are a series of transactions. It is time to embrace the path of progress and technology.
If Mr Varadkar is not happy either with a time-limited backstop or with the facilitation provided by alternative arrangements, then the question that he has to answer is: is there any date or scenario for which you accept customs sovereignty for Northern Ireland ?
The other issue is the one of consent. Boris Johnson has engaged much more intensively with the DUP than Theresa May even began to, and the result is a proposal which grants Stormont consent on the way into the four-year alignment period and also every four years to its continuation.
This leaves the question of EU or Irish consent. A time-limited backstop would not appear to be sufficient for the EU as it theoretically allows the 2021-2025 arrangement to terminate without any EU sign-off on the alternative arrangements that have been put in place. This is why Prosperity UK developed a draft protocol for agreement by both sides on the conditions that need to be met. We understand that a protocol of this kind has been included in the UK proposal. This is the path to legal operability which the EU has requested. It should grant Leo Varadkar the protections he needs – and if it does not I am sure the UK would be open for negotiations in the tunnel.
As Boris Johnson said when he visited the Taoiseach in Dublin, this is a time for Statecraft. Let us hope he rises to the occasion.
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What follows is the text of the letter Boris Johnson has today sent to Jean-Claude Juncker, setting out the UK Government’s proposals for a new Protocol on Ireland/Northern Ireland
A FAIR AND REASONABLE COMPROMISE: UK PROPOSALS FOR A NEW PROTOCOL ON IRELAND/NORTHERN IRELAND
There is now very little time in which to negotiate a new Agreement between the UK and the EU under Article 50. We need to get this done before the October European Council.
This Government wants to get a deal, as I am sure we all do. If we cannot reach one, it would represent a failure of statecraft for which we would all be responsible. Our predecessors have tackled harder problems: we can surely solve this one.
Both sides now need to consider whether there is sufficient willingness to compromise and move beyond existing positions to get us to an agreement in time. We are ready to do that, and this letter sets out what I regard as a reasonable compromise: the broad landing zone in which I believe a deal can begin to take shape.
Our proposed compromise removes the so-called “backstop” in the previous Withdrawal Agreement. I have explained the difficulties with this elsewhere, including the fact that it has been rejected three times by the UK Parliament. Equally importantly in this context, the backstop acted as a bridge to a proposed future relationship with the EU in which the UK would be closely integrated with EU customs arrangements and would align with EU law in many areas. That proposed future relationship is not the goal of the current UK Government. The Government intends that the future relationship should be based on a Free Trade Agreement in which the UK takes control of its own regulatory affairs and trade policy. In these circumstances the proposed “backstop” is a bridge to nowhere, and a new way forward must be found.
Accordingly we are now proposing a new Protocol on Ireland/Northern Ireland. We are delivering the draft legal text of this Protocol to Task Force 50 today. I attach an explanatory note giving further detail of the proposal and I am making this letter and that note public today.
It is based around five elements.
First and foremost, our proposal is centred on our commitment to find solutions which are compatible with the Belfast (Good Friday) Agreement. This framework is the fundamental basis for governance in Northern Ireland and protecting it is the highest priority for all.
Second, it confirms our commitment to long-standing areas of UK/Ireland collaboration, including those provided for in the Belfast (Good Friday) Agreement, but also others, in some cases predating the European Union: the Common Travel Area, the rights of all those living in Northern Ireland, and North/South cooperation. These were set out in the previous Protocol and should be maintained in the new one.
Third, it provides for the potential creation of an all-island regulatory zone on the island of Ireland, covering all goods including agrifood. For as long as it exists, this zone would eliminate all regulatory checks for trade in goods between Northern Ireland and Ireland by ensuring that goods regulations in Northern Ireland are the same as those in the rest of the EU.
Fourth, this regulatory zone must depend on the consent of those affected by it. This is essential to the acceptability of arrangements under which part of the UK accepts the rules of a different political entity. It is fundamental to democracy. We are proposing that the Northern Ireland Executive and Assembly should have the opportunity to endorse those arrangements before they enter into force, that is, during the transition period, and every four years afterwards. If consent is not secured, the arrangements will lapse. The same should apply to the Single Electricity Market, which raises the same principles.
Fifth, and finally, under these arrangements Northern Ireland will be fully part of the UK customs territory, not the EU Customs Union, after the end of the transition period. It has always been a fundamental point for this Government that the UK will leave the EU customs union at the end of the transition period. We must do so whole and entire. Control of trade policy is fundamental to our future vision.
This is entirely compatible with maintaining an open border in Northern Ireland. Goods trade between Northern Ireland and Ireland makes up a little over one per cent of UK-EU total trade in goods. It is entirely reasonable to manage this border in a different way. Any risks arising will be manageable in both the EU single market and the UK market, particularly as all third country imports will continue to be controlled by the EU and UK customs authorities.
We are proposing that all customs processes needed to ensure compliance with the UK and EU customs regimes should take place on a decentralised basis, with paperwork conducted electronically as goods move between the two countries, and with the very small number of physical checks needed conducted at traders’ premises or other points on the supply chain. To enable this, we should both put in place specific, workable improvements and simplifications to existing customs rules between now and the end of the transition period, in the spirit of finding flexible and creative solutions to these particular circumstances. These arrangements can be underpinned by close cooperation between UK and Irish authorities. All this must be coupled with a firm commitment (by both parties) never to conduct checks at the border in future.
Overall, we recognise that our proposals will mean changes from the situation that prevails in Ireland and Northern Ireland now. Our common task is to make sure that these changes entail as little day-to-day disruption as possible to the current situation. I believe that our proposals will achieve that.
Finally, in order to support Northern Ireland through this transition, and in collaboration with others with an interest, this Government proposes a New Deal for Northern Ireland, with appropriate commitments to help boost economic growth and Northern Ireland’s competitiveness, and to support infrastructure projects, particularly with a cross-border focus.
Taken together, these proposals respect the decision taken by the people of the UK to leave the EU, while dealing pragmatically with that decision’s consequences in Northern Ireland and in Ireland.
- They provide for continued regulatory alignment for a potentially prolonged period across the whole island of Ireland after the end of the transition period, for as long as the people of Northern Ireland agree to that.
- They mean that EU rules cannot be maintained indefinitely if they are not wanted – correcting a key defect of the backstop arrangements.
- They provide for a meaningful Brexit in which UK trade policy is fully under UK control from the start.
- They ensure that the border between Northern Ireland and Ireland will remain open, enabling the huge gains of the Belfast (Good Friday) Agreement to be protected.
I hope that these proposals can now provide the basis for rapid negotiations towards a solution, together with finalisation of the necessary changes to the Political Declaration reflecting the goal of a comprehensive Free Trade Agreement, so that an Article 50 agreement can be reached, and the UK can leave the EU in an orderly fashion on 31 October. This will allow us to focus on the positive future relationship that I believe is in all of our interests.
I am copying this letter and paper to other members of the European Council and to Michel Barnier.
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Is there an alternative to the Irish backstop?
Even before the Withdrawal Agreement was finalised last year this question has been central to the Brexit debate. The EU and the Irish Government have insisted on the backstop as a guarantee of maintaining an open border in Ireland. Although they have pledged to look at alternative arrangements and hope the backstop never has to be used, they still see it as the benchmark against which all other solutions must be measured.
The new Government under Boris Johnson has rejected this logic. In doing so, the Prime Minister has been accused of reneging on commitments made by his predecessor, causing great concern in Dublin and Brussels.
In recent weeks, the Government has outlined a possible compromise package, involving a mixture of alternative arrangements to the backstop as well as an all-island regulatory zone for agri-food purposes. While the Irish Taoiseach, Leo Varadkar, has said that “there is still a very wide gap” between the EU and the UK, the fact that talks are continuing is important. The Government is now expected to put forward written proposals after the Conservative Party conference.
Already there are signals coming from Brussels and other capitals that the proposals will fall short of what the EU expects. The EU has set a very high bar for alternative arrangements. They seem to expect the Government to agree to something like a Northern Ireland-only backstop, a solution which has been rejected by Johnson on numerous occasions.
Whatever form a solution takes, there is clearly more work to be done in addressing what Johnson describes as the ‘anti-democratic’ nature of the backstop. The Prime Minister now talks about the importance of securing the ‘consent’ of the people of Northern Ireland as the key to unlocking any deal.
Open Europe’s new report, Brexit and the Belfast (Good Friday) Agreement: Finding a way through the backstop impasse, looks at this issue in some detail. It recognises that the Irish Government – and Nationalists in Northern Ireland – have legitimate concerns about Brexit and the future of the border, but also that Unionists have a very strong case for objecting to the backstop. The question is not about whether the existing approach breaches the Agreement but about finding a way through the impasse. This is a political problem and one that requires an imaginative response from the EU and Ireland as well as the UK.
Ultimately, some special arrangements for Northern Ireland after Brexit are likely. However, the suggestion that the existing backstop offered the ‘best of both worlds’ to Northern Ireland was always questionable, since it was designed to ensure that alignment with the EU was the default in all scenarios. There is a strong argument for saying that any special arrangements for Northern Ireland cannot be decided until there is greater clarity about the future EU-UK relationship itself.
What is possible now is to offer a roadmap about how the decisions will be taken as the negotiations proceed. One way of doing so is to set out a clear role for the Northern Ireland Assembly when divergence becomes an issue. Any decisions about alternative arrangements should also involve the North-South Ministerial Council, one of the institutions established under the Good Friday Agreement. Already the UK and the EU have accepted that these institutions should be involved in the process, but this was merely a domestic political commitment on the part of the UK.
An enhanced Stormont Lock is not about giving the DUP ‘veto’ as the Irish Government fears, but about ensuring that decisions about the future of Northern Ireland are not imposed from the outside. It is also about respecting Northern Ireland’s status as part of the United Kingdom consistent with the consent principle in the Good Friday Agreement itself. The existing approach of the EU has overlooked this key point.
In the long term, it may be that divergence between Great Britain and the EU becomes so great that a hybrid model for Northern Ireland is not possible, and that it is forced to choose which regulatory regime it will follow. At that point it may be necessary to put the question to a referendum, as a very last resort.
But forcing people to make this decision now, at this stage in the Brexit process, would be problematic. The aim of all sides must be to find a solution that is acceptable to everyone, balancing the need for an open border with the concerns of the Unionist parties.
Would Ireland agree to such a package? Ultimately, the goodwill of the Irish Government is needed if the UK is to get a Brexit deal. The Nationalist parties in Northern Ireland also need to be reassured that the process would work for them. There is a risk that a Stormont Lock would simply put more strain on local politics, making a return to devolved government more difficult. That said, imposing a solution on Northern Ireland without addressing the consent mechanism would be inconsistent with the aim of getting the institutions up and running again.
In the end, an unratified Withdrawal Agreement offers no guarantees over the border question at all. Opting for a no-deal Brexit in the expectation that the UK will come back to the original backstop afterwards would not be a responsible route for the Irish Government to take.
If No Deal is to be avoided, there needs to be a compromise solution. This is not about Ireland backing down, but about finding a way to return to the principles of the Good Friday Agreement and restoring the bilateral relationship. It is about identifying a way forward that allows the parties in Northern Ireland to work together in the post-Brexit environment.
During a recent media interview, Fianna Fáil senator Mark Daly said that in the event of Brexit, the border between the United Kingdom and the Republic of Ireland would effectively promote a “smugglers charter” which would transform the Irish border to a “back door into Europe”. Other commentators have argued the risk of smuggling can only be mitigated by complete regulatory alignment between the UK and the EU, within the Customs Union. Or by a “hard border” on the island of Ireland or in the Irish Sea.
It is certainly true that the prime motivation for modern-day smugglers is financial gain. It is also true that any regulatory divergence and consequential controls – such as those that might ensue at the Irish border post-Brexit – can create an environment which may foster smuggling. However, it does not follow that smuggling can only be mitigated either by full regulatory alignment on either side; or by physical checks at a physical frontier on the island of Ireland or in the Irish Sea. In fact, there is a paradigm shift underway in global smuggling techniques, which demands an entirely different approach to customs and border enforcement.
Smuggling is a form of international organised crime, where perpetrators have no regard for the traditional Westphalian model of borders. Globalisation – and new initiatives like e-commerce, the use of fast parcels, dronesingle makrets and so on – demand nothing less. The days of customs officers sitting in kiosks at border crossing points are being replaced rapidly by alternative checks and interventions based on risk assessment and intelligence. In order to keep up with the smugglers, enforcement agencies need to adopt new approaches which transcend traditional border controls. This has already been confirmed by recognised border experts around the world and by the World Customs Organisation.
Therefore, in considering the additional risks posed to the United Kingdom, Ireland and the wider EU Single Market by smuggling in a post-Brexit era, we need to look more closely at each risk in the wider context of modern-day and future international border management strategy.
Anti-Smuggling – General Principles
Firstly, it is important that the concept of smuggling is denounced on all sides and by all parties. The moral high ground for romanticising smuggling as some form of heroism to defeat onerous tax laws for the greater good of communities are long gone. Smugglers are criminals and they move everything that is profitable across borders with no hesitation or any ethics involved – be it drugs, tobacco, weapons, trafficking victims or terrorists.
Secondly, smuggling can take place at both local, regional and international level. At local level it might be simply opportunistic; at regional level co-ordinated; and at international level sophisticated. In law enforcement, these offences are graded under the National Intelligence Model (NIM) as level 1, 2 or 3 crimes. This means that the law enforcement agencies must adopt a co-ordinated and intelligence-led layered approach to tackling it, at all levels and across boundaries.
Thirdly, border agencies now have a depth and breadth of skills in areas of data analytics, intelligence, risk-profiling and communications that are unprecedented. The collection of current and emerging data in any new compliance framework can be refined, adjusted and converted into intelligence-led interventions at breakneck speed. By establishing and connecting government data systems we can use advanced pattern recognition to “remove the haystack” that comprises most genuine traders, leaving the miscreants with fewer places to hide – particularly if the intelligence moves in all directions and across all the NIM levels.
Fourthly, enforcement agencies enjoy new options not previously available to their predecessors. International best practice views modern-day border management through the lens of the “multiple borders strategy”. This means that the border is no longer seen as a line of desks or kiosks at an airport, port or border crossing point, but as a series of transactions which commence at the first point of movement and continue throughout the journey (including border crossing) to the point of destination. By capturing and verifying data at the outset – and sharing it across agencies – we can develop packages for intervention which may be executed prior or after despatch, or at any point along the way. Indeed, best practice demands nothing less. For example, over 95% of cocaine seizures in England and Wales were made by police forces away from the border, not by UK Border Force at the ports.
Irish Border: Current Risk of Smuggling
Turning to the Irish Border, there are already inherent risks posed by smuggling that will remain regardless of any Brexit outcome. These fall within three broad categories: human smuggling, prohibited goods and restricted goods.
There is no evidence of an incentive for human smuggling between Northern Ireland and Ireland. There is agreement on both sides that the provisions of the Common Travel Area (CTA) – which allows for the free movement of people within it – will prevail after Brexit. The UK continues to face a significant threat from human smugglers at its border with France and ongoing bilateral work between the UK and French authorities is underway to disrupt it. But there is no evidence of human smuggling into Ireland, which retains the Schengen opt-out and conducts full checks on all people arriving from outside the CTA (including the EU).
There is no evidence that either the UK or the EU intends to relax controls on prohibited goods such as controlled drugs, firearms, endangered species, indecent or obscene materials. Threats to the external borders of the islands of Ireland and Great Britain posed by such goods will remain the same. It is important that, regardless of the political outcome, enforcement agencies on all sides continue to work with each other and with colleagues in Europe, including Europol and Eurojust, at level 3, to intercept such items at their external borders at airports, ports and harbours at the perimeter of the islands, as they do now – and to conduct joint cross-agency investigations within both territories to disrupt criminal activity.
There is already regulatory divergence on excise duties between the UK and Ireland on alcohol, tobacco, and energy products (fuel, oil, gas etc). As such, there are already incentives for smuggling, especially if prices diverge to such an extent that the financial case is made. This has manifested itself in Ireland in the past through a black market in fuel smuggling. The risk of smuggling in these areas remains the same, as does the mitigation strategy. This demands ongoing collaboration between the enforcement agencies in both Ireland and the UK at all NIM levels, under the Belfast Agreement, to disrupt it.
Irish Border: Additional Risks of Smuggling posed by Brexit
Let us turn then to Brexit and the specific additional risks of smuggling that may accrue from it.
Any tariff differential post-Brexit is most likely to occur in the sanitary and phytosanitary (SPS) and agri-food sector, which might provide a financial incentive to smuggle such goods from North to South. This raises an incentive for smugglers to avoid payment of any EU tariffs by making use of the open border to do so (thus undermining the integrity of the EU Single Market). In order to mitigate this risk, the UK government should establish a legislative framework with mutual obligations to enforce EU law. This would make strong use of anti-circumvention laws with significant criminal penalties in the UK for any person seeking to avoid the EU tariff. Investigations on either side of the border would follow the joint frameworks established under the Belfast Agreement, which would include cross-border jurisdiction to investigate and intervene on either side.
Non-conforming goods on technical standards
Both the UK and the EU have stated an intention to maintain similar regulatory standards on goods – and we expect a high degree of deemed equivalence in an ensuing Free Trade Agreement. Checks on goods entering either the UK or Ireland by ship or aircraft will follow the current risk management frameworks that already exist within the jurisdictions of the UK Border Force and Irish Customs – and the risk of criminal groups placing non-conforming goods on either market would also be mitigated by criminal penalties enforceable on either side. So if, for example, a distributor of electrical products knowingly places a non-confirming product on the market in Ireland, they would immediately commit a criminal offence with significant penalties enforceable by both the UK and Irish authorities.
Violations of Anti-Dumping Orders
In order to protect the EU Single Market, the EU Commission will need preserved powers to investigate any complaints that products may be entering Ireland from the UK market at a price lower than the normal value of the product, and to enforce “anti-dumping” legislation. Such investigations normally arise following a complaint from a European producer, but the Commission may act of its own volition. In order to support the EU Commission in any such circumstances, the UK should pass legislation to make it an offence to breach EU Anti-Dumping legislation (and its anti-circumvention orders) in this way which is enforceable by both UK and EU agencies.
In each of the above scenarios it will be important to establish joint intelligence and enforcement structures and cross-jurisdictional powers between the UK and Irish enforcement agencies. Given that both sides have endorsed the provisions of the Belfast Agreement, the structures established therein for North/South and East/West collaboration are well-suited for this purpose. This is without prejudice to ongoing collaboration between the UK and the EU on anti-smuggling initiatives across both jurisdictions.
Beating the Smugglers
Smuggling is an increasingly complex business, with huge financial incentives for the criminal gangs behind it. We ignore the risks at our peril. However, to suggest that Brexit will create a “smugglers’ paradise” on the island of Ireland undermines the work that already takes place every day – not just by customs but by a variety of law enforcement agencies – across these islands and beyond. Border Control is increasingly operating at multiple levels and across multiple dimensions; in fact, this is essential best practice if we are to defeat the smugglers. The UK Border Force is already a world leader terms of global best practice: its academies regularly host delegations from border agencies around the world seeking to identify best practice in anti-smuggling techniques. A great deal of work already goes on behind the scenes to share market intelligence across sectors at local, regional, national and international boundaries. A close relationship between enforcement agencies in the UK, Ireland, the EU and beyond – united behind a common purpose to defeat smuggling at all levels – is our most potent weapon.
By making best use of structures already established under the Belfast Agreement, the UK and Irish enforcement agencies already have a very sound foundation upon which to build. The ability of governments to check goods arriving in the ports and harbours of both islands – and to develop joint intelligence and targeting systems in country at local, regional, national and international level – represents a significant advantage over other border agencies around the world which are faced with similar challenges.
Properly managed – and with goodwill on all sides – we can turn the “smugglers’ charter” into the “smugglers’ nightmare”. And we don’t need a hard border on the island of Ireland or in the Irish Sea to do so.
The post How to ensure the island of Ireland is no ‘smugglers’ paradise’ post-Brexit appeared first on BrexitCentral.
Below is the text of the statement Boris Johnson just delivered in Dublin alongside Taoiseach Leo Varadkar, a video of which can be found here or at the bottom of the text.
It is wonderful to be here. And I thank you very much for the warm welcome you’ve given us. You and I first met a few years ago when you and I jointly officiated at the St Patrick’s Day parade in Trafalgar square in London. It was a pretty joyous occasion. And of course we celebrated the incalculable contribution of the Irish community to London.
And there in the vast crowds was of course the living human embodiment of one of the densest and most intricate and most vital relationships in the world between any two countries.
And together Leo today we both recognise that our peoples are the beneficiaries of the efforts of our predecessors – politicians and others – who put aside differences, who found compromises, who took our countries forwards together in circumstances far tougher than now. And the results for both UK and Ireland are immense.
Not just a peaceful and open border but an economic partnership by which we eat I think 50 per cent of all the cheese and beef produced in Ireland, and we are talking a lot. And the very captain of the world cup winning English cricket team was born in this city.
And I think that our job now is to take that relationship forward and to build on it at the UK-Ireland summit in November, I look forward to that, and in all the ways in which the UK and Ireland work together around the world with shared values and shared interests.
As you rightly say Taoiseach, before November there are two political tasks that we simply have to do. We must restore the government of Northern Ireland at Stormont, and I promise to work with you on our shared objective. And we must get Brexit done because the UK must come out on October 31, or else I fear that permanent damage will be done to confidence in our democracy in the UK.
And I know that this problem of Brexit was not, to be perfectly frank, a conundrum that Ireland ever wished for and I think there are three basic questions we need now to answer for the sake of our collective peace of mind.
Can we ensure that we continue to have unchecked movement at the border of goods and people and indeed cattle? I think the answer is yes – and as someone who went to the border several times before the Good Friday agreement, and shuddered to see watchtowers on UK soil, I can say now that the UK will never ever institute checks at the border, and I hope our friends in the EU would say the same.
Can we uphold the Belfast Good Friday agreement in all its particulars? Again I say the answer is yes, and our commitment to the peace process is unshakeable. Can we protect the economic unity of the island of Ireland and the gains that Ireland has won through its membership of the EU single market? And again I think the answer is yes – and I think we can achieve all these things while allowing the UK to withdraw whole and entire from the EU.
And of course I acknowledge the complexities involved. And the symbolism and the sensitivities evoked by the very concept of a border. But strip away the politics and at the core of each problem you find practical issues that can be resolved. With sufficient energy and a spirit of compromise, and indeed even the current treaty must logically envisage that the problems can be solved, or the present protocol would never have been called a backstop.
So if I have one message that I want to land with you today Leo, it is that I want to find a deal. I want to get a deal. Like you, I’ve looked carefully at No Deal. I have assessed its consequences, both for our country and yours. And, yes, of course, we could do it, the UK could certainly get through it. But be in no doubt that it would be a failure of statecraft for which we would all be responsible and so, for the sake of business, and farmers, and for millions of ordinary people who are now counting on us to use our imagination and creativity to get this done, I would overwhelmingly prefer to find an agreement.
Our governments have spent three years masticating this problem. I think it is time to honour the achievements of our predecessors who tackled far worse problems by cracking this one ourselves. I won’t say that we can do it all today, but I believe there is a deal to be done by Oct 18. Let’s do it together.
The next week in Parliament is bound to be tumultuous, but I believe all MPs should remember that some of us have spent the summer fashioning the tools to enable the United Kingdom and the EU to agree a deal.
In July, the Prosperity-UK Alternative Arrangements Commission – for which I chair the 20-strong panel of Technical Experts – published its final report intended to avoid the need for the infamous Irish Backstop, while ensuring there is no hard border in Ireland, the Belfast/Good Friday Agreement is upheld, and the UK is able to pursue an independent trade and regulatory policy after Brexit.
The Prime Minister mentioned the report approvingly in both his meetings with the German Chancellor and with the French President. On Friday, Suella Braverman MP led a delegation of experts from Prosperity-UK to meet Stephanie Riso, Michel Barnier’s deputy, to brief her on our proposals.
Our next step, announced yesterday, is to try and fix the Political Declaration, in order to create a new Withdrawal Agreement which could pass in Parliament. We are seeking to consult interested stakeholders on the interim version and will publish a final version in due course.
The Boris Johnson team will know that the Political Declaration was written by the previous government team with a very specific goal of using the backstop as a bridge to some sort of customs union with high regulatory alignment, both of which would essentially negate any serious sort of independent trade and regulatory policy for the UK. Boris Johnson campaigned on the ultimate end state being an advanced EU-UK Free Trade Agreement (FTA), something he has called SuperCanada, and others have called Canada ++.
While sticking country names on trade deals is not perhaps the best way of describing them, the point is that his administration wants the UK to have a comprehensive, advanced FTA with the EU, a commercial treaty between two sovereign entities and not one which puts Britain in a position of legal subordination to the EU.
We know that the EU ultimately wants to have a comprehensive FTA with the UK, with Irish border facilitations, customs facilitations and regulatory cooperation. It should therefore, in theory, be easy for both sides to revise the current inadequate Political Declaration to reflect this. At the same time, it will be necessary to change certain parts of the Withdrawal Agreement to make it technically consistent both with the new Political Declaration and a new Alternative Arrangements Protocol for the Irish Border.
Amongst other things, these changes are reflective of a huge change in direction by the UK government, from the May to Johnson administrations, which the EU may not have fully internalised yet. Whereas the previous government regarded the backstop as a bridge to an end state which would be some sort of subordinate, hybrid customs union arrangement with high regulatory alignment, the new government thinks the end state should be an advanced FTA with regulatory cooperation, but with the capability for the UK to diverge, so that it can preserve its independent trade and regulatory policy. This is a sea change in approach.
In summary, our redrafted Political Declaration reflects that the final end state should be an FTA. The UK’s sovereignty over matters like Geographical Indications (GIs), currently in the Withdrawal Agreement, should be placed where it belongs in the end state agreement. Changes to the defence and security sections, to reflect the UK’s sovereignty and not limiting its choices vis-à-vis the rest of the world, should be made.
The Withdrawal Agreement should be amended to allow for a transition period, during which the UK can negotiate, sign and ratify trade deals (as it says now), but which also critically provides that both parties will be bound by general principles of good regulatory practice in this period, in order to make sure that the EU does not regulate in the transition period in a way which damages the UK’s interests. It would be difficult for the EU to reject the principle of good regulatory practice embedded, as it is in various OECD documents to which the EU has itself made valuable contributions. Similarly, it would be difficult for the EU to reject the idea that what GIs the UK protects is a matter for the end state FTA between both parties. There will clearly be a GI chapter as the UK will want to protect Scotch Whisky and other key GIs it has.
The Withdrawal Agreement has been amended to reflect the fact that the level playing field obligations have been mutualised and pave the way for similar obligations in the ultimate FTA itself. Given how often these are agreed among parties to FTAs now, the EU cannot seriously object to them.
Many MPs voted against the deal because they rightly feared that Theresa May’s Government would move directly from the deal to an end state negotiation based on the Backstop being activated. It turns out they were quite right to be fearful. If they are to vote for any kind of deal, they will need to know with certainty that the end state of an FTA is not in doubt and the government will be strenuously negotiating in the UK’s interest for the most advanced, comprehensive and liberalising FTA, fully utilising the fact that we have regulatory identicality on day one of Brexit, and thus management of divergence is the key regulatory issue. This message can be communicated with the Political Declaration, and the EU will at least know what the UK wants, something it has rightly complained about in the past.
We have a limited amount of time to put a package on the table, which can pass in Parliament while being an eminently reasonable offer from the UK that the EU can get behind. Prosperity-UK has fashioned the tools, the parties must put them to use.
The post How to fix the Brexit deal so a sovereign UK can agree a comprehensive Free Trade Agreement with the EU appeared first on BrexitCentral.
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