The Brexit Trilemma – why has Ireland derailed the process?

One of my favourite quotes about change comes from those ‘demotivational’ slides that were all the rage a few years ago:

“When the winds of change blow hard enough, the most trivial of things can turn into deadly projectiles.”

Change - whent he winds of change blow hard enough, the most trivial of things can turn into deadly projectiles

It’s so often true. Like a tornado picking up a pebble and turning it into a speeding bullet, a period of rapid and tumultuous change can make an issue you thought was peripheral into the thing that derails your project. I speak from bitter experience here.

The Irish border, it seems, has become just such an issue for Brexit. Barely anyone outside the island of Ireland mentioned it during the referendum campaign. It was typical of a  tangential issue within a much bigger project. A small group of people in the corner kept banging on about it but no-one else was really listening. As former Downing Street press officer Matt O’Toole says, it was always going to be a problem but none of his colleagues seemed to take it seriously.

They are taking it seriously now though, for this is the question which has held up the entire process. Another EU summit has come and gone without any agreement being signed because no one can figure out what to do about the land border in Ireland.

The problem started with the UK government’s commitment to leave the EU’s Customs Union and Single Market. The Customs Union ensures that common tariffs are charged on all goods entering the EU and removes tariffs between EU countries. The Single Market ensures that all goods conform to a common set of regulatory standards. If it is made in the EU it is made to those standards, if it is imported into the EU, it has been checked against those standards. The combined effect of the Customs Union and Single Market is to render border checks on goods unnecessary within the EU. Once something is inside the EU it can go anywhere because the tariffs have been paid and its conformity to EU standards confirmed.

The Northern Ireland peace process removed the need for security checks at the border and the long-standing Common Travel Area agreement meant there was no need for passport checks. The EU’s Customs Union and Single Market is the third piece of the jigsaw. By removing the need for trade inspections, it became possible to go backwards and forwards across the border without stopping or, on smaller roads, without even noticing where the border runs. Consequently, people and businesses got used to the idea and cross-border trade boomed.

Brexit, though, moves the EU’s customs and regulatory border from the Atlantic Ocean to the English Channel. From 30 March next year, in the absence of any agreement that states otherwise, the UK moves outside the legal framework of the EU. This means that there will be a trade border. Some people have suggested that we could simply ignore the border in Ireland and decide not to inspect goods crossing it. Unfortunately, though, international trade law gets in the way. The World Trade Organisations principle of non-discrimination means that, unless two countries are part of a customs union or other trade agreement, they cannot treat each other’s goods more favourably than anyone else’s. As this paper by the Institute for Government explains:

“Under World Trade Organization (WTO) rules, unless the UK is prepared to drop tariffs for all imports, it will have to collect duties on EU imports.

“Second, as a member of treaty organisations such as the WTO and as a signatory of the TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary) agreements, the UK would be bound by the principle of non-discrimination when it comes to applying regulatory checks.”

So if we stop charging tariffs on goods from Ireland then we have to stop charging them on goods from anywhere. Worse still, if we stop inspecting goods from Ireland, we have to stop inspecting goods from anywhere. The sub standard medicines, adulterated food and dangerous toys could flood in. Which is why it’s not going to happen.

To prevent border checks, then, it is necessary for the UK to be in a customs union with the EU and in the Single Market, at least for goods. As the UK government has said that leaving both is one of its red lines, that means that border checks would have to be introduced on both sides of the border as a matter of course.

The idea of a border which has been invisible for 20 years reappearing has disturbed many people in Northern Ireland and the Republic. The Irish government has refused to countenance any arrangement between the UK and EU which would see the return of border checks and EU leaders, such as Donald Tusk and Angela Merkel, have very publicly backed this stance. In December 2017, the UK government declared its commitment to avoiding a hard border in Ireland.

In March 2018 the EU proposed the option of Northern Ireland remaining in the Customs Union and Single Market while the rest of the UK leaves. That way, the customs and regulatory checks would take place on goods moving between Great Britain and Northern Ireland. That suggestion was unpopular with many Ulster Unionists and the government has rejected the idea. It would be politically humiliating for any prime minister to agree to the de facto division of the country and, at the very least, would require a referendum in Northern Ireland. The EU has described this idea as a fallback plan in case no other option is agreed but even so, it is very unlikely that the UK would agree to it even on those terms.

It has been suggested by some in the cabinet that technology might solve the problem. Ministers have suggested a level of surveillance that would cause an outcry if it were imposed on their own constituents. Yet even advanced cameras, number plate recognition, satellite tracking and drones would not remove the need for checks at the border. Much of the discussion has been about customs but most physical inspections of non-EU goods are regulatory. The Northern Ireland border has more road crossings than the EU’s entire eastern border. Even with the most sophisticated technology, inspecting the food and livestock that crosses the border would be impossible to do invisibly. There are no unpoliced trade borders in the world for good reason. The technology does not exist to make them invisible. The UK’s former ambassador to the EU, Sir Ivan Rogers, said that idea of a technological solution to the border issue was regarded as “a fantasy island unicorn model” by other EU leaders.

The government, then, seems to have red lined itself into an impossible position by making three incompatible commitments. As the diagram below illustrates, the government can keep any two of its promises but it can’t keep all three. It is a classic trilemma; you can pick two out of three. For two pledges to stand, the third must fall.

The Brexit Trilemma

chart showing brexit effects for northern ireland

(With acknowledgements to R. Daniel Kelemen, Rutgers University and John Springford, Centre for European Reform)

If we are to leave the Customs Union and Single Market but avoid border checks in Ireland, then Northern Ireland must stay in both. If we are to leave the Single Market and Customs Union and refuse to accept a border between Northern Ireland and the UK, then there will be checks at the Irish border, something the EU has said it will not accept. If we are to avoid borders of any kind, we must stay in the Single Market and have a customs union with the EU, at least for goods if not services.

Option C, staying in a customs union and the Single Market for goods only, might enable the government to keep some of its red lines. This has been dubbed the Jersey Option by Sam Lowe of the Centre for European Reform, as it is broadly the arrangement the Crown Dependencies have with the EU. Jersey, Guernsey and the Isle of Man are in the Customs Union and in the Single Market but only for trade in goods. For all other purposes they are treated as third countries. This means that they do not have do not have to accept free movement and do not have to abide by EU law in non-trade matters. Jersey, for example, has no Working Time Directiveno TUPE and only introduced discrimination laws in 2013. If this were applied to the UK as a whole, the government could claim to have taken back control of immigration and removed much of the European Court’s jurisdiction while avoiding the need for border checks on trade. This would keep the red line on immigration intact and slightly smudge the one on the ECJ. (For more on the Jersey Option see Martin Sandbu in the FT, Alasdair Smith of Sussex University and former European Commission economic adviser Philippe Legrain.)

In a speech in May, Sir Ivan Rogers suggested that we might end up with something like this. The FT’s political editor and former Brussels chief , George Parker, agrees and thinks that it may well have been Theresa May’s plan all along:

“The outline of Mrs May’s strategy can already be discerned: it is hidden in plain sight, but gradually becoming clearer to those who are connecting the clues contained in various speeches and policy papers.

“The evidence suggests Mrs May wants to keep Britain in a tight customs relationship with the EU and something that looks suspiciously like a single market for industrial goods.”

Would the EU go for such an arrangement? The official line is ‘No’ but the FT’s James Blitz reckons they just might:

“Looking over the commentary on this issue, there are three reasons why the EU might swerve to accommodate the idea. 

“First, the EU has a surplus in manufacturing trade, while the UK’s strength lies in services. So a level playing field in goods is attractive to Europe. 

“Second, this is the only conceivable route to an invisible Irish border. The commission continues to press the notion of a Northern Ireland-Irish arrangement covering customs union and goods. But the commission does not seem to realise this would be unacceptable to almost any UK prime minister, no matter what their reliance is on the Democratic Unionist party.

“Third, the Trump factor. The EU is increasingly at odds with the biggest English-speaking country in the world. Does it really want to be at odds with the second-biggest as well, or would compromise be wiser?”

No doubt more clues will emerge during the Chequers meeting but, whatever happens, there is really no way out of the Brexit trilemma. Sooner or later, one of the circles must fall. Either the EU gives way and offers the UK a trade deal even though it will mean a hard border in Ireland, or the UK government accepts a trade border in the Irish Sea or the UK stays in the Single Market and in a customs union for goods with the EU. The only question is at what point the crunch will come. The issue was kicked down the road in December, again in March and again in June. Perhaps a fudge will be found that enables the question to be delayed until the transition period. Whatever happens, though, the problem won’t go away. Whether we tackle it now, in 2020 or in 2023, sooner or later something will have to give. The Brexit uncertainty will be with us until this is sorted.

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