We are all caught up in the fuss about whether there is going to be a no-deal Brexit and, if so, when it might happen. And this is vital for our short-term economic prospects. But we are at risk of missing the bigger picture.The explicit policy of Britain, under Boris Johnson, is now to diverge from EU rules and regulations and the EU trading regime in the years ahead. If this happens it raises major economic and political questions for Ireland.
The backstop, if Johnson stays in power and follows this course, would end up being the reality – not just a fall-back plan if future trade talks between the EU and UK do not work out. And this is why there is such an almighty row about it now. All sides realise that the backstop, despite all the “we never want to see it used” PR spin, could be “it”.
The backstop plan is intended as a guarantee that there would never be any checks at the Irish Border, whatever emerged in a future UK-EU trade deal. Under Theresa May, the option that the UK might remain largely aligned to many EU rules in future remained on the table, even if it didn't sit well with the goal of leaving the EU single market and customs union. The internal contradictions eventually sank her.
Johnson has since clarified matters in terms of where the UK wants to go in future. In a letter to European Council president Donald Tusk in August, he said the UK would leave the EU customs union and single market. Crucially, he added that laws and regulations in areas such as labour and product rights and environmental standards would then potentially diverge from the EU. "That is the point of our exit, and our ability to enable this is central to our future democracy".
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Complicated deal
If this is the direction the UK is heading, then any future trade deal with the EU will be much more complicated to negotiate and involve a much looser relationship than currently exists. Such a deal would, at best, only solve some of the issues relating to the need for Border checks in Ireland. In time, as rules diverged, it would make the need for such checks even more important, as well as causing major problems for Irish-UK trade.
In a speech in DCU last Monday, Minister for Finance Paschal Donohoe said this approach by the UK meant that "whether there is a deal or whether there is no deal, we will still be faced with very many of the same issues". If somehow a deal is found on the withdrawal agreement, then striking a trade deal with a UK intent on diverging from EU rules will be tricky.
According to Donohoe, “there will be difficult discussions and even more difficult decisions to be made on tariffs, customs, quotas, product standards, state aid, minimum standards for the environment, workers’ rights, visa regimes and not forgetting fishing rights, aviation landing rights between UK and EU, including Ireland and many other issues across many sectors of activity”.
If there is a no-deal exit, the EU and UK will, the Minister said, first have to return to the key issues dealt with in the draft withdrawal agreement – citizens’ rights, the UK’s financial settlement and, yes, the Border and the backstop. Only when – or should we say if – these are sorted would a new trade deal come back into the picture, involving all the issues outlined above.
Of course, UK policy might change. There could soon be a new incumbent in No 10 Downing Street. And even if there is not, the idea that a country can set its own standards independently is out of step with the modern world, where the EU, US and China determine the rules and regulations in their own separate orbits.
Is the UK planning to become a low-cost "Singapore on the North Sea", to use the phrase of MEP Guy Verhofstadt? Or will it be pulled into the US regulatory regime in tandem with a post-Brexit deal with Donald Trump's administration?
Economic nonsense
The implication of Johnson’s plan to diverge is that the backstop plan, if agreed, could well – in large part – become the long-term reality, even if a new EU-UK trade deal might remove the need for some checks (for example, if it agreed tariff-free trade). And UK divergence opens up deeper questions about the future of the island, because if rules and regulations remain the same in the North as in the Republic, then divergence by the rest of the UK would open up big gaps in some areas between Britain and the North. Or if the North were to remain aligned with the UK, big differences would open up with the Republic, with all the complications that entails for the all-island economy and the need to protect the single market.
This is why the Irish Government will continue to insist on the idea of regulations staying the same in the North and South as part of the backstop, or any replacement and try to resist the UK argument that there are alternative solutions to avoid checks, even between two different regimes.
This goal of Johnson to take the UK off in a new direction now hangs over not only the current talks but also the years ahead. It is, of course, economic nonsense as a policy. Your best trading partners are the ones closest to you, and diverging from their rules will rack up the cost of Brexit. But we are, for now anyway, dealing with a policy driven by politics, and a significant portion of the UK population is apparently willing to pay the economic price.