No Deal would mean ” a blockade” of Northern Ireland. Is anybody listening? Does anybody care?

David Sterling, head of the Northern Ireland civil service

Tony Connelly RTE’s ace Europe editor, has pulled together in its full awfulness the impact of No Deal on the Northern Ireland economy, amounting  “to a full blockade.”  Clearly well briefed by officials in Belfast, Dublin and Brussels, the message isn’t getting through in London where it matters most at the moment.

Just consider this for a wee opener….

When the original exit date of 29 March approached, officials fretted that the Leinster V Ulster rugby match the next day might be hit if Britain crashed out without a deal. Contingency plans were worked up that envisaged southern-registered buses and drivers having to drive north to collect Ulster rugby supporters.

In the event, Dublin was able to deploy its No Deal legislation as well as the EU’s own emergency exemptions to ensure Northern buses and drivers were operable (eventually the UK sought an extension so these exemptions were not invoked).

But dealing with the multi-billion euro cross border trade system is a different order of magnitude….

“Northern Ireland is largely an SME driven economy,” says one source. “We have 9,700 businesses and 8,700 of those are very small operations that rely on cross-border trade.”

Food industry sources depict a perfect storm: tightly integrated, just-in-time food supply chains broken within weeks, millions of litres of milk being stranded, Northern traders being priced out of the GB market if cheaper South American meat starts to roll in, EU products being channelled through Dublin Port and into Great Britain via Belfast in order to avoid UK tariffs, traffic congestion disrupting the narrow delivery window for Northern Irish suppliers to UK supermarkets and so on.

None of this includes the disruption to cross-border services, a much higher value trade flow, including all-island legal and financial services.

“In the absence of the backstop you will have the complete collapse in the exchange of data north and south, the inability to recognise mutual professional qualifications,” cautions one official. “Everyone is looking at the wrong thing here.”

One senior official has described the scenario as akin to a “blockade” of the Northern economy

The Tory leadership race has brought a no-deal Brexit closer. Most candidates have either elevated No Deal to a heightened form of Brexit – a “clean” Brexit – or have insisted it is preferable to an extension beyond the current Article 50 deadline of 31 October.

Brussels has remained largely silent on the Tory contest, but unease in Brussels and Dublin is growing.  “They’ve redefined Brexit,” says one senior EU official. “They’ve turned Brexit into No Deal.”

What those candidates have not explored is what No Deal would mean for Northern Ireland.

Concern has been deepening within the North’s civil service and export sector.

Senior officials in Belfast have been writing increasingly frantic letters to Whitehall to raise the alarm and to educate key elements of the British political and administrative systems.

If Boris Johnson, presuming he is the new prime minister, makes good on his promise to leave with or without a deal on 1 November, the UK will become a third country. In theory, tariffs and restrictions will apply on Northern Ireland goods entering the EU across the land border..

This cannot be dismissed as industry scaremongering. On 5 March David Sterling, the head of the Northern Ireland Civil Service, wrote to political parties warning that disruption would be “severe”. The economic and social effects would be “profound and lasting”.

The SME and agri-food sectors, especially those operating along the border, would be particularly vulnerable. EU customs and single market regulations would have “very serious effects” on any company selling goods to or through the South. Some patterns of trade would become “uneconomic immediately”.

“In effect,” Mr Sterling warned, “there is currently no mitigation available for the severe consequences of No Deal.”

On 1 April, the cabinet secretary Mark Sedwill told ministers that Northern Ireland would face “more severe” consequences.  

“The current powers granted to the Northern Irish Secretary would not be adequate for the pace, breadth or controversy of the decisions needed to be taken through a No Deal exit,” he wrote in a leaked letter to Cabinet. 

“Therefore we would have to introduce Direct Rule.”

The Stormont system has been in a quandary. Already Brexit was being tightly controlled by Downing Street and the Department for Exiting the European Union (DexEU), while the absence of the Assembly and Executive has deprived officials of political cover to pull what levers they might in order to steer the process away from No Deal.

There is ongoing contact between Belfast and Dublin on small practical measures that can be taken in the event of No Deal…

.We drew attention to the Pickett Lux report before but in the context of the Conservative leadership contest. Here, Connelly discusses it where it best belongs

 Several months ago a team travelled to Geneva to talk to WTO officials. A short time later they commissioned a report from two highly respected experts on EU customs and international trade law. The idea was that politicians would find it difficult to reject their evidence.

The report, The Irish Land Border: Existing and Potential Customs Facilitations in a No-Deal Scenario, was drawn up by Eric Pickett, a German lawyer specialising in EU customs and WTO law, and Michael Lux, head of unit in the European Commission’s customs division for 25 years. 

Because No Deal means no transition and no interim political or legal agreement, both experts were limited to exploring what EU or WTO rules might currently permit in terms of limiting the damage.

In 2017, over 90pc of Northern businesses exporting to the EU traded across the border. That trade was worth £3.9bn and accounted for 38pc of all exports and 18pc of external sales (including sales to Great Britain via Dublin Port or Rosslare). 

n 2016, imports from the South to the North were worth £2.3bn and accounted for 34pc of all of Northern Ireland’s imports.

A disproportionately high amount of this trade – almost one third of goods heading south – is in agri-food. Such products will face higher tariffs, and be subject to stricter regulatory checks. Many of the SMEs involved in this trade have little or no experience of customs declarations.

he authors also explored whether the UK and EU could invoke a security clause, ie Article 21 of the GATT agreement, which allows countries to waive customs obligations in times of war or where peace is threatened. 

The report acknowledges that in a No Deal scenario “a return to civil unrest is rather more likely than not”.

The report, indeed, points out that over 80pc of Northern micro-enterprises (those employing fewer than 10 people) who export, only export to the South.

Again, 70pc of slightly bigger companies who export, only send their goods south. 

The report shows it’s going to be incredibly difficult for businesses to continue to trade in the manner that they currently do. Large businesses might get away with it. Their cross-border businesses will become more complex and there will be additional costs.  

“For SMEs who trade across the border on a daily basis, the cost implications, and the statutory requirements would be so extensive that it would be almost impossible to trade.”

Industry figures break down which sectors would be hardest hit.

One quarter of Northern Ireland’s dairy output is exported to Ireland and Europe. According to Declan Billington of the Northern Ireland Food and Drink Association (NIFDA), the immediate tariff would mean producers receiving 11p a litre instead of 28p.

Across the board Northern Ireland meat producers face enormous hurdles. A 2017 study by The Andersons Centre and Oxford Economics on the impact of a hard Brexit concluded that beef and sheep meat production would decline by 21pc with exports to the EU “collapsing by over 90pc”.

Andersons reported that, according to Northern Irish prices in 2016, EU tariffs would range from 48pc for fresh or chilled lamb carcasses up to 96pc for fresh or chilled boneless beef.

“WTO trading,” concluded the Andersons report, “would have a devastating impact on Northern Irish trade with the EU for beef and sheep meat”. 

At present, London believes that the Withdrawal Agreement should be re-opened and at the very least the backstop should have a time limit.

One can assume that, if elected, Boris Johnson will demand such an expiry date as the very bottom line.

This is the prism through which the Lux and Pickett paper is viewed. To British officials, this 85-page report shows that no matter how much you try to mitigate a No Deal scenario on the island of Ireland, you will still end up with a mish-mash of infrastructure and a threat to the peace process.

“The only thing coming out of these papers,” says one official, “is that you can push back the infrastructure a little bit from the physical border itself in a way in which makes absolutely no difference. It’s still a hard border.  It’s all infrastructure in border counties.”

So the way to avoid this, say officials, is for the EU to agree to exemptions and derogations to EU law along the Irish border – as were proposed for SMEs in the UK’s August 2017 paper on Maximum Facilitation (Max Fac), (This was flatly rejected by the Article 50 Task Force.)

Or to go for an expiry date to the backstop.

When in the autumn No Deal looms, say London sources, MPs will cry that they too want to avoid it. So, they will ask, why won’t Leo Varadkar go for a backstop “with a tweak and a time limit, instead of guaranteeing a hard border in a few weeks’ time?”

Dublin  are saying a time limit won’t work for various reasons.…  

… not least the prospect of Sinn Féin linking such an expiry date to a border poll on a united Ireland. So far the EU has flatly rejected any reopening of the Withdrawal Agreement. 

A senior Irish official says: “There are people who want to reduce it to those ‘pesky Irish’. But the reality is, there is no fix that solves the real conundrum: how will the EU be satisfied that the customs union and single market will be protected?

“We have that frequently pushed back at us. Even if we were to explore alternatives, say a time limit, then the first question we will get is, what then? The minute that point is reached, and the time limit came into effect, and the backstop no longer applied…?

“No-one has been able to answer that question.