Solving the border issue is recognised as an argument against a clean break with the EU

Although it’s firmly orientated to business and high finance, the Financial Times (£) concludes in an editorial that the British-Irish relationship should  put a brake on the extreme Brexiteers who favour a clean break from the EU.

Both sides have much to lose. Without the support of its outsized neighbour, Dublin may now find itself more isolated in Brussels on EU issues such as tax harmonisation, which it opposes. Although Ireland’s economy is less dependent on the UK than it once was, it is still heavily so. Trade between the two countries is worth more than €1bn a week and is more important to the UK than business with all of Africa. Any slackening in UK growth has knock-on effects for Ireland.

Repartition risks reawakening the ghosts of Irish nationalism at a time that in Ireland, as elsewhere in Europe, the centre ground in politics is shrinking and populists are already on the march. Yet the 310-mile border will be the UK’s sole land frontier with the EU. To prevent EU nationals, and smugglers, from entering the UK through the back door, immigration and customs controls might have to be reimposed.

In this, the UK must weigh the priority of preserving the union against the prerogatives of Brexit. Ireland, meanwhile, is confronted by choices it did not want to make and outcomes over which it may have little say.

Maintaining the common travel area, which allows passport-free travel between the two countries, and ensuring the border remains as invisible as possible, will be priorities. So, too, will relations within the EU. Handled carefully these constraints could act as a brake on the ambitions of the more radical Brexiters who favour a clean departure from the EU.

The FT of course was strongly committed to Remain and  now favours  the closest possible links with the EU in the interests of the City and the rest of the financial services industry. But it is interesting to see it invoking the interests of Ireland in support of its  principal cause.

Theresa May’s government has yet to decide how clean a break to make from the EU. The impression of indecision and review ( also dramatically exposed  in the last minute postponement of the Hinkley Point deal ) arises because  the Conservatives had intended to take the two months between David Cameron’s notice to quit and  the election of a new prime minister by the Conservative rank and file in September  to work out key positions before  the successor  government took office.  But then Andrea Leadsom suddenly dropped out and Mrs May was catapulted into Downing St.

A customs union between the UK and EU would reduce the need for border controls.  But Liam Fox the new  International Trade Secretary was slapped down for suggesting that that London would probably seek to enter a free-trade agreement with the EU, rather than a closer “customs union” that could restrict its ability to negotiate lower tariffs with other trading partners.

There is no doubt that a customs union would ease the problems of the Irish border and UK-Irish trade.  But another   FT article explains why the choice is so difficult.

This week, divisions emerged between Mr Fox and Downing Street over the question of Britain remaining within the EU’s customs union. Those tensions show that fundamental issues surrounding the UK’s relationship with Europe will have to be addressed before the UK can attempt to sign deals elsewhere.

Membership of the EU’s customs union — that is, having a common external tariff applied to imports from the rest of the world — is a separate issue to membership of its single market. Norway, for example, is a member of the single market but not of the customs union, enabling it to protect some of its producers with higher tariffs than allowed in the EU. If it wants, Norway can also sign trade deals with third-country governments permitting imports at lower tariffs.

However, in order to prevent countries such as Norway becoming a backdoor into the EU market, Oslo is obliged to apply complex “rules of origin” to its exports, ensuring that they have substantially been made in Norway rather than imported from, say, China and re-exported to the EU. This, plus the need to comply with customs paperwork from which EU countries are exempt, imposes considerable costs on Norwegian companies selling goods to the bloc.

For Norway, whose exports are dominated by primary products like crude oil, this may not pose too great a hardship. For the UK, whose goods exports are generally more complex and involve the use of imported inputs, they could prove a serious handicap. On the other hand, if the UK stays inside the EU customs union and is forced to apply the same tariffs as the EU, that will in effect preclude it signing any meaningful trade deals involving goods trade with any other economy.

Small wonder  then, that Theresa May still wants to  keep an open mind.

“I think we should be developing the model that suits the United Kingdom and the European Union. Not adopting, necessarily, a model that is on the shelf already.”

 

 

 

 

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