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EACCNY Pulse: Transatlantic Business Insights

Listen to this final “Brexit Musing” episode with John Bruton, the former Irish Prime Minister (Taoiseach) and former EU Ambassador to the United States who will share his wisdom on what Brexit means and his thoughts moving forward with regard to not only the UK and EU, but also the U.S.

THE TRADE AND COOPERATION AGREEMENT

UK GAINED A LITTLE EXTRA SOVEREIGNTY OF THE ISLAND OF BRITAIN, BY GIVING UP SOME UK SOVEREIGNTY IN NORTHERN IRELAND

The EU/UK trade deal maintains Ireland’s agricultural export market in Britain. A “No Deal” would have destroyed it. The imposition of tariffs would have imposed huge costs on consumers and disruption to business.

That said, the fact that the Agreement had to be rushed through at the last minute left little time for debate which side lost the least in the negotiation.  For it is in the nature of a divorce, like Brexit, that both sides actually lose.

First let us look at the British side.

 For them, the goal was “sovereignty”. In sum, Boris Johnson gained more UK sovereignty over the island of Britain, but did so by sacrificing a considerable measure of UK sovereignty over Northern Ireland.

Traditionally sovereignty in Britain was seen as the unfettered power of the British Parliament to legislate.  Brexiteers have interpreted it as taking back control into the hands of British Ministers, rather than into the hands of Parliament as such.

On the other hand, EU rules, in which neither the UK, nor the people of Northern Ireland, will have  a direct say, will continue to be made for, and apply in, Northern Ireland. This creates a democracy deficit, even if the subject matter will be highly technical.

After much effort and controversy, the UK has won the right to diverge from EU rules for the island of Britain. To show that the effort was worthwhile, it will be tempted to adopt different rules on trade and regulatory matters just for the sake of it.

THE MORE BRITAIN DIVERGES FROM EU, THE MORE WILL IT DIVERGE FROM NORTHERN IRELAND

But the more British rules diverge from EU rules, the more will Northern Ireland diverge from the rest of the United Kingdom.

 This creates a political mine field and a strategic dilemma.

The implications for NI unionists could be quite destabilising. A sense of losing control over their future, and of not being represented when decisions are being made, could encourage irrational politics. This will require serious reflection in Brussels, London and especially Dublin before there is any new divergence between the UK and the EU.

The Joint EU/UK Committee, already set up under the Withdrawal Agreement, will need to monitor the political and security consequences. Title X of the Agreement requires advance notice, and consultations, on any changes in regulations as between the UK and the EU. It will be important for peace and security of these islands  that these consultations include representatives of all major interests in Northern Ireland.

 THE GAINS FOR THE UK SIDE, AT A PRICE

On the other hand, the Agreement contains significant gains for the UK side from a “sovereignty” perspective, at least as far as the island of Britain is concerned.

 Firstly, there will be no direct application of decisions of the European Court of Justice on the island of Britain.

Secondly, while the UK has accepted that it will not regress from present high social and environmental standards, it will be free to set for itself the detail of those standards. These may be different from those in the EU and thus in Northern Ireland.  This right to diverge is what UK Brexiteers saw as an expression of UK’s sovereignty. There will be strong temptations to use this power if only to show that Brexit was worth the effort.

But the UK also accepts that divergence will not come for free.

 It has had to accept that services exports from the UK have lost automatic access to the EU market, a large and incalculable sacrifice. It has also lost the European Arrest Warrant and access to eU data bases.

 As one advocate of Brexit, Dr Liam Fox MP, put it in Westminster last week

“If we want to access the Single Market, there has to be a price to be paid.  If we want to diverge from the rules of the Single Market, there has to a price to be paid”

The Agreement establishes detailed mechanisms to settle what ”price” will  have to be paid for any new  divergence .

Already, the UK is contemplating allowing genetically edited crops. If these are not permitted in the EU, there could be trade frictions and competitive losses for EU farmers.

HOW WILL DISPUTES BE SETTLED?

These new mechanisms , a Partnership Council, Joint Committees, and Arbitration Tribunals, are completely untested at this stage.

A great deal will depend on how much use the UK will make of its new freedoms. The more EU and British policies diverge, the greater will be the strain on the Agreement.

 In the last 5 years of debate about Brexit, UK politicians have actually advanced very few ideas of how they might use the new freedom conferred by Brexit.

So it is impossible to assess, at this stage, whether or not they might do things that would push the EU to seek redress through the mechanisms of the Agreement, or contribute to instability in Northern Ireland.

 If problems arise and these cannot be settled in the committee system, there is an agreed provision for arbitration. Three person Arbitration Tribunals which will operate on strict time limits. If the Arbitrators find that either the EU or the UK has breached the agreed principles, the other party will be allowed to impose tariffs or prohibitions, to compensate for losses it has suffered.

BETTER THAN NO DEAL

 This Dispute settlement aspect of the Agreement is valuable from an EU point of view.

 Without it, any disputes would have had to be referred to the WTO.  The WTO system is both cumbersome and narrow. Parties can stall, adopt delaying tactics, or  ignore WTO rulings.

 Disputes in the WTO can drag on for years, as we have seen with the US/EU dispute about subsidies to Boeing and Airbus.

 That said, we will now  be replacing a single set of rules, interpreted by the European Court of Justice (ECJ), with individual Arbitration Tribunals, operating under tight deadlines.

This could lead to inconsistent decisions in different areas of trade. If a Tribunal interprets EU law differently to the interpretation later made by the ECJ, there could be real difficulties. Some of the problems that have arisen in EU relations with Switzerland could be replicated in EU relations with the UK, but with added complications in respect of Northern Ireland.

The UK will also be free to negotiate trade agreements of its own with non EU countries. These negotiations may create additional pressure for even more divergence between UK and EU standards, than the UK authorities themselves might have chosen.

 It may come under pressure to allow the imports to the UK that would not meet EU standards, for example chlorinated chicken, hormone treated beef, or genetically modified food . If these products are then incorporated into exports to the EU, the EU will have to ban them.

  UK or EU policy decisions could also skew the level playing field on which EU and British producers must compete.

In Title XI of Part One, and in Part Six of the Agreement, there are provisions for resolving disputes .

 If the dispute is about unfair subsidies, firms can go directly to the courts, citing the text of Title XI.

 If the dispute is about something else, the remedy  will be under Part Six  and  will be indirect, requiring either the EU or UK side to take the matter up in one of the many Committees set up under the Agreement. There could eventually be recourse to an Arbitration Tribunal.

In global terms, the continent of Europe as a whole has been weakened by Brexit.   The day to day effect remains to be seen.

WHAT THE BREXIT TRADE DEAL MEANS

The Trade and Cooperation Agreement between the EU and the UK is an exercise in damage limitation. The UK will face numerous obstacles because of its decision to leave the EU, including leaving the Customs Union and Single Market.

 But it was in nobody’s interest to add to these obstacles. That was the spirit in which the EU approached the negotiation.

The Agreement may run to 1256 pages, but it boils down to some fairly simple and sensible ideas.

 While no longer a member of the EU, the UK still wants to do business with the EU, and the EU members want to do business with it. 

So, for the future, there needs to be a system for ensuring that there are no surprises, or unfair trading , that would disrupt mutually beneficial business. That is essentially what the Agreement is all about.

 While the UK was a member of the EU, that goal was achieved by having a common set of business rules, made democratically and together, and interpreted in a consistent way by the European Court of Justice (ECJ). These rules could be enforced in national courts. In other words the goal of predictable and fair business conditions between the UK and its fellow EU members was achieved directly by common action. 

Under the new Agreement, the same goal will be pursued, but indirectly.

 Common rules, made and interpreted in common, will be replaced, as far as trade between the EU and the UK is concerned, by understandings set out in the Agreement, which will be interpreted by arbitrators appointed under the Agreement.

 These understandings will have legal force, but will generally only be enforceable under the procedures set out in the Agreement, rather than directly in national courts.

While the EU and the UK will each be free to determine their own policies on the environment, social and working conditions, and subsidy controls, Article 9.4 of the Agreement allows for “rebalancing” measures to be taken by the other side if it feels its own businesses are being put at a disadvantage. This is supposed to restore the level in the level playing field. 

The Agreement contains principles, now to be enshrined in international law through the Agreement, that are shared by the EU and the UK. These cover environmental, social and subsidy issues. Arbitration Tribunals to be set up under the Agreement will interpret these agreed principles in specific cases. They will have a legal, but also a political, task.

Most of the text of the Agreement is taken up with procedures for resolving disputes. 

Matters, currently resolved in national courts under EU law, will have to be resolved at inter state level between the UK and the EU, rather than in the national courts. This is inherently more cumbersome.

Sometimes the issue will be settled by political agreement in one of the myriad of committees set up under the Agreement. 

ARBITRATION…. THE CORE IDEA

If the issue cannot be settled in this way, it will go the arbitration. 

So, instead of the interpretation being done by Judges of the ECJ, they will be done by an Arbitration Tribunal set up under the Agreement.

An Arbitration Tribunal will consist of three people. There will be lists of qualified arbitrators from which the three may be chosen, one by the UK and one by the EU and the Chair of the Tribunal will be someone who is not from EU or the UK. 

 I think this idea that the chair must come from outside either the EU or UK may prove difficult. It will not  always be easy  to find suitable chairs who are not either British or EU citizens, especially as the work will have to be done at short notice and under tight time limits.

To qualify for appointment, an arbitrator will have to have “demonstrated expertise in law and international trade” .  They will all have to be people “whose independence is beyond doubt”. They will serve in their individual capacities, and not take instructions from anyone. They will have to be people who would qualify to be judges in their home countries.

I suspect there will be a lot of intense haggling over the composition of particular Arbitration Tribunals.  The nationality of the arbitrators and their past records will be scrutinised by the governments most affected by the issues in dispute. 

There are detailed provisions in the Agreement to prevent stalling by either the EU, or the UK, in appointing Arbitrators. Once established, the Tribunals will have to deliver their ruling within 130 days . Within 30 days after that, the affected party will have to say how they will comply with the ruling.

This entire structure of dispute resolution will be presided over by a Partnership Council to be chaired jointly, by a UK Minister and an EU Commissioner. It will be assisted by over 20 specialised committees and a number of Working Groups, all of which are listed in Title III of the Agreement.

EVEN MORE MEETINGS THAN BEFORE!

 I expect that there will, in the future, be even more EU related meetings for UK officials than in the past.  But the dynamic will be different.

 Instead of being able to build alliances on particular topics with other EU member states, the UK will in future find itself alone in the room with the European Commission.

 The Commission side will have instructions, negotiated in advance with the 27 member states, so there will be a high degree of rigidity in the process.

As the EU member state most affected by relations between the UK and the EU, this will be a particular challenge for Ireland. Irish officials in Brussels and will have to stay on top of all that is going on in the various EU/UK committees. Cultivating an understanding with the Commission officials serving on these committees will be a priority.

No longer in the EU, the UK will, notwithstanding the provisions of the Agreement, encounter significant extra bureaucracy and uncertainty in doing business with the EU. 

PARTING COMPANY GRADUALLY

This will lead to a gradual divergence between the UK and all its European neighbours, including Ireland. That, in turn, will have cultural and political effects. 

The UK, and the EU states including Ireland will, so to speak, be mixing in different company .They will increasingly be seeing the world from diverging angles of vision. Issues that were previously depoliticised will become more political.

 Eventually, this may affect the way the UK sees its physical and military security. NATO is already under strain, and Brexit creates a new fault line within NATO.

 While Ireland is not in NATO, we live in a part of the world which has sheltered under the NATO umbrella, and we are deeply interconnected with NATO’s biggest member, the US.  

Brexit may be over and done with, but the forces which led to it…identity politics and suspicion of foreigners….have not gone away.

WE NEED A FULL STRENGTH TEAM ON THE PITCH AS BREXIT REACHES THE ENDGAME

It is increasingly likely that, unless things change, on 1 January 2021,  we will have a no deal Brexit. The only agreement between the EU and the UK would then be the already ratified Withdrawal Agreement.

 There are only 50 working days left in which to make a broader agreement. The consequences of  a failure to do so  for Ireland will be as profound, and even as  long lasting, that those of Covid 19.

A failure to reach an EU/UK Agreement would mean a deep rift between the UK and Ireland.

 It would mean heightened tensions within Northern Ireland, disruptions to century’s old business relations, and a succession of high profile and prolonged court cases between the EU and the UK dragging on for years.

 Issues, on which agreement could easily have been settled in amicable give and take negotiations, will be used as hostages or for leverage on other issues. The economic and political damage would be incalculable.

We must do everything we can to avoid this.

Changing the EU Trade Commissioner in such circumstances would be dangerous.  Trying to change horses in mid stream is always difficult. But attempting to do so at the height of a flood, in high winds, would  be even more so.

The EU would lose an exceptionally competent Trade Commissioner when he was never more needed. An Irishman would no longer hold the Trade portfolio. The independence of the European commission, a vital ingredient in the EU’s success would have been compromised…a huge loss for all smaller EU states.

According to Michel Barnier, the EU/UK talks , which ended last week, seemed at times to be going “backwards rather than forwards”.

The impasse has been reached for three reasons.

THE MEANING OF SOVEREIGNTY

Firstly, the two sides have set themselves incompatible objectives.

The EU side wants a “wide ranging economic partnership” between the UK and the EU with ”a level playing field for open and fair competition”. The UK also agreed to this objective in the joint political declaration  made with the EU at the time of the Withdrawal Agreement.

Since it agreed to this, the UK has had a General Election, and it has changed its mind. Now it is insisting, in the uncompromising words of it chief negotiator, on

 “sovereign control over our laws, our borders, and our waters”.

This formula fails to take account of the fact that any Agreement the UK might make with the EU (or with anyone else) on standards for goods, services or food stuffs necessarily involves a diminution of sovereign control.

Even being in the World Trade Organisation (WTO) involves accepting its rulings which are a diminution of “sovereign control”. This is why Donald Trump does not like the WTO and is trying to undermine it.

The Withdrawal Agreement from the EU (WA), which the UK has already ratified,  also involves a diminution of sovereign control by Westminster over the laws that will apply in Northern Ireland (NI) and thus within the UK.

 The WA obliges the UK to apply EU laws on tariffs and standards to goods entering NI from Britain, ie. going from one part of the UK to another.

This obligation is one of the reasons given by a group of UK parliamentarians, including Ian Duncan Smith, David Trimble, Bill Cash, Owen Patterson and Sammy Wilson, for wanting the UK to withdraw from the Withdrawal Agreement, even though most of them voted for it last year!

Sovereignty is a metaphysical concept, not a practical policy.

Attempting to apply it literally would make structured, and predictable, international cooperation between states impossible. That is not understood by many in the UK Conservative Party.

THE METHOD OF NEGOTIATION

The second difficulty is one of negotiating method. The legal and political timetables do not gel.

The UK wants to discuss the legal texts of a possible Free Trade Agreement first, and leave the controversial issues, like level playing field competition and fisheries, over until the endgame in October.

The EU side wants serious engagement to start on these controversial issues straight away .

Any resolution of these controversial issues will require complex legal drafting, which cannot be left to the last minute. After all, these legal texts will have to be approved by The EU and UK Parliaments before the end of this year.

There can be no ambiguities or late night sloppy drafting.

The problem is that the UK negotiator cannot yet get instructions, on the compromises he might make , from Boris Johnson. Boris Johnson is preoccupied instead with Covid 19, and with keeping the likes of Ian Duncan Smith and Co. onside.  He is a last minute type of guy. 

TRADE RELATIONS WITH OTHER BLOCS

The Third difficulty is  that of making provision for with the Trade Agreements the UK wants to make in future with other countries like the US, Japan and New Zealand. Freedom to make such deals was presented to UK voters as one of the benefits of Brexit.

The underlying problem here is that the UK government has yet to make up its mind on whether it will continue with the EU’s strict precautionary policy on food safety, or adopt the  more permissive approach favoured by the US.

Similar policy choices will have to be made by the UK on chemicals, energy efficiency displays, and geographical indicators.

The more the UK diverges from existing EU standards on these issues, the more intrusive will have to be the controls on goods coming into  Northern Ireland from Britain, and the more acute will be the distress in Unionist circles in NI.

Issues that are uncontroversial in themselves will assume vast symbolic significance, and threaten the peace of our island.

The UK is likely be forced to make side deals with the US on issues like hormone treated beef, GMOs  and chlorinated chicken. The US questions the scientific basis for the existing EU restrictions, and has won a WTO case on beef on that basis.  It would probably win on chlorinated chicken too.

 If the UK conceded to the US on hormones and chlorination, this would create control problems at the border between the UK and the EU, wherever that border is in Ireland.

Either UK officials would enforce EU rules on hormones and chlorination on entry of beef or chicken to this island, or there would be a huge international court case.

All this shows that, in the absence of some sort of Partnership Agreement between the EU and the UK, relations could spiral out of control.

Ireland , and the EU, needs its best team on the pitch to ensure that this  does not happen!

A FRAUGHT NEGOTIATION BETWEEN THE EU AND THE UK IS LOOMING

 #banksy

There are increasing grounds for concern that the UK is backing away from the legal and political commitments it made last October in its Withdrawal Agreement with the EU. The Withdrawal Agreement was made before the UK General Election, when Boris Johnson led a minority government. Now he has an overall majority, and the prospect of four more years in office. He has more weight to throw around, at least in the short term. Some of the governments on the EU side are not in such a strong position.

 There is a suspicion that he may now be backing away from legally and politically binding commitments he gave to the EU last October in order to appear to “get Brexit done” before his General Election.

For example, the newly appointed Northern Ireland Secretary has stated that there “will be no border down the Irish Sea”.  Boris Johnson has made similar comments.

 

This could be interpreted as meaning that the UK was acting in bad faith when it agreed last October to the Withdrawal Agreement and to its legally binding protocol on Ireland.

In the Protocol, the UK committed itself to what amount to border controls between Britain and Northern Ireland.

While the word “border” is not used in the Protocol, the UK accepted in Article 5, that  EU customs duties would be collected on goods coming into Northern Ireland from Britain which if those goods were “at risk of subsequently being moved” to the rest of Ireland and thus into the EU.

It was also envisaged that goods would also have to check for the purposes of collecting the appropriate amount of VAT, and to verifying their origin. EU officials were to have a right to be present when this checking was being done, so as to assure themselves that the UK officials were correctly interpreting the EU laws that would apply in Northern Ireland.

The protocol contains detailed provisions for determining how UK goods, that were at risk of entering the EU through Ireland, might be identified and controlled, and how the customs duties on them might be collected. This was not to be done at the land border in Ireland, so it had to be done before the goods entered Northern Ireland, effectively on either side of the Irish Sea.

It is difficult to see how the new Northern Secretary’s comment the there would be no border in the Irish Sea can be compatible with the legally binding protocol agreed to by the UK, unless one interprets that the word “border”  as only applying to a border on land.

The UK Government also seems to backing away from the commitments, on ensuring fair competition, it made in the Political Declaration which it agreed with the EU as the framework for the Withdrawal Agreement.

This Political Declaration, while not legally binding in the same way as the Withdrawal Treaty itself, is part of the Withdrawal process under Article 50 of the EU Treaties, and it is referred to in the Withdrawal Treaty.

For either the EU or the UK to back away from what they had agreed in the Political Declaration would amount to bad faith, and could poison future relations.

One can accept that, once the UK leaves the EU, the EU should accept the autonomy of the UK’s decision making processes, and vice versa.

 It a legal sense, there should be a relationship of equals between the EU and the UK.

But if there is to be trade between the EU and UK, it is only common sense that there  be  basic compatibility of standards. Indeed most modern trade agreements are more about standards than they are about mere tariffs and quotas.

The Political Declaration, agreed by the UK last October, makes repeated references to the need for  provisions for a level playing field and fair competition in any future agreement between the UK and the EU.

 Article 17 says the Partnership between the UK and the EU should ensure

a level playing field for open and fair competition

 between UK and EU firms.

 Article 77 commits the UK and the EU to

uphold the common high standards applicable to the EU and the UK at the end of the transition period in areas of state aid, competition, social and employment standards, environment, climate change and relevant tax matters.

The common standards applying at the end of the transition period at the end of this year are the existing EU standards. The UK agreed there would be no rolling back of these  EU standards.

 But Boris Johnson said, in a speech in Greenwich earlier this month, that

There is no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment or anything else anymore than the EU is obliged to accept UK rules.

Prime Minister Johnson’s EU negotiator, David Frost went further this week when he said

to think that we might accept EU supervise of so called level playing field issues simply fails to understand the point of what we are doing

adding that the UK must be free to “set laws that suit us” and that

 this is the  point of the whole project.

On the face of it, these statements appear to be a flat contradiction of what Mr. Johnson and his government agreed to last October in the Political Declaration.

The level playing field provisions in the Political Declaration clearly envisage mutual supervision of the EU by the UK, and vice versa, to ensure that neither side does anything that interferes with open and fair competition or rolls back standards.

There may be some room for benign interpretation.

Prime Minister Johnson could say he is referring to rules to be made in future by either the EU or the UK, and not to the rules in force now.

 But the Political Declaration is only says that the “common high standards “, in force at the end of the transition period, should not be reduced. It does not prevent new rules being made by either side, so long as they do not reduce these standards. So it is difficult to know what Mr. Johnson and Mr. Frost are talking about.

 The agreed Declaration does not require the UK or the EU to use exactly the same words to maintain those standards, just that standards should not be reduced.

The statement by David Frost, rejecting any EU supervision of what the UK does, could undermine the Political Declaration in a fundamental way.

The UK, if it wants good relations with all its immediate neighbours, should dial back the rhetoric. Trust needs to be rebuilt.

The EU should also be careful not to over estimate its own negotiating leverage, and not to look for certainty on everything.

CAN BREXIT TAKE PLACE WITHOUT EITHER MAJOR TRADE DISRUPTION, OR SERIOUS DILUTION OF THE EU LEGAL ORDER?

Brexit is a British decision.

It means that Britain is seeking to withdraw from a contract it made with the other EU members, on the basis of which those countries opened their markets to British business, in a way it was not opened to other countries. That was the deal.

In business, if one unilaterally withdraws from a contract, one does not normally expect to continue to enjoy all the benefits of the contract, afterwards.  One expects to have to make good some of the losses incurred by the other party.

But that is not how British public opinion sees Brexit. It IS how it is seen by the 27 partners of the UK in the EU.

This difference in perspective is at the root of the difficulties in the present negotiation.

The EU has developed, and maintained, an integrated Single Market for business because it has a single unified system for making, interpreting and enforcing a single set of rules.

The Single Market is deepening all the time and new fields of business are being made the subject of common rules, thereby opening new markets. This will not stop when the UK leaves.

Common rules are what keeps the EU together.

They derive from the EU Treaties, which is like a written constitution. It is difficult to amend. The UK, in contrast, has no written constitution, and there is no similar constraint on the UK Parliament.

So UK often looks at problems purely politically, while the EU has first to look at them legally. This causes misunderstandings. UK Ministers sometimes think that a political understanding with France and Germany will be enough to overcome its problems with the Commission, but that is not the way the EU works. France and Germany, and the Commission, are all subject to a common set of rules. This rule based system protects smaller countries and has been the secret of the EU’s success.

The recent Chequers decision by the UK Cabinet says the UK will keep to the  common EU rules for goods, but goes on to say that the

“UK Parliament would still have a lock on incorporating these rules in the UK legal order by not passing the relevant legislation”.

This is giving with one hand, and taking away with the other.

So, even if the UK and EU standards were the same at the outset, they could diverge substantially, depending on the vagaries of British politics. Ultimately the UK Parliament can do what it likes.

The UK will not be part of the EU legal order. This builds uncertainty into the proposed arrangement, and is bad for business.

This let out clause means that border controls might not be there at the outset, but might have to be reintroduced.

This is a critical issue for Ireland, where the reintroduction of border controls on the 300 mile boundary would be both provocative and impractical.

That is why the EU wants the Northern Ireland issue agreed before the UK leaves the EU.

The UK wants to take back control, but EU needs to have control too.  This point is not always understood in London.

The EU is 27 countries, and all their Parliaments will have accepted any eventual trade deal with the UK. This makes the sort of” flexibility”, the UK says it would like, difficult to obtain. Getting unanimous agreement of all EU Parliaments to a future EU trade deal with the UK will not be easy.

That was illustrated by the difficulties in ratifying recent Agreements with Ukraine and Canada, when extraneous domestic issues were used in Belgium and the Netherlands to delay ratification.

If the Commission wants a deal with the UK that will pass in all 27 Parliaments, it will have to exercise great care.

Patience will be required. Sound bites will not always be a help.

But before we even get down to detail on trade, there will have to be a Withdrawal Agreement.

80% of the text of the Withdrawal Agreement is already agreed, but 20% remains to be settled. Among the issues that are not settled is the

“backstop” to prevent a hard border in Ireland.

Here the EU has put forward the proposal that

“Northern Ireland remains in a common regulatory area for goods and customs with the rest of the EU”.

It has said it is ready to improve the text of this proposal, if the UK has suggestions to make. But such suggestions need to be within the parameters of what the EU has proposed.

This is difficult for the UK for various technical and political reasons, not least because England and Wales, but not Northern Ireland, voted in the Referendum to leave the EU’s common regulatory area.

Opinion on this in the UK is changing, but only very slowly.

The implications of a hard Brexit are only now being contemplated by most of the people who voted Leave in 2016.

In 2016, these people saw Brexit as an emotional assertion of national identity, rather than as a concrete proposal that would change their lives and livelihoods irrevocably.

I believe UK public opinion needs more time to consider if Brexit is really the best way to express their national identity, and more time to fix some of the inequities in British society that prompted people to vote Leave in 2016.

That why I have argued, in an earlier column in this paper, that the period of negotiation under Article 50 should be extended.

This could happen if the UK asked for it, but asking for it would require both immense courage on the part of the UK government, and a constructive response from the UK opposition.

It is hard to see evidence of either yet, but they could emerge if there is a crisis.

 

 

 

THE DAWNING REALITY OF BREXIT

At a conference last week, I heard Owen Patterson, Conservative MP and former Secretary of State for Northern Ireland, say that the UK should renege on the “backstop” agreement on the Irish border, given by Teresa May to EU negotiators.

He admitted that Irish public opinion ”hates Brexit”, yet seemed to expect the Irish government to make Brexit easy for the UK! That is naive.

At the same event, Lord Alderdice, former Leader of the Alliance Party of Northern Ireland, said the Good Friday Agreement came about because the protagonists put the emphasis on developing new relationships between the communities in Northern Ireland, rather than on detailed rules and economic questions.

It seems to me that the absence of this sort of broad thinking, in the UK about the EU,  led to Brexit. UK public opinion saw joining the EU as a business transaction, rather than as a long term relationship building exercise.

When David Cameron decided to have a referendum on leaving the EU, it did not occur to him to call a meeting of the British / Irish Intergovernmental Conference, set up under the Good Friday agreement, to explore how this might affect relations between the UK and Ireland, between North and South and, consequently, within Northern Ireland.

This was myopic. It demonstrated a lack of seriousness, which persists.

 A similar myopia affected the UK relationship with the EU as a whole. UK decision makers saw the EU in purely functional terms, rather than as a means of developing new relationships.

The UK still hopes to negotiate access for itself to the UK Customs Union and Single Market, without joining either of them, and without allowing the freedom of movement of people that all EU members grant to each other, or accepting that the rules will be interpreted by the European Court of Justice(ECJ).

This is unrealistic. Any dilution of freedom of movement would require an amendment of the EU Treaties which would require the unanimous agreement of all 27 EU states. This will not be forthcoming. The ECJ is essential to ensure uniform interpretation of market rules, especially in services.

UK politicians and opinion formers forget that the EU is a rules based organisation, with a common system for making, interpreting and enforcing the agreed rules. In this, the EU is different from other international organisations.

The Treaties founding the EU are the equivalent of a written constitution, which is hard to amend. As the UK has no written constitution of its own, it finds this difficult to accept. These differences in perspective between the EU and UK will continue to cause trouble, unless UK politicians educate their electorate about the nature of the EU.

At this stage in the negotiations, the UK is seeking to interpret Article 49 of the Joint Report, the so called “backstop”, to cover the whole UK, and not just Ireland.

The wording of the Article is as follows;

  1. The United Kingdom remains committed “to protecting North-South cooperation and to its guarantee of avoiding a hard border. Any future arrangements must be compatible with these overarching requirements. The United Kingdom’s intention is to achieve these objectives 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.”

Reading the paragraph as a whole, it is clear that it is about Ireland, not about the two islands.

In any event, there is no possibility of the other EU countries allowing the whole UK to enjoy the benefits of full access to EU markets simply by aligning its rules, but without allowing free movement of people and accepting the jurisdiction of the European Court.

The UK government is committed to having a frictionless border in Ireland and is considering two possible customs arrangements with the EU to achieve this.

One is called a “Customs Partnership”, which would see the UK collecting the EU tariffs on goods entering the UK, but destined for the EU, and then passing the money on to Brussels. It is hard to see the EU sub contracting its revenue collection to an external power over which it had no control. The Palestinian experience of subcontracting its revenue collection to Israel has not been a happy one.

The other customs option, called “Maximum Facilitation”, entails doing the customs controls, currently done at the border, remotely using technology. This technology is untried and there would be data protection and privacy concerns. It would still entail the preparation of customs declarations for all consignments of goods. This bureaucracy will add between £17 billion and £ 20 billion the business costs, or £32 per declaration, according to the UK Revenue authorities. This will make trade unprofitable in many cases.

The fact that, even at this stage, the UK has not made up its mind between these options, and has not yet made a detailed proposal is disquieting.

The EU will not be bounced into agreeing a half baked proposal, presented just before the Summit,  which attempts to evade the consequences of the UK’s own decision to quit the Single Market and Customs Union.

Those decisions were taken by the Prime Minister, not by Parliament, and should be reversed.

THE IRISH CONVENTION OF 1917…..A  LAST CHANCE TO RESOLVE  ANGLO  IRISH RELATIONS PEACEFULLY……WHY WAS IT LOST?

© By Eric Jones, CC BY-SA 2.0

A century ago on Tuesday, on 25th July 1917, the Irish Convention convened in Trinity College to make what would prove be the  final, non violent, attempt to agree a basis for relations between Ireland and Britain on an All Ireland basis.

Some of the issues the Irish Convention tried to settle one hundred years ago still divide us today….

  • Should partition be temporary or permanent?
  • To what extent should education be denominational?
  • Should Ireland be free to set its own tariffs on imports, or should Ireland and Britain be in a Customs Union?
  • In a 32 county Ireland, what protection might there be for Unionist interests?

The Convention was widely representative.

The biggest group in the Convention were the Irish Parliamentary Party, and John Redmond was among the members.

It was he who had suggested a Convention, when he rejected a suggestion by  the UK government that Home Rule be introduced for the 26 counties only, with the position of the 6 counties left aside for the time being.

The Ulster Unionists were present, led by one of their MPs , JM Barrie.

Southern Unionists also had representation, and their leading figure was Lord Midleton.

There were six representatives of the Labour movement.

The members included the  Mayors of the major cities, including Belfast, the chairmen of a number of County Councils (including I noted Meath County Council), four Catholic Bishops , two Church of Ireland Bishops and the Moderator of the Presbyterian Church.

The President of the Belfast Chamber of Commerce, Mr Pollock, and William Martin Murphy, the Dublin employers leader and owner of the” Irish Independent” , were also among the members.

Seats were allocated to the Sinn Fein Party, of Eamon de Valera and Arthur Griffith, but they refused to take them up because the terms of reference of the Convention did not allow for complete separation between Ireland and Britain.

Although Sinn Fein was not there, the Convention was a unique gathering together of Irish people of widely divergent goals.

Whereas previous attempts to resolve the “Irish Question” had taken place in Westminster in negotiations with British politicians, this was a meeting of Irish representatives, trying to resolve the outstanding issues between themselves, without direct external involvement.

In that sense, it was arguably inconsistent of Sinn Fein, with their “ourselves alone “ philosophy, not to take part, because it would have given them an opportunity to put their case to their fellow Irishmen, without what they would regard as British interference.

Although the constitutional struggle for Home Rule had been going on for 40 years, and Home Rule had passed into law three years before, the relationship between the Unionist parts of Ulster and the proposed Home Rule Government in Dublin remained a matter of deep contention.

 Ulster Unionists had, six years earlier, armed themselves to resist Home Rule and they were encouraged in this by the UK Conservative Party, who even tried, in 1911, to persuade the British Army not to take any action against the Ulster Volunteers. It could be argued that this had been a treasonable course for the Conservatives to take.

Notwithstanding this activity, the UK Parliament had passed the Home Rule Bill into law in September 1914, but its operation was postponed because the Great War had started a month earlier, and it had been felt at the time that all energies should be devoted to winning what many hoped would be a short war.

Three years later, when the Convention convened to discuss how Ulster might fit into the Home Rule scheme, the Great War was still going on. Large numbers of Irish soldiers had been killed on the Western Front and in Gallipoli.

Conscription had been imposed in Britain and in most belligerent countries , but not in Ireland. This was resented by some in Britain.

Also resented in Britain was the  Rising against British Rule, supported by Germany, that had taken place the previous year. Many of those involved were still in prison.

So the atmosphere was fraught, not just in Ireland, but in Britain too.

The Conservative Party, which had gone to such lengths six years previously to oppose Home Rule was now a predominant part of the UK government, although the Prime Minister, David Lloyd George, was a Liberal.

Despite all these difficulties, Irish Nationalist ambitions were high.

Partition was rejected on principle, but no very practical ideas were advanced on how to overcome the opposition to the imposition of Home Rule from Dublin in the counties of North East Ulster.  There seems to have been an assumption that Britain would force Ulster Unionists to accept Home Rule, although the practicalities of doing this, especially during a war in Europe, were never addressed.

The new leader of Sinn Fein, Eamon de Valera, and recently elected Sinn Fein MP for East Clare offered some remarkably simplistic solutions.

He told his supporters in Killaloe that, if Ulster Unionists did not come in under Dublin rule, they would

“have to go under”

Later, in Bessbrook Co Down, during a by election campaign which his party lost, he said

“If Ulster stood in the way of Irish freedom, Ulster should be coerced”.

By attending the Convention, Mr de Valera could have tried persuasion, before resorting to the coercion he was threatening.

He apparently felt  was simpler for him to blame the British for not coercing Ulster,  than it would have been to sit down in the Convention and try to persuade his fellow Irishmen of North East Ulster to accept some form of agreed Ireland.

John Dillon, the deputy leader of the Irish Parliamentary Party warned de Valera of what attempt to coerce Ulster would entail. Speaking in Armagh, of de Valera’s idea that Ulster be forced to “go under”, he  said ;

“Against such a programme Unionist Ulster will fight to the last man living; and to all the other horrors of the situation would be added a civil war as bitter and relentless as that which reduced the country to a desert in the seventeenth century”

A similar, but less lethal, air of unreality prevailed in Southern Unionist circles. They wanted no partition, and no Home Rule.

The Convention was an attempt to reconcile these irreconcilables positions, and , given the unpromising  conditions, it made some progress.

It found a solution to the Land Question, that subsequently was enacted by the Free State government in the 1920’s.

A serious effort was made to agree some form of united Ireland. Ulster Unionists put forward a federal approach whereby an Ulster regional government would have substantial autonomy but within an all Ireland framework. Nationalists were not in favour of this. Nationalists suggested extra representation (appointed or elected) for Unionists in an all Ireland Parliament.  Unionists were not keen on this because they feared they would still be outvoted, particularly on the issue of tariffs.

Ulster industry wanted continued free trade with Britain, whereas nationalists want the power to impose customs duties on some British goods to protect Irish industries. This issue is arising again in the Brexit negotiations.  In effect Unionists wanted to be in a Customs Union with the UK, whereas Nationalists did not.

John Redmond was prepared to accept immediate Home Rule, without the power to levy customs duties, but his supporters were not and he had to back away from his proposal.

The Convention came close to agreeing a majority report with significant Nationalist and Unionist support, but this was stymied by the big German offensive of 1918 which led the UK government to propose imposing conscription in Ireland. This threat of conscription led to a crisis which destroyed any hope of agreement.

Looking back, the pity is that a Convention of this kind was not attempted in 1911, when Home Rule was first mooted. It might not have led to agreement but it might have contributed to a better understanding of the Ulster problem by all shades of Irish Nationalism.

 

WHAT LESSON TO DRAW FROM THE NORTHERN IRELAND ASSEMBLY RESULTS?

In the recent Northern Ireland elections, the Democratic Unionists got 28.1% of the vote, Sinn Fein 27.9%,the Ulster Unionists 12.9%, the SDLP 11.9% and the Alliance Party 9.1%.

The fact Sinn Fein increased their share of the vote by a substantial 3.9 percentage points has led some commentators to  interpret this as a mandate to start negotiating towards a united Ireland.

There is some wishful thinking going on here. Of the 90 seats in the new Assembly,

  • 49 were won by parties that broadly support the continuation of the Union with Britain, while only
  • 39 were won by parties who want to replace that with a union with the rest of Ireland.

Incidentally the Alliance and Ulster Unionist Party, both moderate parties, but supportive of the existing constitutional position, increased their vote shares too,  by  2.1 and 0.3 percentage points respectively.

Putting a choice between the two unions, at the heart of the current political debate in Northern Ireland is likely to deepen sectarian divisions there, and make day to day compromise even more difficult to achieve.

To use a word Gerry Adams often used in another context, it is

“not helpful to the peace process”,

if , by ”peace process” we mean, in the first place, a reconciliation between the two communities in Northern Ireland.

Centering debate around whether one is for against a united Ireland, would make any attempt at creating an alternative to the Sinn Fein/DUP duopoly of power in Belfast, like the one attempted without success in the recent elections by the Ulster Unionists and the SDLP, next to impossible.

FREEZING THE SECTARIAN DIVIDE

Indeed that may be one of the reasons the drum is being beaten for a united Ireland.

It is a good way of freezing politico/sectarian divisions. And that suits both Sinn Fein and the DUP.

Of course, as a tactic, it may also help Sinn Fein electorally in the Republic, because distant, unattainable, objectives, like a united Ireland or the restoration of the Irish language, have been useful, and reusable, rallying cries for other parties in the Republic in the past(notably by Fianna Fail when Mr  de Valera led them).

The case that Sinn Fein is making, for immediate agitation towards a united Ireland, was summed up in an article by an Irish Independent columnist, Martina Devlin.

She said

“The Border has to go. The case for Irish reunification is overwhelming – over time, the two parts of this island will be more prosperous together than apart.”

REPLACING THE UK SUBSIDY?

This seems to ignore the huge subsidy Northern Ireland receives from the UK (20% of its GDP), which the Republic, with a much smaller population and tax base, could not replace, especially if it itself  is suffering the huge dislocation of its trade pattern that will result from the island of Britain leaving the EU

Martina Devlin continued

                 “A united Ireland is the clearest way to minimise the fallout from Brexit, provided it can be handled sensitively and a carefully plotted, long-term approach taken.”

I fear this is not so.

A United Ireland would, in the context of Brexit, simply move the border from Newry to Larne. The costs on East/West trade between Ireland and Britain, caused by Brexit would all remain, but the British subsidy to Northern Ireland would be gone.

A UNITED NORTHERN IRELAND MUST COME FIRST

Now I know money is not everything. If the people of Northern Ireland are united in wanting to make new constitutional arrangements (whatever they are) work, they will work.

But Irish unity imposed by a simple majority of the population, overruling a large minority, who still want to stay in the UK, would NOT leave behind a united people, willing make big sacrifices for the common good of a united Ireland.

In my view, a united Northern Ireland must come first, and only when we have such unity can wider constitutional options be considered in a pragmatic way.

The recent Election did not help in that regard, and a Sinn Fein campaign for a united Ireland, will deepen divisions further.  We should recall the futile anti partition campaign of the late 1940’s, which did just that.

WOULD UK REALLY SUBSIDISE SECESSION?

Martina Devlin does try to address the financial problem of replacing the UK subsidy in the event that Northern Ireland  left the UK and joined a united Ireland.

She says

                                       “ An economic stimulus package needs to be put in place and Britain would have a responsibility to contribute. But, however expensive,  there would be an end in sight. The EU would have financial obligations, too. Perhaps Irish-American well-wishers might also put their hands in their pockets. The financial support package would need to cover at least one decade and possibly two, with a variety of targets including reorientating the entire business culture in the North.”

Given the current attitudes in Britain, this seems to me to be wholly naive.

The UK is reluctant to pay its share of the EU bills, contracted while the UK was a full voting member of the EU.

A post Brexit UK will, I believe , be a poorer country than it is today, something Ms Devlin does not address.

So it is hard to see it contributing for years to a place that had seceded from the UK, at the very time when the UK was also trying to prevent the secession of Scotland.

If the UK is unlikely to subsidise the secession of Scotland it is also unlikely to subsidise the secession of Northern Ireland.

SAVINGS?

Ms Devlin thinks there could be savings

       “On the financial front, it’s not all a drain. Economies of scale and merged services could achieve savings – one parliament, one health service, one education service, and so on.”

This is theoretically possible, but it is contrary to the scenario envisaged in the Good Friday Agreement, which provides for the retention of separate Northern institution and guarantees, even if ultimate sovereignty  is transferred from London to Dublin.

THE COST OF SECURITY

One also needs to consider the potential security risks, and consequent increases in police and military spending by our state, if a significant minority in Northern Ireland decided to resist the arrangements Ms Devlin advocates.

Resistance would be geographically concentrated. For example, parties supporting a united Ireland  received

  • only 3% of the vote in East Belfast,
  • 10% in Strangford and
  • 14% in Lagan Valley and East Antrim.

These security costs would fall on the Irish taxpayer.

HOW NOT TO PERSUADE MODERATE UNIONISTS

Finally Ms Devlin  says

             “Meanwhile, there are moderate Unionists who could be convinced about the benefits from reunification. Some of them realise the British have no interest in Northern Ireland and, after all, why be loyal to a government which feels no loyalty in return?”

This is true. I do not sense a deep emotional commitment in Britain to any part of Ireland or to its interests, as the Brexit vote has shown.

Loud talk, and flag waving about a united Ireland by Sinn Fein will undermine these very “moderate” unionists, of whom Ms Devlin writes so hopefully.

One would not just be asking “moderate Unionists” to be reasonable about a pragmatic arrangement. One would be asking them to cease to be Unionist. That would be asking them to change their identity, as they see it. That is no small matter.  There is more urgent work to be done.

Let us hope, now that the elections are over, that a pragmatic and united case can be agreed between Unionists and Nationalists about how to deal with Brexit, and then put  by them to Brussels, London and Dublin.

That is the job of new Assembly, and it should get on with it.

WILL THE 1998 BELFAST AGREEMENT SURVIVE THE  UK GENERAL ELECTION OF 2020?

The Daily Telegraph today says that the UK Prime Minister intends to include in the 2020 Conservative Party General Election Manifesto a promise to pull the UK, including presumably Northern Ireland, out of the European Convention on Human Rights (ECHR).

According to the story, she does not intend to implement this promise until after the UK has left the EU, which she hopes to have achieved before the 2020 Election.

The existing corpus of ECHR law would apparently be incorporated into UK law, but there would no longer be a right of appeal to the European Court on Human Rights, only to the UK Supreme Court.

If implemented, this promise would appear to me to breach the terms of the Belfast Agreement of 1998, which is an international Agreement. On the strength of this international Agreement, Ireland amended its constitution. The Agreement was the fruit of years of work by successive Taoisigh and Prime Ministers.

There is no mention of the inter relationship of the ECHR and the Belfast Agreement, or of any negotiation on it with the parties to the Belfast Agreement, anywhere in the Daily Telegraph article. Yet the  appears to be the result of a very detailed briefing. A purely unilateral UK action seems to be what is envisaged, without reference to the parties, including Ireland.

Adherence to the European Convention by the Northern Ireland Administration, and therefore by the UK unless Northern Ireland’s status changes,  is built explicitly into the terms of the Belfast Agreement.

Paragraphs 5(b) and 5(c) of Strand One of the Agreement require all legislation passed by the Northern Ireland Assembly to adhere to the terms of the ECHR.

There are other references to the ECHR in other parts of the Agreement.

The ECHR is fundamental to all the human rights elements of the Belfast Agreement.

If the UK is no longer a party to ECHR, and no longer subject to the rulings on the European Court on Human Rights, there will no longer be any common basis, between Ireland and the UK, for settling any differences of interpretation that might arise between Ireland and the UK concerning human rights issues in Northern Ireland.

It is important to the sustainability of any international agreement, in this case one between Ireland and the UK, that there be a neutral referee in the case of disputes.

This neutral element was particularly important to nationalist opinion at the time of the finalisation of Agreement, and the referenda which approved it. It remains so to this day.

As far as any disputes might arise about human rights in Northern Ireland, that neutral referee is the European Court of Human Rights. But the UK Prime Minister now apparently intends unilaterally to withdraw Northern Ireland from the ECHR and its court.

I believe this is a very serious issue, and bodes ill for the future.

As a former Home Secretary, the current UK Prime Minister should be aware of the constitutional importance of the Belfast Agreement, and indeed of the referendums approving it, in both parts of Ireland, which ended an historic dispute, dating back a very long time indeed.

We can only ensure that we do not “return to the border of the past” if there is an appreciation at the highest level that party driven initiatives do not undermine hard won negotiated achievements.

 

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