Messy Brexit compromise stores up problems for the future

Deal had to be done – but politics made it impossible to avoid significant risks

UK prime minister Boris Johnson. “This is Johnson’s deal and the one he will either get approved now or will go to the people with in an election.” Photograph: Simon Dawson/Bloomberg

UK prime minister Boris Johnson. “This is Johnson’s deal and the one he will either get approved now or will go to the people with in an election.” Photograph: Simon Dawson/Bloomberg

 

It was a messy compromise. Perhaps it was always going to be. And it was worth doing to avoid the chaos of a no-deal Brexit. But the more you look at the agreement, the more you see how the differences from the original backstop plan have created significant complications and risks.

From previously insisting that everything had been tied down and legally operable, the European Union side has signed up to a plan which involves a lot of detail still being worked out. And this creates risks for the future.

It is as clear a sign as you could get that the EU just wants to get the UK out and this phase of Brexit done. Now we wait to see if Boris Johnson can get the deal through the House of Commons – and, if he does, whether he can navigate the road to an October 31st exit. Either way, this is Johnson’s deal and the one he will either get approved now or will go to the people with in an election.

In time it could work okay, but nobody is quite sure yet how much of the new customs regime will operate

It leaves the longer-term future of relations between the EU and UK still to be worked out – with the UK having flexibility to diverge from EU rules in the years ahead, as Johnson has promised.

Whether he chooses to pursue this route or not will be vital for Ireland – the more the UK diverges from the EU the greater the challenges in managing the deal agreed this week and in dealing with the complications in the North – and the greater the likely disruption to trade between Ireland and Britain.

Political negotiations are an exercise in seeking a “landing zone”, a point where everyone can sign up. And Ireland generally played its cards well in this game, avoiding the threat of border controls on the island, even ones away from the Border itself.

The price, from the Dublin viewpoint, was to abandon the all-weather backstop, the promise that the North would remain in the EU trading bloc unless and until some other way was found to avoid an Irish border.

Operational uncertainty

In its place we now have a bit of a Heath-Robinson arrangement, with the North in the UK customs regime, but applying EU rules. And voting every four years on whether this would continue.

BREXIT: The Facts

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In time it could work okay, but nobody is quite sure yet how much of the new customs regime will operate. The vital details are all to be worked out by a joint committee comprised of representatives from the UK and EU. There is scope for rows here – lots of them, as the tough talking on how exactly to protect the EU single market has been partly deferred.

One saving grace may be that most of the checks can take place at ports, ideal fixed points. But the risks are there too, in terms of smuggling and fraud.

And trust will be a big issue, with the EU relying on the UK to check and monitor goods, animals and food entering the EU single market, albeit that EU observers can be present as these checks are carried out. There is much to be worked out here by the joint committee and it is hard to see this working without a much greater level of mobile controls at the Border than currently exist.

There is always smuggling and fraud at borders, of course. But it is vital for Ireland that this works. Goods coming from the Republic must be acceptable in the EU single market as “Irish”, without any finger of suspicion that they entered here illegally via the North. The last thing we would want is any suggestion that some kind of checks would be needed on goods leaving Ireland for continental EU markets, just “to be sure, to be sure.”

The old Northern Ireland backstop solution – with the North effectively staying in the EU trading bloc – would have avoided a lot of the complexities and challenges (though not all of them) but would not fly politically.

The consent mechanism, while it was the key that unlocked the deal, also carries some economic – and possibly political – risks. You would think it unlikely that Stormont would vote by majority to leave the new arrangements – though if it did the two-year period when some other way has to be thought up to abide by the Belfast Agreement could be chaotic.

What would be the incentive to leave something which, while not perfect for the North’s economy, avoids some of the Brexit cost and gives the option to sell into the UK and EU markets?

Investment concerns

But we simply don’t know and the very fact of a vote every four years could, for example, give pause for thought to overseas companies planning big investments in the North.

The North’s politicians could conceivably overcome this and work together to make the best of the new arrangement, though recent history gives limited confidence on that score.

For EU and UK negotiators, meanwhile, years of talking lies ahead in working through this deal – if finally agreed – and then working out the future relationship between the two sides.

The UK says this should all be negotiated by the end of 2020, when the transition period if due to end, but this looks highly unlikely. This would raise the risk of another no-deal threat at the end of next year, unless the UK agrees to extend the transition. For now, the DUP’s opposition is a serious political issue.

In terms of the shape of a future deal, it is all to play for. The deal outlines the aspiration of a zero-tariff future, based on the UK maintaining EU-style standards in areas such as the environment and workers’ rights.

But it gives the UK the ability to choose to go in the other direction and diverge – this is what the UK general election will be all about.

If it does diverge, then the EU will not agree to tariff-free trade and Irish companies buying from or selling to the UK will face these additional costs and barriers, as well as the bureaucracy of being in a different trading bloc. This is the big long-term threat to Ireland. But with Johnson in power, there was no way to do a deal which saw off this danger.

Borderlands

A special investigation on Brexit & the Border Read More
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