Upcoming Event, 13 December: Brexit, the Backstop and the Island of Ireland
The Brexit Deal’s Protocol on Ireland/Northern Ireland and the UK’s ‘Red Lines’
Chloé Papazian (DCU Brexit Institute)
The road to the publication of the draft withdrawal agreement on Wednesday 14th of November was bumpy. To reach this agreement, both the UK Government and the EU-27 had to make concessions and move from their firm positions. Yet, the road to the agreement’s approval in the UK Parliament looks even bumpier. The tense atmosphere and public outcry that the draft withdrawal agreement provoked in the UK in recent days merely overshadows a more important insight which only slowly surfaces: the UK Government might have played almost all its cards during this negotiation round.
Rather than insisting on a ‘EU-Northern Ireland only’ customs union as the backstop solution, the EU accepted the creation of a customs union with the entire territory of the UK when it leaves the EU Customs Union and Single Market on 29 March 2019. Should the transition period lapse without an EU-UK trade agreement, this new customs union will enter into force and govern the EU-UK relationship until an agreement satisfying the necessity of an invisible Irish border is reached. Yet, under the EU-UK customs union, a specific regime will still apply to Northern Ireland, differentiating this territory from the rest of the UK. Undoubtedly, this differentiation represents a bitter defeat for the UK Government. Moreover, although not as salient at first sight, the ability of the UK Government to conduct a truly independent trade policy and to autonomously negotiate and conclude trade agreements around the world with third countries constitutes an important concession the UK will have to give away if the backstop were to become necessary. Going even further, the conditions and constraints attached to the agreed Irish backstop suggest that the UK Government may have serious difficulties in any future trade deal with the EU to become a genuinely independent trade player.
A closer look at the constraints, as well as terms and conditions accompanying the Irish backstop, demonstrates the concessions the UK Government was forced to make to obtain the draft withdrawal agreement and the future concessions that it might have to make in order to hammer out a future trade deal.
Concessions made in the Protocol on Ireland/Northern Ireland
In her Mansion House speech in early March 2018, Theresa May pointed out that “we [the UK and the EU] both need to face the fact that this is a negotiation and neither of us can have exactly what we want.” Both the UK Prime Minister and the EU’s chief Brexit negotiator, Michel Barnier, underlined again this issue in their respective press conferences following the publication of the draft withdrawal agreement.
Admittedly, the EU made concessions during the negotiations of the draft withdrawal agreement by progressively moving its stance on the backstop. After the EU initial proposal in March 2018 which was significantly disparaged in the UK, Michel Barnier tried to ‘de-dramatise’ the backstop. As the UK Government nonetheless continued to reject the principle of having the territory of Northern Ireland in a separate customs union from the rest of the UK, the EU abandoned its backstop solution and accepted the recent UK proposal. In the absence of a trade agreement at the end of the transition period, the EU and the whole UK will enter in a customs union until both sides find a comprehensive deal governing their trade relationship.
Yet the EU and its 27 Member States attached strict conditions to this concession, which represent important sacrifices the UK Government has had to make less than five months before exiting the EU. The three following points describe pivotal elements of the Protocol that suggest that the UK had to trespass at least some of its ‘red lines’:
- First, the customs union enshrined in Article 6(1) of the Protocol will enter into force for an indefinite period. It can only cease to apply following a joint EU-UK decision that the Protocol is no longer necessary to achieve its objectives (Article 20 subparagraph 3 of the Protocol).
- Second, mirroring the guarantee of a level playing field that the EU and its Member States require in any future trade agreement, Annex 4 of the Protocol includes non-regression clauses in relation to not only environmental protection but also labour and social standards, as well as the application of the Union competition rules and the Union State aid rules for measures affecting trade between the EU and the UK. State aid granted by the UK public authorities affecting trade between the UK and the EU come under the purview of Articles 93 and 106 to 109 TFEU. For those measures, an independent UK authority will perform, within EU constraints, the powers and functions of the European Commission to apply and enforce EU State aid rules (Article 9, Annex 4 of the Protocol).
- Third, even if the EU dropped its initial proposal of a Northern-Ireland-only backstop, Northern Ireland will still be subject to a separate regulatory regime than that of the rest of the UK. While the UK must apply only parts of the Union Customs Code (Regulation 2013/952/EU) by aligning its tariffs, as well as its rules determining the origin and the value of the goods for customs purposes with the EU (Article 3, Annex 2 of the Protocol), the whole EU customs and trade legislation listed in Article 5(2) of Regulation 2013/92/EU and Annex 5 of the Protocol must apply to the territory of Northern Ireland (Article 6(2) of the Protocol). Moreover, Northern Ireland must continue to apply specific rules of the EU Single Market related to technical regulations on goods (Article 8 and Annex 5 of the Protocol), agriculture and the environment (Article 10 and Annex 5), and the EU value-added tax and excise tax (Article 9 and Annex 6). Furthermore, the European Commission will remain competent to examine State aid granted by the UK public authorities affecting trade between the EU and the territory of Northern Ireland (Article 12 of the Protocol).
Significance of the UK Concessions
The specific regime applicable to Northern Ireland clearly undermines the request which the UK Government has long fought for and one of its most important ‘red lines’, namely the need to preserve the territorial integrity of the UK. To prevent any customs or regulatory checks at the border between the North and the Republic of Ireland, the territory of Northern Ireland – unlike the rest of the UK territory – would have to maintain alignment with specific EU rules related to the EU Customs Union, trade policy and the Single Market. Hence, under the Protocol agreed between the EU and Theresa May’s Government, specific regulatory checks will apply on sensitive goods listed in Annex 5 moving from Great Britain to Northern Ireland.
Moreover, while the UK will leave the EU Customs Union and the EU Single Market, as it wished, one part of the UK territory (eg Northern Ireland) will remain subject to certain rules of the EU Customs Union and Single Market and thereby to the jurisdiction of the European Commission and the Court of Justice of the European Union (CJEU). Thus, should the Protocol enter into force after the transition period, the regime applicable to Northern Ireland would transgress two other ‘red lines’ set by the UK Government. Indeed, during her Mansion House speech, Theresa May made clear that the UK will leave both the EU Single Market and Customs Union and will end the jurisdiction of the CJEU.
Undoubtedly, it is these issues that have prompted the resignation of several cabinet members in recent days. Other members of the UK cabinet are currently urging Theresa May to re-open the negotiations before the next EU Council at the end of the month. Furthermore, the backstop solution proves that the UK will have in the future, under the backstop or under any other trade agreement replacing this backstop, great difficulties in conducting an independent trade policy. The Protocol therefore encroaches upon another pivotal ‘red line’ the UK Government had set.
Entering a new customs union with the EU, the UK will have to align its tariffs and rules applicable in its customs territory with the EU common external tariff, as well as with the EU rules determining the origin of goods and the value of goods for customs purposes (Article 3, Annex 4). In other words, the UK will not be able to grant preferential treatment to any third country by applying a different customs tariff or a different rule of origin than that which is done under EU rules. Additionally, the UK must comply with any EU decision to amend the common customs tariff, to suspend or reintroduce duties, and with any EU decision concerning the introduction/modification of quotas or tariff-rate quotas. The UK will merely be kept informed of such a decision in due time to ensure its compliance, although joint EU-UK consultations may be held, if necessary (Article 3, Annex 4). Antidumping duties, countervailing duties and safeguards enacted by the EU will also apply at the UK borders (Article 4, Annex 4). Hence, the UK will remain subject to the EU trade policy without having any voice to influence it. Certainly, the UK will become an independent WTO Member but will have the same Schedules of Concession on goods as the EU ones.
More generally, the UK will also have to comply with the EU trade agenda and will be unable to negotiate trade agreements independently with the rest of the world. A comparison with the customs union the EU has concluded with Turkey on industrial goods may prove relevant here. Since its entry into force in 1995, the EU-Turkey customs union affects the ability of Turkey to autonomously negotiate trade agreements with countries outside the EU. Turkey must, just as the UK will have to, apply the EU common external tariff and any preferential tariff the EU grants on the basis of a preferential trade agreement (PTA). As a result, if the EU concludes a PTA with a non-EU country, that country gains access to the Turkish market (and in future the UK market) on the same terms as it gains access to the EU market. Turkey and the UK will not, however, have automatic access to this third-country’s market. Both countries must negotiate and conclude a separate trade agreement with this third-country on the exact same terms of the one concluded with the EU. Hence, this separate trade agreement with Turkey or the UK and the third-country concerned must include the preferential customs tariffs, tariff-rate quotas and regulatory standards negotiated by the EU.
The backstop solution therefore eliminates any possibility for the UK to conduct an independent trade policy. The UK will, furthermore, not easily walk out of this EU-UK customs union. Importantly, the UK cannot unilaterally withdraw from it. The EU and the UK must jointly decide that this Protocol is no longer necessary to permit the maintenance of an invisible border within the island of Ireland and to protect the 1998 Good Friday Agreement. Yet, under the terms and conditions attached to the backstop, how would it be possible for the UK to prevent any customs and regulatory checks at the Irish border without having a full regulatory alignment on goods with the EU and without accepting and complying with the EU trade policy? The future ambitious and independent UK trade policy as wished for by the UK Prime Minister and the Government seems very difficult to realise under any other EU-UK trade agreement to replace the backstop solution.
Although the EU made a step forward by accepting an EU-UK customs union as the backstop solution, the UK Government gave away all its negotiating cards and transgressed all ‘red lines’ the UK Prime Minister had fixed at her Mansion House speech. A future solution that protects the UK’s territorial integrity and guarantees a truly invisible border between the North and South of Ireland will not come without the UK aligning on some EU Single Market and Customs Union rules. Alignment and acceptance of a level playing field will render particularly difficult negotiations with other major trade players such as the United States, which had hoped that a regulatory unravelling in the UK will allow a better access to the UK market, as compared with the access terms the EU is currently offering.
Chloé Papazian is a Research Fellow at the Brexit Research and Policy Institute at the Dublin City University. She is finishing her Ph.D. at the Faculty of Law of the European University Institute, Florence, Italy. Her thesis focuses on WTO subsidy law and EU State aid law. She holds a LL.M in European legal studies from the College of Europe. Her research interests relate to WTO law and EU law, as well as international energy and environmental law.