Trouble Brewing for Guinness

The Irish border poses one of the biggest challenges for Theresa May’s government in achieving the EU exit that she has set out. Leaving the customs union – a requirement if the UK is to be free to negotiate its own trade deals – almost certainly would introduce the requirement for a customs border between the Ireland and the UK.

This poses a big problem for Northern Ireland, and for businesses in both countries that operate across the border. A well known example is the drink synonymous with Ireland, brewed at St James’ Gate in Dublin, which is driven to Belfast for canning, and then driven back to Dublin for onward distribution. A customs border, even if tariff free, would potentially add delays and certainly would add administrative costs to this constant cross border model. The brewery would presumably need to either source a different canning partner within Ireland, at a cost of jobs in Belfast, or risk losing market share as the additional overheads are priced into the drink, making it less competitive.

While May has indicated that she desires a “frictionless” border, there is very little evidence or opinion to support that such a goal is achievable, if the UK exits the customs union. Primarily, this is because, even if the UK elected not to impose border checks, Ireland would be required, under EU law, to ensure that every single lorry carrying goods in value more than €300 to be stopped and checked. Every such movement of goods would need an accompanying export declaration document – the administrative cost to businesses of which is estimated to be somewhere between €20 to €80 per consignment. Any waiver for these requirements would be a clear violation of WTO rules.

The only way, experts agree, to prevent customs checks becoming a requirement on the Irish border, would be for the UK to retain membership of the customs union.

An overhead like this is expected to spell disaster for the Northern Irish dairy business – one third of all milk produced in Northern Ireland is sent south of the border. HMRC estimates that 52% of Northern Irish exports are to the EU, and 38% to Ireland alone.

One potential solution mooted that could mitigate the impact would be electronic border checks, however tax officials will not be able to get such a system in place prior to the EU exit date. Even once established, physical checks would still be required, as evidenced by the customs checks still in place on the Norway-Sweden border.

If Scotland were to become independent, it would face the difficult and undesirable choice of trade arrangements with Europe over the rest of the UK.

The only way, experts agree, to prevent customs checks becoming a requirement on the Irish border, would be for the UK to retain membership of the customs union. However, as doing so would prevent the UK from being able to negotiate its own trade deals, one would argue that this would also mean that retaining single market membership is also the only pragmatic option. If the UK retains single market membership, it must also uphold the four basic freedoms of movement… I think you see where this is going.

Observing these discussions develop, with interest, are the SNP; well aware that the Irish border question now also poses difficult questions for Scotland and the independence movement. If Scotland were to become independent, it would face the difficult and undesirable choice of trade arrangements with Europe over the rest of the UK. If England is outside of the customs union, and Scotland pursues full EU membership, then Ireland is a very interesting test bed for what may or may not be possible.

 


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