Facilitating ease of movement of goods over the Irish border

Once the United Kingdom (“UK”) leaves the European Union (“EU”) in March 2019, the existing border separating Northern Ireland (“NI”) and the Republic of Ireland (“ROI”) will become the border separating the UK from the EU. As one of the three key “separation issues” (alongside citizens’ rights and financial settlement), the EU Commission has repeatedly stated that “sufficient progress” must be made on the Irish border issue, before it is prepared to enter into trade discussions and agreement of the wider, long-term relationship between the UK and the EU.

In one of a series of position papers, the UK Government published Northern Ireland and Ireland: position paper on 16 August 2017. In the paper, the UK Government reconfirmed its commitment to safeguarding the peace process in NI, maintaining the Common Travel Area for movement of people between the UK and ROI, preserving close co-operation and avoiding a hard border for movement of goods between the two jurisdictions.

This article focuses on the latter of these core priorities. The UK Government’s position paper puts forward a liberal approach, suggesting no physical controls at the border for inspection of goods. We have considered below the issue from a strictly legal and economic perspective, although we recognise that there are also multiple social, historical and political factors in play, which will influence the outcome of UK-EU negotiations.

Figures released by the NI Statistics and Research Agency, whilst experimental as a new measure under development, paint a surprising picture. The latest figures show that in 2015, annual turnover related to goods and services was comprised of 66 percent of sales within NI and 21 percent in Great Britain (“GB”), making a total of 87 percent within the state and 13 percent in exports. Of total exports, 38.4 percent went to ROI. Figures released by the Irish Government indicate that exports of goods from the ROI to NI are only 1.6 percent of total ROI exports. GB was the destination for 12.3 percent of ROI’s exports during the same period. Although the figures do not precisely match the NI turnover figures (partly because the NI figures include services), together these indicate that trade of goods over the NI-ROI border is less than might generally be expected.

However, ensuring the minimal disruption as possible for all cross-border traders and businesses operating across in the UK and Irish markets will be key – across the land border and across the Irish Sea. To assist with this process, in addition to the continuation of tariff free trade that the UK is hoping to achieve, possible solutions might include:

• Agreeing a smooth customs arrangement, and using the best practice legal and technology tools. Customs controls could be carried out remotely through use of electronic technology at the border and ongoing inspections and audits by authorities away from the border. Commercial operators would likely need to log journeys online in advance of travel, alongside spot-checks and enforcement taking place away from the border.
• Examine options to minimise disruptions caused by customs checks, for example including an enhanced Authorised Economic Operator (“AEO”) programme or other trusted trader scheme. As volumes traded between NI and the ROI are relatively low and the type of cross-border trade affected, such as shipments of milk from NI for processing in the ROI, is dominated by a small number of operators, it may be possible to enrol such operators in the AEO scheme, a trusted trader programme set up to expedite customs clearance. In its position paper, the UK Government proposed an exemption from customs requirements for businesses with less than 250 employees and facilitation measures for larger businesses, to eradicate further the need for physical infrastructure at the border.
• Seek to agree recognition of UK and EU product standards, conformity assessment and AEOs. Although the UK is able implement such steps unilaterally in respect of the goods it imports over the Irish border, there would be limitations on the measures ROI can deploy, by virtue of its remaining as a member state of the EU.

Proposals have previously been put forward to the effect that the UK might seek agreement from the EU to a form of special status for NI, by way of customs union or single-market membership. It is difficult to see how this would work in practice from an economic perspective, as it would inevitably introduce a goods border between NI and GB. As GB is, by a distance, NI’s biggest trade partner, from an economic perspective, maintaining frictionless trade with GB is likely to be a core priority.

Staying in the EU customs union (either the UK as a whole or NI alone) would similarly not remove the need for a hard border, because much border activity is not connected with enforcement of customs duties. The UK would also be limited in its ability to develop a global trade policy and improve domestic competitiveness. In any event, the EU has not offered such a scenario.

In the interim, whilst the UK continues to seek a full free trade agreement with the EU, it might seek to retain tariff consistency and alignment of goods regulation to avoid disruption to goods crossing the UK-Ireland border.

EU leaders will decide next month, at a European Council summit, whether sufficient progression has been made on the Irish border, citizens’ rights and financial settlement. In the event that the conclusion is affirmative, negotiations will begin on the wider UK-EU trading relationship.