Brexit: no Irish solutions on the horizon

05/09/2017

It's still interesting, though, how much we're getting from the Irish who, of course, have a massive dog in this fight. And one such source being especially helpful at the moment is Ireland's foreign minister, Simon Coveney.

He has just been meeting Michel Barnier in Brussels (pictured), along with Guy Verhofstad and Irish MEPs Matt Carthy, Brian Hayes, and Luke Flanagan. Also in attendance was Danuta Hubner, the EU parliament's European People's Party chair of its constitutional affairs committee.

Showing the sort of headline solidarity that has frustrated David Davis and his colleagues, Barnier told the Brussels press corps that, "Ireland's concerns are the Union's concerns", adding, "all member states and EU institutions are fully united in this regard".

This, the Irish Times noted, is by now a familiar refrain, but nonetheless it was reassuring to Mr Coveney who was only in Brussels for the day. And that reassurance, it is expected, will be reflected in detail in the Commission negotiating paper on Ireland which is expected next week.

For the moment, though, London – and the "incompetent" Mrs May - will not have wanted to hear Coveney's comment to the effect that, unless the UK makes a more detailed proposal on the financial settlement, talks would not move forward to negotiations on trade. "Clearly", says Coveney, "unless there is progress on that issue, we are not going to get to phase two".

He also dismissed reports in that "least trusted" British press that it is the EU's fault that progress on the Irish border is not moving faster. "I've seen some media coverage to suggest that this is all the EU's fault and Britain wants to resolve all of these issues, but because of the EU it can't be done".

"I think really that that is a distortion of the facts", he said. "Britain is the country that has decided to leave the European Union. Britain in my view has a responsibility to its neighbours and friends".

One area where there has been "very good progress", according to Coveney, is on the common travel area, which allows citizens across Ireland to travel freely across the border. The minister said reaching an agreement on this was seen as "a confidence-building measure" that would allow for negotiators to find a way forward "on some of the more contentious and difficult areas".

Nevertheless, we are told that there is "disappointment" from both the Commission and the Irish that the UK position paper on Ireland was "long on aspirations but short on detail, particularly on how to preserve the many elements of all-Ireland co-operation which were enshrined in the Belfast Agreement.

On the Border issue, Coveney said it was clear that UK aspirations to a frictionless border "were not credible answers" to the problem, without threatening the integrity of the Single Market.

Speaking of the need to continue discussions on the issues associated with North/South dialogue, he said: "The decision to leave was the UK's decision not the EU's decision or Ireland's and we respect the decision". The challenge would be, "that any solution we look at it will have to be fully compatible with union law and the single market".

What was then extremely interesting was the comment of MEP Matt Carthy, who argued that Ireland needed to "toughen up" its negotiating position and to campaign for "special designated status" for the North. In effect the North would remain part of as many of the EU institutions and programmes, such as the customs union, post-Brexit.

When the UK has been insisting that there will only be an all-UK outcome, this in effect is the "moving the border" solution, in this case moving it to the Irish Sea between Northern Ireland and the mainland.

According to Politico (not the most reliable of sources), the UK's proposals on how to maintain free trade between Ireland and Northern Ireland have raised eyebrows in Dublin and Brussels.

Britain has committed to having no physical infrastructure at the border and instead implement so-called waiver systems for traders who undergo strict audits on items such as livestock and agricultural products. But such suggestions have not convinced the EU.

Says Coveney: "Certainly there was a lot of scepticism coming from the [EU's Brexit] task force as to whether those solutions [would work]. The response from our own customs team in Ireland was also one of real scepticism… We cannot be part of essentially creating some kind of back door into the Single market that's not properly regulated and that we can't stand over".

Directly from the Revenue Commissions, though, we see that a "hard border" – predictably – would raise all sorts of capacity issues for Irish customs, for other government control agencies, for ports and for everyone involved in supply chains into and out of this country.

The only certainty is that there is no one big solution to the problems. A senior Revenue official states that, if faced with a worst-case scenario in April 2019, they are going to have to use all possible measures to mitigate the capacity issues. The greatest contribution may come from using simplified customs procedures that are already available under the Union Customs Code.

Currently, trade with non-EU countries relies very much on the EU's "trusted trader" scheme in which AEOs (Authorised Economic Operators) enjoy cooperation with customs and are given expedited clearance through the border. There are less than 200 AEOs in the country but they handle 85 percent of third-country imports to and exports from Ireland.

In a less than felicitous comment though, the Revenue official states that, "if the UK were to become a third country in two years' time and they had to handle the trade, their workload would need to increase by 500-700 percent". The thing here is that there is no conditionality. Come what may, the UK will assume the status of third country.

"In any event", says the official, "we can't just assume that the AEO programme will continue to be recognised by UK customs. It is an EU scheme so by definition recognition of British AEOs and vice versa falls away with Brexit.

Thus, he tells us, "new agreements would be needed in the form of a Mutual Recognition Agreement". Similar agreements are already in place with a number of the EU's larger trading partners and it would seem that "such an agreement is likely to be part of the second stage of talks on a final trade deal".

And there is the rub. With Coveney suggesting that the talks might not move on to the second stage, we are looking at the prospect of the AEO scheme lapsing, with all operators having to be checked.

There is also a recognition that capacity issues and bottlenecks are likely to arise in food and agricultural products, which account for almost all the non-Customs control procedures. One complication, says the Revenue official, is that while customs control procedures can theoretically be operated outside the ports, that option "may be unsuitable for food and agriculture checks which under current legislation must be performed at Border Inspection Posts (BIPs)".

Here, then – at last - we are beginning to see a recognition of the practical difficulties of managing a hard border, reinforced yesterday by Sainsbury's chief executive. He says that fresh food could be left rotting at the British border if strict customs controls for EU goods are put in place after Brexit.

This is Mike Coupe, who says that anything disrupting established food supply chains, currently governed by EU customs arrangements, would be "detrimental". He claims that the repercussions of supply chain disruption are "not fully recognised" in Westminster and cautions that if it gets nearer to March 2019 and a solution has not been found, retailers and food producers will "make that point and make it very strongly".

Going back to our Irish Revenue official, he also remarks about the problem of goods from Ireland transiting through the UK to other destinations in the EEA. Once the UK leaves the EU, he says, Ireland will need to rejoin the Common Transit Convention.

However, membership is not a right. The Irish must be invited to rejoin, and any contracting party may object. The alternative would be the old TIR (Transport International de Routiers) system, but it is not computerised so we would be back to sheaves of paper forms in lorry cabs, with a carnet to be stamped at every border crossing.

Recently the Irish Revenue modelled a lorry carrying goods from Paris to an approved premises in the midlands via England. That could be eights stops and stamps and checking of the load. If each one takes an optimistic 15 minutes, that's two hours. Multiply that all across a just-in-time supply line and you can see the sort of problems business will face.

There is, we are told, another aspect to border controls which gets little public attention: EU safety and security regulations require that goods entering the union be checked by customs at the first point of entry to determine whether there are threats of any kind.

The situation right now is that 75 percent of all non-EU goods come to Ireland via another member state, so someone else is carrying out those checks, and paying for them, often the UK. If the UK leaves the safety and security zone, the Irish would have to do their own check at the border – yet another complication and one that would obviously have resource implications.

In short, only a fraction of the border issues have been addressed and, where practical problems arise, there is nothing even close to a solution.

As regards the Irish customs service, this suffers from many of the same problems as the rest of the public service in terms of resources and renewal. It is currently below its establishment figure, it has an ageing cohort of staff and is losing some of our most experienced people to retirement.

Even without Brexit, the service has considerable training needs to maintain its skills set. Put Brexit in any form into the middle of that and, obviously, there are going to be capacity issues.

As to the resources needed, there are no explicit estimates, and there can't be any until the outcome of any trade deal is known. Some other Member States have made projections and are anticipating a need for up to 30 percent extra staff in circumstances where the proportion of trade with the UK is far lower and there is no land border.

While the talking goes on (or not), the Irish Revenue service has made no plans for physical customs infrastructure on the land border. That, says the Revenue official, "is a decision for government". And, as Mr Barnier keeps saying, the clock is ticking.