For the UK, Brexit now means going back to the 70s

By Brian Keegan

The concerns felt by business both north and south of the border at the prospect of the UK’s departure from the EU next year are not exactly mirrored on the far side of the Irish Sea.

High-profile commentators receive the most attention — the financial services executives concerned at the prospect of their trading opportunities in the EU being diminished post-Brexit, or the automotive executives concerned at the disruption to their supply chains.

However, there is another constituency. These are the smaller businesses that were very happy with European Economic Community (EEC) membership, but which began to run scared of the encroaching political dimension of the EU, with its interest in foreign policy, security, immigration, and other aspects of society outside of trade and commerce.

This sentiment is being tapped, perhaps unwittingly, with last week’s so-called technical note on a temporary customs arrangement from the British government. The proposed temporary customs arrangement is like a return to EEC principles, involving a common market and customs union but without any of the troublesome EU political strings attached.

This temporary arrangement is a further step beyond the draft transitional agreement which extends the UK’s de facto membership of the EU from March 29, 2019 (the official departure date) to December 31, 2020. The temporary arrangement will extend the trading aspects of the transition agreement to December 2021, always assuming that everyone is in agreement.

It is intended to eliminate a hard border between north and south. The underlying assumption behind a further ‘temporary’ extension is that there will still be border problems to resolve even by the end of 2020.

The temporary arrangement deals only with the movement of goods, and not the movement of people. It doesn’t address the provision of services at all. The arrangement suggests ways of ensuring no customs tariffs on goods moving between the UK and the EU, and perhaps even more significantly there would be no customs checking of goods.

Increased prices for businesses due to tariffs are one thing, but increased prices due to supply-chain delays and holdups are quite another. It is the checking and inspection regime which many businesses are most concerned about. There are oblique references to waivers of safety and security checks on cross-border consignments as well.

How these might operate in practice would, the document acknowledges, require further negotiation.

One important Brexit red line issue for the UK, which is the ability to negotiate its own free-trade agreements is tackled. The transition agreement suggests these could be negotiated by the UK, but only implemented in so far as they don’t disrupt UK EU trade flows.

For once, we are being offered a UK solution to an Irish problem and from the UK government perspective, it charts a path around many of the key sticking points for Brexiteers and Remainers alike.

However, it completely fudges one of the Brexit redline issues for the EU, which is the governance of any future trading arrangements.

Michel Barnier, the EU lead negotiator on Brexit, has already signalled that the transition agreement, the extension to December 31, 2020, is in trouble because of a lack of agreement on whose courts should govern the arrangements, and resolve any disputes.

This further temporary customs arrangement will fall foul of the same concerns.

With every successive iteration of draft agreements and position papers, we may be edging closer to a solution which can be adopted by all the parties concerned.

This so-called technical note which would reinstate EEC principles is not the last word.

It seems like progress on Brexit now involves a return to the 1970s. n Brian Keegan is director of public policy and taxation at Chartered Accountants Ireland.

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