Cliff Taylor: Government faces first crunch moment in Brexit talks

Leo Varadkar and Simon Coveney are facing their first big call in the Brexit talks. What assurances do they need on the Irish Border to be able to give the nod next month to the talks progressing to the next stage? The problem is that what was obvious on day one when the talks started remains, well, obvious. If Britain leaves the EU Customs Union and Single Market – as it says it will – then either the Border is coming back or there must be controls as goods cross the Irish Sea.

During the past year we have heard more than enough nonsense about frictionless and seamless borders, but nobody has come up with a solution to the conundrum. Because there isn't one. As former EU commissioner and World Trade Organisation (WTO) director general Paschal Lamy put it in Dublin recently: "There is no 'no Border' solution."

So the tactical challenge for the Taoiseach and his Ministers is significant. At the EU summit in the middle of next month they will either have to give the thumbs up or thumbs down on whether they believe enough progress has been made on so-called “Irish” issues to allow the talks to proceed.

This decision will be made on the basis of a consensus being reached among all the EU member states, with no delegation opposing it.*

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So we have some leverage. The question is how to use it, and what is achievable now.

Irish issues are one of a set of three main headings on which the EU has insisted sufficient progress must be made before moving on to talk about how a new trade deal between it and the UK might operate post-Brexit. The other two are the size of Britain’s financial liabilities to the EU and the mutual rights of EU and UK citizens.

There is now a push on all sides to try to get enough agreed by December to allow the talks to progress. Both sides have looked over the precipice of a cliff-edge Brexit and decided they didn’t like what they say. Even so, progress is far from certain.

Divorce bill

The issue of the so-called divorce bill is hugely contentious. And such is the political chaos in the UK – which can only deepen as the true horror of Brexit becomes ever clearer – that pretty much anything is possible.

The realpolitik of this for Ireland is tricky. What exactly do we want to achieve by December on the Border issue? How do we deal with Britain trying to ride two horses by saying it wants to avoid a hard Border while at the same time saying it will leave the Single Market and Customs Union?

And how far do we feel London, Brussels and the other EU capitals are really committed to avoiding the return of a Border. Talk on all sides of avoiding a “hard Border”does raise the risk that we could come under pressure to agree some kind of a “softer” version.

The Border issue will not be sorted by December. Britain will argue it needs to knows the shape of its future trade arrangement with the EU before this can happen. This is true, but it is dishonest to pretend that there is some easy solution, unless Britain reverses course and stays in the Customs Union and Single Market.

Free trade

Economist Kevin O’Rourke pointed out in a recent blog that one option would be for Britain to remain in the EU Single Market for goods – but not for capital and services – and also the Customs Union. This would allow free trade in goods to continue between Britain and the EU and solve the Border issue.

However, it would mean Britain could not strike new free trade deals with other countries, a central part of its avowed strategy, and would remain subject to many EU rules.

And many EU countries might well object to Britain being half in and half out of the Single Market.

The only other way forward, as outlined by Paschal Lamy in Dublin recently, would be for the North to have a special economic status after Brexit, possibly via having its own membership of the WTO – like Hong Kong and Macau – and choosing to mirror the EU customs regime. This would eliminate the need for trade checks at the Irish Border, but would mean they would be needed instead on goods crossing the Irish Sea. It would mean the North remaining politically British but economically European.

London has more or less ruled this out – as has the DUP. Yet part of the Irish strategy must be for this to remain open as a possibility.

Ireland’s interests

It is also in Ireland’s interests to keep Britain and the EU talking, and for agreement to be reached on a transition period during which the UK remains in the Customs Union and Single Market. This could kick the Border can down the road a bit, and who knows how British policy might change in the meantime, particularly as the economic cost of Brexit becomes clearer.

Most of all, in the run up to December, Varadkar and Coveney must get clarity on all sides about what Lamy referred to as the “ fairy tale” of a frictionless Border. We have some leverage now on the Border issue. We can’t let is quietly slip down the order of priorities if these talks are to progress as this could potentially leave us exposed to pressure to compromise somewhere down the road.

And if that requires Ireland to be the awkward squad in the run up to the key decision in December, then so be it.

* Article amdended to reflect the fact that moving from phase 1 to phase 2 requires consensus at the European Council.