The devil is in the detail for softening a hard border and terms for a good trade deal

Here are a couple of Big Ideas.

On the border….

It reads as dryly as any piece of euro-bureaucracy you could ever imagine. But here is a potential magic bullet that could ease the non-trade cross border problems of Brexit. It’s spotted by Dr Janice Morphett a planning expert currently with University College London writing in the Centre for Constitutional Change blog. It could be developed tight away, she says. Governments and local parties please take note.

 

There are already signs that some businesses are relocating across the (Irish) border to ensure that they can have access to EU legislation, market agreements and, particularly for agri-food business, access to beneficial WTO subsidies that will be lost following Brexit.  In public services, the provision of specialist health care facilities that now operate across the border is regarded as very uncertain by some who rely on these for themselves and their families.

There is one approach that could give some certainty to the relationships across the border on the island of Ireland that could be implemented now and could bridge Brexit into whatever follows. This is using an EU Regulation that supports the creation of agreements of European Groupings for Territorial Cooperation (EGTC).

The EGTC allows public bodies in different member states to come together under a new entity with a full legal personality and is designed to ‘facilitate and promote territorial cooperation (cross-border, transnational and interregional). This can include the provision of investment, public services and other cross border agreements and running public transport services, hospitals, managing development projects, exchanging good practices. The EGTC can be established by two or more member states. The Regulation also allows the inclusion of third party states that are not part of the EU. The EGTC can include public bodies and local and regional authorities and it must have an assembly comprising of representatives of the area and a director. The EGTC’s activities are defined through its establishment and it must set a budget and a work programme. EGTCs can be in receipt of EU funding but may also include other funding streams in their programmes.

While there are no EGTCs in the UK or Ireland, in 2016 there were 63 different groupings registered across the EU. These including EGTCs across the borders between France and Belgium in Flanders, across the border between Spain and Portugal in Douro and between Spain and France in the Pyrenees. They are also used for external EU borders such as the grouping for Hungary and the Ukraine.

If the Flanders grouping is considered in more detail, it includes a variety of activities in its programme including transport, healthcare, cross border employment and economic development, social inclusion, waste and energy – all of which would be of relevance across the order in Ireland. It also includes ICT, education, research, culture, sport and postal services. In addition to considering cross border services this EGTC has also established some thematic approaches to cross border issues including the consideration of water courses, rural areas, urban areas and maritime cooperation. In terms of tools it is using spatial planning, infrastructure and housing programmes, identifying where there are blockages to working and using legal means to attempt to overcome them if this is appropriate.

Could an EGTC be used now on the Island of Ireland? There seems no reason, subject to agreement of both governments, why such an EGTC could not be progressed alongside Brexit and it could be concluded more quickly.

 

But what about trade?

John Springford policy director of the authoritative Centre of European Reform argues that “ the best hope for Britain is something like the Swiss-EU deal, given the red lines of the 27 and the UK.” This however seems to mean surrendering the City as the euro’s hub. Some of this is happening already but  the word from the City is that it’s big enough and global enough to withstand wholesale flight.

A .new empirical analysis of trade barriers, set out in more detail below, shows three things. First, trade barriers in goods with the EU have almost halved since the UK joined in 1973, while barriers with the US has only fallen by one quarter.

  • Second, Switzerland’s barriers in goods with the EU are now almost as low as the UK’s, despite its partial membership of the single market, and its arm’s-length relationship with the EU’s institutions.

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  • Third, barriers in both goods and services between the UK and the EU have barely fallen since the year 2000. This suggests that the single market is reaching its limits, given that further falls would require more sharing of sovereignty, especially in the highly-regulated services sector. It also suggests that the losses foregone by Britain from further single market integration will be limited: the priority must be to limit the costs of the divorce.
  • How might that be done? The focus should be on goods trade, not services. The barriers to trading goods between the UK and the EU are less than half as large as those in services, according to our analysis. The exception is in capital markets and the business services that support them, such as accountancy, law and consulting. But the UK’s dominance in finance – Britain exports three-quarters of all capital market services within the EU – means that the 27 are keen to repatriate that activity.
  • In recent years, the most contentious ECJ cases involving Britain involved disagreements over financial regulation or the free movement of people. The 27 will not be willing to allow financial services access without closely aligned rules and the power of the ECJ to arbitrate disputes with the UK government.
  • The best hope for the UK, then, is a comprehensive trade agreement focussed on goods and those services, such as aviation, where both sides have a strong incentive to maintain the freest trade possible. This would be similar to Switzerland’s deal with the EU. Despite the Commission’s frustration with the Swiss relationship, a Swiss-style agreement largely limited to goods is Britain’s best hope: it represents the limit of market access that the EU has been willing to accept without the full supremacy of EU law.

 

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  • Fear Éireannach

    The EGTC seems a good framework for such things. Unfortunately, despite all the big talk about cross border cooperation, there is actually very little and much more needs to be done and this is critical to issues such as Daisy Hill hospital.

    As for Swtizerland, of course Britain could use Switzerland as a model and make progress. However Switzerland is in Schengen, and pays significant funds to Eastern European as their contribution to the development of the European continent, it seems Britain wants the free trade without such things.

  • George

    I love big ideas but unfortunately I think there is a potential fatal flaw in the EGTC idea.

    Article 3(2) of the 2006 Regulation:

    “An EGTC shall be made up of members located on the territory of at least two Member States.”

    My understanding of the EGTC with Ukraine is that it also involves Hungary, Slovakia and Romania. In other words it fulfills its requirements under Article 3(2).

    There cannot be an EGTC between Ireland and the UK as it will only involve one Member State once Brexit occurs. We can only use an EGTC while the UK is an EU member. Dr Morphett mentions the fact that there needs to be two Member States but doesn’t mention how this problem can be overcome subsequent to Brexit.

  • 1729torus

    Ukraine-style Association Agreement is the most likely outcome, since it can do everything that this post wants, and it’s simpler.

  • murdockp

    A hospital with a &e department serving dundalk and newry seems like the sort of thing that has legs given both towns current facilities hang in the balance.

  • Brian Walker

    she does mention Ukraine. Anyway for Ireland it might be a model to adapt to our unique circumstances.

  • lizmcneill

    Didn’t Boris Johnson say the UK could have the benefits of the single market without the responsibilities, or words to that effect?

  • George

    As I said in my post, it’s Ukraine and 3 EU Member States. Ireland can’t adopt it as it needs a second EU Member State as per Article 3(2). To create an EGTC as described, it will need to be Ireland, another EU Member State as well as the UK.

    What will be the second EU Member State involved in this EGTC suggested post Brexit?

  • runnymede

    not a chance of that – it wouldn’t be Brexit in any meaningful sense

  • Pang

    Any Danes out there interested in getting the 1973 hand back together?

  • Smithborough

    If I recollect correctly, one of the Irish government reports on Brexit concluded that North South trade peaked in the early 1980s, which is quite surprising. Trade issues will be the most complex part of Brexit but perhaps the actual in the ground impact will be less than imagined. Movement of persons will be much easier to manage and have much greater practical consequences.

  • Kevin Breslin

    The Swiss have had 40 years, we’d be lucky if the UK leave themselves 40 days to discuss the trade and customs formalities.

    And the Swiss solution still has border checks, customs roads and physical infrastructure in place to check goods going in and going out.

    I hope the DUP realize what they have put Northern Ireland through again for their tunnel vision of British nationalism.

  • James Livesey

    The very first one of these things was the Rhine Commission, set up by the Congress of Vienna in 1815 http://www.ccr-zkr.org/ Castlereagh and Clancarty were instrumental in this, so there is a long Irish history of involvement in complex trans-national organisations. The point is that such arrangements long precede the EU (and have survived worse than Brexit).

  • MainlandUlsterman

    Can we take it as read that we are not limited to existing structures – it is possible new ones can be agreed and legislation consequently enacted to give them effect?

  • MainlandUlsterman

    Interesting ideas. What it flags up to me is that the devil – and the angels – will indeed be in the detail. Whatever deal we end up with will almost certainly have some element of novel cross-border arrangement that is sui generis. It will also have complex trade terms that will need a forensic eye and a lot of judgment to really work out the consequences of. It will all be much less easy to characterise as ‘hard’ or ‘soft’ Brexit than the current debate implies.

    Had an interesting debate / drunken argument after too much Sagres over 3 days in Lisbon there with a couple of Lib Dem voting English mates, on what May’s real plan is. Helped clarify my thoughts! And I’m becoming convinced May is triangulating. She will go for the shell of a hard-looking Brexit but one she will actually fill up with pro-trade and free movement content, unseen by the wider public. The swivel-eyes on the Tory right will call it out, but May will be in such a strong position domestically she can steamroller over them.

    So, we’ll have:
    – notional controls over immigration – but actually so many exceptions in practice that British business will still have the labour it wants
    – no single market – but we’ll pay in handsomely (sorry, invest) for something very close to single market access for all or most of our key industries