Mutual Interest
The Legatum Institute has taken a look at maximizing the UK and Republic of Ireland mututal interests in trade opportunities around the world, post-Brexit: depending on the output of current UK/EU negotiations.
Free trade and free and competitive markets have been the most powerful antidote to poverty since the Second World War.
As a wealth-creating engine, trade has an unparalleled record. Trade has changed lives and communities. It has transformed villages and towns, and given hope and opportunity to billions.
As the UK leaves the EU, it is vital that everything in our power is done to increase trading opportunities for the people of the UK, including those in Northern Ireland, and for the people of the Republic of Ireland, the rest of Europe and the wider world.
While some look at the particular issue of the Irish border as only a problem to be solved, it is also possible to see opportunity. It would be wrong to minimise the very real challenges that the people of Northern Ireland and the Republic face. However, it would be a mistake not to recognise the opportunity that the people of Northern Ireland in particular have if the UK is more open to the world and engaged in trade liberalising initiatives with many countries, as well as global institutions like the World Trade Organization (WTO).
The Challenge
Brexit will create a new border after March 2019, transforming the existing boundary between Northern Ireland (NI) and the Republic of Ireland (ROI) into one that separates the UK from the European Union (EU).
This transformation has significant implications for commerce and security for both the UK and the ROI; maintaining an appropriate balance between the ease of movement for goods and people and the effectiveness of border controls is of paramount importance to both nations.
The challenge is how to make sure that the UK leaving the EU will not lead to an unnecessary hardening of the border between NI and ROI.
The imposition of tariffs between NI and ROI would suggest that NI and ROI are returning to the days of trade barriers, and could increase the perception of division, as well as giving rise to economic hardships. Equally, the ROI’s economic reliance on trade with the UK means it would be adversely affected if the UK and EU fail to agree a free trade agreement (FTA) after Brexit, with suitable interim measures if no trade deal has been agreed by March 2019.
The challenges posed by the border mirror those that must be resolved between the UK and EU, but this challenge also provides an opportunity. The problem presented requires solutions that can be deployed between the UK and the rest of the EU, and could become a model for other border arrangements around the world.
Responding to the Challenge
The UK’s Prime Minister, Theresa May noted in her Lancaster House speech that no one wants a return to the borders of the past. In her letter giving notice under Article 50, she said:
“We must pay attention to the UK’s unique relationship with the Republic of Ireland and the importance of the peace process in Northern Ireland … we want to avoid a return to a hard border between [the UK and the Republic of Ireland], to be able to maintain the common travel area between us, and to make sure the UK’s withdrawal from the EU does not harm the Republic of Ireland”.
In its guidelines issued in response (the “Guidelines”), the European Council stated that it “welcomes and shares the UK’s desire to establish a close partnership between the [EU] and the UK after its departure”. It also reiterated the aim of avoiding a hard border (“while respecting the integrity of the Union legal order”) and noted that the EU should “recognise existing bilateral agreements and arrangements between the United Kingdom and Ireland which are compatible with EU law”.
This was followed by the negotiation directives given by the Council to the Commission (the “Directives”), which state that “the unique circumstances and challenges on the island of Ireland will require flexible and imaginative solutions. Negotiations should in particular aim to avoid the creation of a hard border on the island of Ireland.”
Out of challenge comes opportunity; creating a prototype for ensuring smooth, low friction border between nations.
The proposals in this document seek to provide those flexible and imaginative solutions. Creativity and ingenuity will be at a premium in devising these solutions, and we believe that the talents of the British, Irish and fellow European peoples are up to the task of finding the kinds of solutions that can not only solve this unique challenge but can serve as a prototype for ensuring smooth borders around the world.
The UK Government’s stated policy of leaving the EU Customs Union and the Single Market does not prevent the UK and the EU achieving a resolution to the Irish border issue.
There is a spectrum of border arrangements, from the current situation to the kind of hard border that exists between most countries. Some allege that there is no border now and that inevitably leaving the EU Customs Union will mean the return of a border, which could increase the likelihood of a return to violence.
However, since the border does currently exist, our goal is to ensure that it does not harden significantly and that we can deliver a low friction, low visibility border.
While much has been made of potential special arrangements between ROI and NI, we believe that any settlement will be determined by the wider agreement between the UK and EU.
This creates an opportunity to deploy the kinds of solutions in the Irish context that would also work in the UK-EU context. It also presents an opportunity in the UK-EU negotiations to seize the initiative and discuss the future trade relationship now, as we cannot discuss the issues between the ROI and NI without discussing the future relationship between the UK and the EU.
There is an opportunity for advanced customs clearance mechanisms to be deployed on the border, which can also be used to serve UK-EU trade more generally.
A resolution does not require special status for Northern Ireland, although special status for specific exporters through enhanced Authorised Economic Operator (AEO) and similar programmes may be necessary.
Finding an inclusive solution to the Irish border presents an important opportunity to build momentum towards a broader settlement between the UK and EU.
Austen Morgan
The paper from the Legatum Institute, Special Trade Commission, “How the UK and EU can resolve the Irish border issue after Brexit” is available for download. http://www.austenmorgan.com/Assets/PDFs/Articles/Paper110917.pdf
The technical note that underpins the paper is also available. http://www.austenmorgan.com/Assets/PDFs/Articles/Paper110917_TechnicalNote.pdf