We are heading for some kind of Brexit moment of truth. The House of Commons looks likely to vote down the withdrawal agreement, setting off a period of uncertainty and turbulence.Having fought successfully to ensure guarantees on the Irish Border in the withdrawal agreement, a few short weeks later the government may well be under increasing pressure to clarify what happens if this agreement falls and there is a "no deal" exit.
Of course who knows what happens now. Theresa May is still fighting and could win an unlikely victory in the Commons. If she loses, it opens up a range of possibilities – a new Conservative leader, a general election, a second Commons vote,a second referendum, or even a delay of the UK's departure date.
However, a Commons defeat would also increase fears of a messy“no deal” exit, where the two sides fail to conclude a withdrawal agreement and the UK crashes out. If this happens, there would be no backstop – the guarantee in the agreement of no hard border – because the whole agreement would fall. A “no-deal” Brexit would be in nobody’s interest – and so some way may be found to avoid it – but it remains a serious risk.
Taoiseach Leo Varadkar has been talking recently about what might happen in relation to the border in a “no deal” situation. Last week he said that it would be “very difficult” to avoid a hard border.This seemed a step back from the Government’s previous line and its clear instructions that no planning take place for the return of the Border.
Tariffs on goods
A couple of days later, he seemed back "on message" and told RTÉ's The Week in Politics programme that the Government was not contemplating the return of a hard border in any circumstances – and that if there was a no-deal Brexit then Ireland would have to have a "difficult conversation" with the EU. But the Taoiseach was right the first time – a no-deal Brexit makes avoiding the return of a hard border very difficult.
So what would happen in a no-deal exit? Overnight the UK would leave the EU single market and customs union. The EU would start charging special import taxes – or tariffs – on goods from the UK and visa versa. Different regulatory regimes would apply in the EU and UK and different VAT arrangements.
The World Trade Organisation, the body which oversees international commerce, would not be out demanding a border be put in place. That is not what it does. But a border between two different trading blocs with different customs and regulatory regimes cannot remain unchecked for long. How do you control smuggling? How do you ensure that all trucks contain what they say they do, and that VAT is paid? How do you check food products and livestock for animal and food safety rules?
Think of it from the EU point of view. One of its fundamental goals is protecting the integrity of the single market. How could it allow goods to flow from the UK into the EU after Brexit with no checks, including goods which entered the UK from a third country. Likewise the UK will need to have border checks. Otherwise it will appear as some kind of rogue trading state and leave itself open to challenge at the World Trade Organisation for other countries that it is treating their imports less favourably than ones coming from the EU.
Would there be a way out? Well the UK could decide to check goods crossing the Irish Sea, taking up the original backstop option that the North would remain aligned to EU customs and regulatory rules. But seeing as “breaking up the union” is one of the reasons for political opposition in the UK to the negotiated deal, this looks unlikely.
Tough talking
Ireland would be faced with EU demands to control imports to the single market, and no amount of tough talking with Brussels would magic this away. We could consider looking at way to impose checks on goods leaving Ireland for the EU as an alternative to controlling goods at the Irish border. But it’s just not clear how this would work from a regulatory and customs point of view.Any version of this – seen as separating us from the EU market in any way – would put a huge dent in our economic model, imposing new barriers on exports to our biggest market, the EU, hitting Irish businesses and undermining our selling point for US companies as offering free access to the EU. This also looks most unlikely.
There is simply no clear way out of imposing a hard border in the event of a no-deal Brexit and no technology or new procedures, or negotiation with Brussels, can make it go away.
Even if the withdrawal agreement does at some stage get UK approval, we will be hearing about the Border and the backstop for years to come. The guidelines agreed this week on the future relationship between the EU and UK suggest that a free trade deal is in prospect, but not close enough in itself to eliminate the need for Irish Border checks. So, if we head down the path set in the withdrawal agreement, the backstop could be triggered – perhaps after the end of an extended transition period at the end of 2022. The whole thing would be overseen by the joint EU/UK committee established under the withdrawal agreement – with a disputes arbitration system if both sides can’t agree on any issue. It would go on and on.
However, that is still a long way off. The UK is now confronted with the reality of the Brexit decision and the "red lines" it set down in the talks. Dominic Raab, the former Brexit secretary, has declared that the deal is worse than staying in the EU. But of course any deal was always going to be worse than membership and the UK has backed itself into corners with its red lines and fantasies. What a mess. As reality hits home in the UK, we are entering a very unpredictable few months.