Ibec warns of cliff-edge scenario for Ireland

The employers’ body realises there are no easy solutions for the post-Brexit world, but says customs agreements and other measures must be agreed early, writes Stephen Rogers

In the introduction to his organisation’s “Brexit: challenges with solutions” document, Ibec chief executive Danny McCoy opens with the comment: “The departure of the United Kingdom from the European Union presents an unprecedented and profoundly unwelcome challenge to the Europe we know.”

His organisation is genuinely fearful as to how so many of its member companies could suffer — and potentially perish — if the talks between British and EU officials which begin in Brussels this morning yield the wrong outcome for Ireland.

He concedes that a significant gap exists between Britain’s objectives and what is realistically possible within the parameters of the current EU negotiating guidelines.

The pitfalls of what could go wrong for Ireland, as Britain’s closest neighbour, as a result of Brexit have been well versed. Ibec does go into detail as to the impact on export and imports in particular.

However, its document also points to ways of addressing the headline issues.

“The Ibec report aims to help shift the debate from political posturing to pragmatic solutions, but the way forward remains unclear,” said Mr McCoy.

“If the UK crashes out of Europe, Ireland will need all the policy levers available to respond. State aid will be needed to support companies through any period of adjustment, and tax and labour market policy will need to ensure Ireland remains internationally competitive. A post-Brexit EU must take full advantage of Europe’s collective strength and influence, but not limit the capacity of member states to respond quickly to external shocks.”

A Brexit day trade ‘cliff edge’

Ibec believes that if the UK exits the customs union, a customs agreement between the EU and the UK must be in place on the day of exit.

If there is no agreement in place there will be no agreed procedure to land goods entering the EU from the UK or goods exported from the EU to the UK leading to major disruption and legal uncertainty at entry and exit ports, airports and along the land border.

The employers’ body says the UK should remain in the customs union to enable tariff-free trade to continue, but if it exits, business and governments should be given time to prepare.

It says customs requirements, etc, should be dealt with early in the Article 50 negotiations and it also says the UK should remain part of the European common transit system to ensure smooth transit of goods to, from and through the UK from the first day that the UK is no longer a member of the EU.

It also warns a ‘cliff edge’ scenario in the absence of an EU-UK deal, whereby WTO tariffs would apply to EU-UK trade on the day that the UK exits, must be avoided.

Costly, disruptive EU-UK tariff barriers

A poor post-Brexit EU-UK trade deal could result in crippling tariff barriers on certain products and key, job intensive sectors of the economy could be particularly vulnerable if they are reliant on the market in Britain as an export destination and on the north as a source of raw material and processing location. Ibec wants a “broad and comprehensive EU-UK Free Trade Agreement (FTA) involving minimal tariff and non-tariff barriers to goods being processed and goods going to market. It should also cover services.

“If tariffs and tariff rate quotas are a feature in a new agreement, the tariff rate quota(s) volume, structure and definition must take into account existing trade flows and market requirements.” Burdensome, costly customs procedures for companies.

Ibec says the movement of goods must not be unduly hampered by customs procedures. Simplified procedures must be sought within the bounds of the Union Customs Code to ensure the smooth flow of goods. “Local clearance or pre-clearance procedures should be granted to sensitive sectors to facilitate management of their new customs obligations onsite,” it said.

“The EU and the UK must agree to recognise each other’s Trusted Trader status (or Authorised Economic Operator (AEO) status in the EU framework) under exit and transitional arrangements to facilitate continuation of business operations.”

It also says the imposition of import Vat on trade with Britain and Northern Ireland will impose very significant cash-flow costs on business in the Republic. To alleviate this, a mechanism should be made available to all Vat registered companies in Ireland, whereby import Vat from a third country (the UK) is paid and accounted for in a simultaneous transaction.

Lack of business expertise to manage new customs rules

According to Ibec, EU-backed training, logistical and financial supports will be needed for businesses to upskill and adjust their practices in light of the new EU-UK trading relationship.

Divergent food and agricultural standards

The EU has strict sanitary and phytosanitary (SPS) standards and is a sealed zone for the production, sale and consumption of food and agricultural products, including plants, animal products and cereals Ibec said current SPS standards must be recognised and maintained by both parties on exit day and during the transition to an FTA.

“Any new FTA must involve maximum collaboration on SPS standards and minimal divergence in the application of such standards into the future to ensure minimal disruption to trade and production,” it said.

Negative impact on trade transit and facilitation Ibec warns that the smooth movement of goods may be impeded post-Brexit due to changes in transport and transit procedures and it says this will impact business directly and do harm to firms in Ireland, through the costs associated with transport, and indirectly through the potential time lost at borders.

Therefore it says the UK should remain a member of the European transit system and the associated guarantee waiver scheme should be extended as widely as possible to traders in Ireland.

“Given the volume of trucks carrying goods by sea in and out of Ireland and the existing infrastructure challenge at Irish ports, every effort must be made to avoid unnecessary delays and stopping of vehicles. Customs procedures at ports in Britain, Northern Ireland, the Republic and on the Continent should be aligned to operate on a seamless basis to ensure the overall integrity of the system.”

Capacity pressure on customs authorities

Britain’s departure from the EU customs union and becoming a third country will dramatically increase the workload on customs authorities raising significant issues around the capacity of customs officials in Ireland and the UK to manage the new relationship.

Ibec says that, to support inter-agency cooperation, a legal framework for future close customs collaboration between EU and UK authorities must be agreed early in negotiations.

“The duplication of any customs procedures on both the EU and UK side must be avoided,” it says.

“The principles that have underpinned the simplification of customs procedures to facilitate trade and business should continue to be applied.”

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