Brexit: EU prepared to accept two customs territories on island of Ireland

After a fleeting surge of optimism on Thursday, when MPs from both wings of the Conservative party lined up to back it, Boris Johnson’s Brexit proposal looked on Friday as if it was heading for destruction. The immediate response from senior European Union figures was dismissive, describing the proposals as unworkable and inadequate as the basis for serious negotiations.

Although a deal before the European Council on October 17th is unlikely, it is not impossible if the prime minister is willing to take some bold steps that carry a political risk but do not cross his own red lines.

In an important concession to the EU, Johnson’s plan envisages an all-Ireland regulatory zone for all goods, so that Northern Ireland will effectively remain in the European single market.

The EU members are adamant the regulatory order cannot be held hostage by a devolved assembly that has not sat for 2½ years

This means there will be no regulatory checks on goods crossing the Border or going from Northern Ireland to Great Britain. Goods moving from Great Britain into the North will be subject to regulatory checks but most of these, apart from animal health inspections, will be carried out in the market rather than at a port of entry.

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Johnson wants these arrangements to be subject to the consent of the Northern Ireland Executive and Assembly, which will have to approve them in advance and renew that endorsement every four years. If Stormont says no, Northern Ireland will revert to the same status as the rest of the United Kingdom, creating a regulatory border between North and South. This gives the DUP a recurring veto over regulatory alignment.

Held hostage

When Michel Barnier briefed EU ambassadors on Johnson’s plan on Thursday, representatives of the larger member states were the most outspoken in their opposition to the Stormont veto proposal. They are adamant that the EU’s regulatory order cannot be held hostage by a devolved assembly that has not been sitting for 2½ years.

They point to the current withdrawal agreement’s plan for a joint committee to oversee the backstop to which the British government could appoint representatives from Stormont, and the EU is open to proposals to strengthen such a mechanism. Sources close to him suggest that Johnson may be willing to rethink his Stormont veto proposal but if he moves too far he risks losing the support of the DUP and some Conservative Eurosceptics.

The prime minister is not, however, prepared to compromise on his determination that Northern Ireland should remain in the UK’s customs territory and leave the EU’s customs union after Brexit. Leo Varadkar said in Stockholm on Thursday that “if we are going to be in two different customs territories, that is going to create difficulties that will be very difficult to reconcile”.

The EU rejects Johnson’s proposals for managing a North-South customs border as vague and fanciful and it will not commit to imposing no checks on the Border before arrangements are worked out and agreed. It also complains that without customs declarations and checks on goods coming from Great Britain into Northern Ireland, it will have no way of knowing what is coming into the all-island regulatory zone and the single market.

But the EU is not opposed in principle to having two customs territories on the island of Ireland and it is open to reviving a reduced version of the customs partnership proposed by Theresa May last year. The EU rejected as unrealistic her proposal that Britain would have an independent trade policy but would enforce EU customs rules and tariffs on goods destined for the single market.

Downing Street continues to claim Johnson will take Britain out of the EU on October 31st, deal or no deal

But as Martin Sandbu argued in the Financial Times last week, such a model would be much easier to enforce on goods crossing the Irish Sea into Northern Ireland. Consumers and businesses in Northern Ireland would pay the EU tariff but would receive a rebate if the UK tariff is lower.

Benn Act

Northern Ireland would leave the EU customs union with the rest of the UK but there would be no customs border between North and South and the EU would know what goods were entering the North.

If Johnson is not willing to move far enough on the Stormont veto or to embrace a creative solution to the customs dilemma, there will be no deal on October 17th. Two days later, the prime minister is obliged by the Benn Act to write a letter requesting a three-month delay to Brexit, which the EU is almost certain to grant.

Despite Friday’s news that Johnson has told a Scottish court that he will write the letter, Downing Street continues to claim that he will take Britain out of the EU on October 31st, deal or no deal. Nobody believes it and EU governments expect an extension followed by a general election.

Johnson’s closest allies warn that he will fight the election promising a no-deal Brexit, so that his current proposal could represent the last chance for a deal. Such a hardline stance could be what the Conservatives need to mop up the votes of almost all the Brexit Party’s supporters, a prerequisite if Johnson is to win an overall majority.

But the outcome of the next election is unpredictable and although Jeremy Corbyn appears to be a drag on his party’s popularity, a Labour-led government remains a possibility.

Labour does not need to win a majority or even to emerge as the largest party at Westminster to have a chance to form the next government because he has a choice of potential partners for a coalition or a confidence-and-supply arrangement. The Conservatives, on the other hand, cannot expect the support of any party except the DUP.

A government led by any party other than the Conservatives means either a soft Brexit or a referendum that could lead to no Brexit. But even if Johnson returns to office with a majority, a Brexit deal remains in his political interest as well as Britain’s national interest. And negotiators on both sides will be able take up where they left off, trying to agree a role for Stormont and to resolve the dilemma over customs.

Denis Staunton is London Editor