WHAT NEXT FOR UK-EU CUSTOMS AND THE IRISH BORDER? Edelman
16 August 2017
Pawel Swidlicki Brexit Analyst Pawel.Swidlicki@Edelman.com In the last two days the Government has published two key Brexit reports: a ‘future partnership’ paper on UK-EU customs arrangements and a position paper on the Northern Irish border, two closely interlinked issues. The two papers reveal a familiar Brexit dilemma; how to balance maintaining the benefits of the current set-up – smooth trade in goods and a virtual Irish border – with seizing the benefits of ‘taking control’, namely the ability to strike new trade deals around the world.
WHAT HAS THE UK PROPOSED? The government has identified three key objectives as regards its post-Brexit trade and customs policy: •
ensuring UK-EU trade is as frictionless as possible;
•
avoiding a ‘hard border’ between Ireland and Northern Ireland; and
•
establishing an independent international trade policy.
There is a natural degree of tension between the first two objectives and the last one; seeking to preserve the status quo in terms of UK-EU trade will necessarily restrict the scope to pursue a fully independent trade policy, for example in areas such as tariff reduction and regulatory harmonisation. As such, the UK has tacitly accepted the EU’s argument that “frictionless trade is not possible outside the single market and customs union”, calling instead for an arrangement that “facilitates the freest and most frictionless trade possible.”
A TEMPORARY UK-EU CUSTOMS UNION Upon the UK’s exit from the EU on 29 March 2019 the UK will also leave the Customs Union; this is a legal inevitability. However, the government has proposed immediately putting into place “a new and time-limited customs union between the UK and the EU Customs Union, based on a shared external tariff and without customs processes and duties between the UK and the EU.” In simple terms, this entails the UK swapping the EU Customs Union for a new customs union with the EU (ala Turkey) with the UK continuing to apply the EU’s common external tariff. This would allow companies to operate as they do now without fear of a cliff-edge in March 2019, such as new WTO level tariffs or burdensome rules of origin, allowing the new arrangement to be worked out and implemented. The exact length is not specified, with the government saying this will be subject to further consultation and consideration. As with other aspects of the transition, the idea is for the new system to be in place by June 2022, the date of the next scheduled General Election, at the very latest. Would this allow UK to negotiate new FTAs? The paper states that “The UK would intend to pursue new trade negotiations with others once we leave the EU, though it would not bring into effect any new arrangements with third countries which were not consistent with the terms of the interim agreement.”