What Does Chequers Mean for Northern Ireland?

Jul 16, 2018

It has been an enduring mystery since last December’s Joint Progress Report why the UK Government conceded so much on the Irish land border. The concessions effectively forced the Government to propose at Chequers that the UK would be bound by EU regulations on exportable goods and would remain within a customs union.

The result is to compromise the independence of the UK in several important areas of policy. As a result, Theresa May is left in a position which risks splitting the Tory Party like Robert Peel or Joseph Chamberlain before her, and condemning the UK to decades of rancorous dispute and soured relations? Can all of this really flow from a minor border with flow of trade which is miniscule in the context of either the UK or EU?

The fact that the Irish border has driven the Brexit process was stated by the PM to Donald Trump at the Blenheim dinner last Thursday to explain to him why the UK was following the path described at Chequers. This was a path that mystified the President who had exclaimed in a tweet that he had thought that the UK wanted to leave the EU.

The drafting of the Progress Report left a wake of hostages to fortune. In paragraph 42 for instance the UK ‘recalls ‘its commitment’ not only to avoiding any infrastructure but also to avoiding ‘related checks or controls’. This was always absurd drafting.  It appears to suggest that existing cameras and actions by customs officials to deter smuggling be discontinued. It also quite unnecessarily suggests that checks away from the border will not be permitted.  The European Union (Withdrawal) Act 2018 recently passed by Parliament appears to retain the existing infrastructure and according to some critics, even permits its possible expansion in the future.[1]

The key paragraph 49 in that report states that:

The United Kingdom remains committed to… its guarantee of avoiding a hard border….. through the overall EU-UK relationship. Should this not be possible, the United Kingdom will propose specific solutions to address the unique circumstances of the island of Ireland. In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all- island economy and the protection of the 1998 Agreement”.

This wording gave the EU a veto over progress. If the EU failed to agree an overall relationship or specific solutions then the fall-back became automatic. The White Paper concedes the fall-back but applies it to the entire UK, since the DUP would not agree any arrangement that did not apply to the entire UK.

In fact, the UK Government did not need to stick to these commitments. The EU had already moved decisively away from the December Report it had agreed as a Joint document by insisting in its draft Withdrawal Agreement of last February that only Northern Ireland remain within the Single market and Customs Union. This in turn meant an Irish sea border, which had been explicitly ruled out in paragraph 50 of the Joint Report. If the EU ignored key aspects of the Report, then surely the UK could also have done so, but as we know at Chequers it chose not to do so.

The White Paper proposes three things that inter alia solve the border issue. One is free trade in goods. A second is a ‘common rulebook’ for goods, essentially tying the UK to all current and future EU regulations for goods. Third is a so-called ‘facilitated customs arrangement’, removing the need for all customs checks with the EU while allowing the UK to set its own tariffs with countries outside the EU. For services there is less precision, but the UK will seek such things as mutual recognition of professional qualifications and reciprocal access for aviation and road haulage, as well as equivalence for the regulation of finance. The Paper commits the UK to continue treating the island of Ireland as a single epidemiological unit with a common strategy on animal health.

All of these should be sufficient to meet the UK’s intentions on avoiding a border in Ireland with no infrastructure. It should also allow Ireland to do likewise on its side of the border. If these proposals were enacted we could declare the Irish problem solved, but we may be far from this conclusion.

Strong opposition within the UK to continuing ties to EU regulations and oversight may prevent the measures being adopted in Parliament. The Conservative Party is split, and much will depend on how Labour reacts. The EU has deep problems with what it sees as the cherry-picking aspects of these proposals. The former Irish Ambassador Ray Bassett (now Policy Exchange’s Senior Fellow on EU Affairs) fears that Irish Foreign Affairs officials will not reflect clear Irish interests in supporting the proposals and will continue their usual subservience to Brussels.

More generally Irish attitudes are divided. The removal of direct threats to Irish goods exports to the UK are welcomed, as is the renewed prospect of London financial firms relocating to Dublin. Uncertainties over finance may however threaten Ireland’s now substantial financial exports to the UK.

In Northern Ireland there will be relief that the promise of no hard border has been fleshed out. The DUP are content that no constitutional threat to the status of Northern Ireland is contained in the White Paper. The hints in the White Paper that there may be flexibility in the movement of skilled labour will also please Northern Ireland’s firms. Many firms have identified access to EU labour as their chief worry. Food processors, farmers and fishing firms have come to rely on East European labour and will try to designate semi-skilled operatives as skilled. For them the future is far from clear as it also is in Great Britain.

Much in the White Paper contrives to constrain future UK competitiveness. This includes an inability to diverge on regulations, but also an undertaking to stay in line with EU labour regulations and state aid rules on subsidies to firms in disadvantaged regions like Northern Ireland. Firms in Northern Ireland have however long adjusted to downward pressure from the EU on grants and subsidies, and in any case were in the process of switching to a low corporation tax regime.

On the face of it life can continue as normal in many respects for Northern firms and people. The issue of daily cross-border activity by small traders may also be near to solution but must await further agreement on qualifications and service provision. Few inside Northern Ireland are likely to join English Brexiteers in worrying about constraints on future trade deals or a restricted scope for regulatory change. In this respect they may be regarded as short-sighted but such has been the near hysteria about more immediate dangers that most will settle for this deal with few complaints.

[1] https://hansard.parliament.uk/lords/2018-06-18/debates/38C39823-F992-450D-AD1F-1A7A0FC6E706/EuropeanUnion(Withdrawal)Bill

Hansard European Union (Withdrawal) Bill House of Lords 18 June 2018 vol 791 col 1914 Lord Hain 6.30pm

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Dr Graham Gudgin

Dr Graham Gudgin
Chief Economic Adviser Read Full Bio

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