Leaving single market and customs union is incompatible with ensuring no borders

Last week's column highlighted how, 90 years ago, Ireland's economic relations with the UK were tied up with the future of the Border. Now, achieving a successful agreement on economic relations between the EU and the UK is entangled in the same thicket.

The Irish Government has repeatedly emphasised that the "border issue" in the Brexit talks is not about furthering Ireland's economic interests.

Instead it is the top priority for Irish negotiators because of the vital national interest in preserving and developing a Northern Ireland that is happy, successful and reconciled with its constitutional position.

Border controls within the island would disrupt the current position of limited harmony. Unfortunately the UK government has so far shown less concern for the long-term interests of its citizens in the North, something that could best be protected by the UK remaining in the customs union.

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In that context the agreement reached on Friday morning in Brussels was as good as could have been achieved at this stage of the negotiations.

Given that we still don’t know what the nature of the UK’s eventual trading relationships will be with the EU, the text had to provide for a range of different eventualities.

Structurally ambiguous

It also had to be structurally ambiguous to cover the fact that the UK’s future course of action is undecided.

However, the statement by Arlene Foster that Northern Ireland would now leave the single market and the customs union (with the UK) is incompatible with the stated aim of ensuring no borders on the island or between the island of Ireland and Britain.

The text agreed between the EU and the UK leaves open the possibility that the UK as a whole may choose to adopt the same regulatory alignment with the EU.

This could facilitate the UK remaining in some form of customs union, though it might be given a different name to humour supporters of Brexit.

This could minimise the economic cost to the UK of leaving the EU and it is favoured by some British politicians, such as Ruth Davidson the Scottish Conservative leader.

However, other UK statements suggest that they only see the regulatory alignment applying to areas covered by the Good Friday Agreement. If this were defined to exclude trade, then a customs border would be inevitable.

The statement by British prime minister Theresa May that the agreement ensures no hard border may be based on her belief that the blame for such a border would lie with the EU rather than the UK if the UK leaves the customs union.

Mental reservation

Such a mental reservation would ignore what words mean - leaving the customs union means leaving the customs union and reimposing border controls.

If the agreement means what the EU and Ireland are assuming, it has the down the down-side for those in the UK who want to leave the EU that such regulatory alignment could severely hamper the UK’s ability to do trade deals with other countries.

The US would definitely demand changes in regulations (chlorine chickens?) if they were to negotiate a bilateral trade deal. However, as the medium-term costs of developing independent trade deals becomes apparent, the attractions for the UK of piggy-backing on the EU’s network of trade agreements may increase.

If the UK leaves the customs union there will have to be a customs border somewhere - that is what leaving a customs union means. However, under these circumstances it might be possible to avoid a border on the island for food and agriculture by ensuring regulatory alignment. However, if regulatory alignment only applied to the North, there would have to be checks on trade between the North and Britain for food items.

If the UK leaves the customs union customs controls would have to be located at some point between Britain and the EU. Even with the most liberal trade agreement between the EU and the UK, these controls would be needed to deal with the issue of third country imports. Otherwise imports from countries such as China and Brazil transiting the UK could by-pass EU tariff barriers.

If the UK were to leave the customs union, one possible solution that has been canvassed would be to locate the customs border in the Irish Sea. From an economic point of view it would not make much difference to Ireland where it was located; the presence of customs controls, wherever located, would do major damage to the Irish economy.

Northern Ireland

For Northern Ireland, not only would a border in the Irish Sea be politically unacceptable to unionists, it would also be economically damaging. This is because 75 per cent of their imports come from GB compared to less than 10 per cent from the Republic.

Imports to the North account for 45 per cent of all goods they consume or use as inputs in production. The Northern economy is integrated to an exceptional degree with the rest of the UK.

That means that any barriers to imports across the Irish Sea would impose major costs to the Northern economy, on top of any other hits they will take from Brexit.

And any serious disruption to the Northern economy could aggravate political instability, and damage the peace process the Irish Government is so anxious to preserve.

As a result, the ruling out of customs barriers in the Irish Sea is a desirable outcome, not only for the DUP and the people of Northern Ireland, but also for the Irish government in their search for peace and stability on this island.

If cooler heads prevail, “regulatory alignment” might yet prove a practical mechanism to maintain a post-Brexit customs union between all the UK and the EU, to everyone’s benefit.

Mutual recognition of separate national qualifications, from Abitur to A-levels to our Leaving Cert, shows how the principle of equivalence can become a practical instrument to work alongside distinctive approaches in different jurisdictions.