Why the Irish Border Has Hamstrung Brexit

Date : 10/13/2019 @ 6:02PM
Source : Dow Jones News

Why the Irish Border Has Hamstrung Brexit

By Stephen Fidler 

LONDON -- Britain's plans for Brexit have been bedeviled by the U.K.'s only land border.

The border, which splits the Republic of Ireland from British territory in the northeast of the island, was once the focus of sectarian conflict and smuggling rackets that helped finance terrorism.

Today, it is invisible except for subtle changes in road markings and signage.

That is because both the U.K. and Ireland are members of the European Union. Now the U.K. is leaving the bloc, both sides are seeking a way to avoid a physical border.

The complexity of that task defeated former Prime Minister Theresa May and is testing her successor, Boris Johnson. That complexity is magnified by the EU's unique nature.

The bloc has been a customs union since 1968, before Britain and Ireland joined, with members trading among each other without tariffs and imposing a common schedule of duties on goods imported from outside the bloc. That did away with customs bureaucracy on trade within the bloc necessary even in conventional free-trade agreements -- for example, to certify the origin of goods.

But it is more than a customs union. Even inside the customs union, members found that they weren't free to export elsewhere in the bloc because national regulations differed from product to product. In a series of European court rulings and in legislation that harmonized regulation, the bloc's governments swept away most of those "behind-the-border" obstacles to trade in creating its single market.

The single market came to fruition in 1993. It meant that a company in Manchester could sell a product as easily to a customer in Luxembourg as it could to one in Leeds. It led to a rapid expansion of intra-EU trade but it also resulted in an increasing level of regulation and oversight that fueled anti-EU sentiment among some businesses and other groups.

Since the U.K. voted to leave the EU in 2016, both Mrs. May and Mr. Johnson initially set out plans to leave the customs union and the single market to allow the U.K. to follow its own rules and standards, and set its own customs and trade policy.

But nowhere in the world is there a customs border without checks and border controls. Trucks going from Norway -- which is inside the EU's single market but not its customs union -- are checked on their way into EU member Sweden. Goods from Turkey, which is in a customs union with the EU, don't require tariffs to enter the EU but are checked at the border with Bulgaria to make sure they meet EU regulations and to ensure trucks and drivers are fit to travel on EU roads.

Some of these checks can be streamlined but not abolished. Life outside the EU creates challenges for all U.K. trade with the EU, but nowhere more than on its sensitive land border with Ireland.

The solution to the conundrum agreed to by Mrs. May was to keep Northern Ireland in the single market for goods. That would require new product checks in the Irish Sea between the British mainland and Ireland. (Some already happen because the island of Ireland is a separate agricultural territory to limit the spread, for example, of animal diseases.)

She also postponed her plan for the U.K. to leave the EU's customs union. Until alternative and as yet undefined arrangements could be established to avoid a physical border -- using a combination of a trade deal and new technologies -- the U.K. would stay inside the bloc's customs area. That proposal -- the so-called all-U.K. backstop -- meant the U.K. wouldn't be free to enter trade deals with other countries. When Mrs. May's Brexit deal was rejected by Parliament three times this year, the backstop received much of the blame.

Mr. Johnson came to office in July and rejected Mrs. May's agreement. After reassessing his initial proposals -- which would have created a regulatory border in the Irish Sea and a separate customs border between North and South in Ireland -- he outlined new ideas last week to Leo Varadkar, his Irish counterpart, that have led to intensified negotiations over the weekend.

Details are scant. Mr. Johnson has conceded the need for product checks in the Irish Sea and officials say has proposed an arrangement whereby Northern Ireland would stay notionally as part of the U.K.'s customs union. But in practical terms, goods traveling into Northern Ireland from the rest of the U.K. or elsewhere would undergo EU customs checks before entering the territory, and Northern Irish companies or retailers would then claim tariff rebates where U.K. tariffs were below EU levels.

Mr. Johnson also appears to have shifted from his original position that would have effectively given his allies in the largely Protestant Democratic Unionist Party from Northern Ireland a periodic veto over the arrangement. The people of Northern Ireland would still be required to give consent -- but likely on terms that gave both unionist and mainly Catholic nationalist communities a say.

There are big questions over such an arrangement, which has echoes of an original EU proposal in which Northern Ireland would stay inside the EU's customs union and single market. The first is whether the EU would believe it could be made legally and practically watertight and not undermine the single market. The second is how feasible it would be to have two customs arrangements operating in Northern Ireland, requiring systems to be built to quickly repay local businesses for tariffs they don't owe.

The third is whether it would pass muster in the House of Commons, the U.K. Parliament's lower house, whose backing is required for any deal. A growing number of British lawmakers believe any exit arrangement should be put to a new referendum.

Even if those conditions are met, the challenge of writing it all into a treaty by the Oct. 31 deadline and making it legally operational in both the EU and U.K. may be too ambitious in such a short space of time. A further delay to Brexit -- even if only for practical reasons -- appears highly likely.

Write to Stephen Fidler at stephen.fidler@wsj.com


(END) Dow Jones Newswires

October 13, 2019 13:47 ET (17:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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