Belfast Telegraph

Dan O'Brien: Risk of a no-deal Brexit not going away but we shouldn't dismiss tariff proposal


House of Commons votes on Brexit proposals
House of Commons votes on Brexit proposals

By Dan O'Brien

Plans by the British Government for trade in the event of a no-deal exit involved a commitment not to change anything on the northern side of the border on this island for one year, and the announcement of new taxes (or 'tariffs' in the jargon on international trade) on some goods entering the island of Britain from Ireland and the rest of the EU.

In one respect, the plans were at odds with what sources had signalled repeatedly over many months - that there would be no changes for goods arriving in Britain from the EU, at least in the initial days and weeks after a no-deal exit. This was to be the position, even if the EU were to hit British exports with tariffs when they arrived at the bloc's external frontier. This was all based on the 'continuity principle'. The idea was not to be nicer to the EU than the EU might be to Britain. It was designed to minimise disruption to supplies coming into that country in the immediate aftermath of a no-deal exit.

The plans last week suggested that new tariffs would be applied on some EU goods from the beginning.

This contributed to a view in Ireland, and more widely in the EU, that the British were trying to divert attention from their own difficulties or, worse still, isolate Ireland from its fellow 26 EU members. This view is not incorrect.

But that does not mean the proposals should be dismissed out of hand, as they largely were, reflecting the degree to which discussion on Brexit has become an echo chamber. In this cocoon, people compete to show who can be most disdainful of the British side in the Brexit fiasco.

This is neither healthy nor helpful in managing what is a massive damage limitation exercise.

As most people on all sides agree, a top priority is reducing the risk to peace on this island posed by Brexit. The deepest fear is that a re-militarisation of the border would lead to the re-radicalisation of the nationalist community which, in turn, could cause the Troubles to restart. That scenario is most likely to play out if British border infrastructure appears, which is then subject to attack by extremists which, in turn, requires British security personnel to protect the installations.

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Last week's proposal from London that it would not change the northern side of the border for a year has downsides. It would, for instance, increase incentives for smuggling. More significantly, it would also create incentives for legitimate businesses to ship goods destined for the British market through Northern Ireland to avoid tariffs at British ports. The big loser in all this would be the UK treasury.

One aspect of the criticism of the British border proposal was that the World Trade Organisation would not allow it. This is very wide of the mark. The WTO secretariat is not like the European Commission, which has powers to challenge EU members who break EU rules. The WTO civil servants in Geneva carry out technocratic tasks at the request of the member countries. They don't tell countries to do anything.

It is possible that another WTO member country could claim that by not policing the northern side of the Irish border, it was being discriminated against, thereby beaching WTO rules. While that could conceivably result in a legal case being taken against the UK, Article 21 of the founding treaties of the WTO allows countries to take measures for reasons of national security, even if other member countries believe those measures discriminate against their exporters. Not putting British soldiers on the border, and avoiding a return to the Troubles, is very clearly a national security matter for the UK.

If last week was wall-to-wall Brexit, don't expect any respite this week or next. EU leaders will be considering the terms upon which they would agree to postponing the March 29 expiration of Britain's EU membership.

They will have to agree among themselves to prolong the agony and then agree with a British Government which has shown itself to have little competence and even less authority.

It is very far from a foregone conclusion that an agreement will be reached.

With these two huge obstacles to overcome, it is hard to avoid the conclusion that there remains a worryingly high risk of a no-deal exit in 12 days.

Dan O'Brien is chief economist at the Institute of International and European Affairs

Belfast Telegraph