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#Brexit: UK government presents half-baked proposal on customs

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After much deliberation the UK finally sent what it believes to be a partial solution to achieve an Irish border ‘backstop’. After much toing and froing, the technical document on a ‘temporary customs arrangement’ was published this afternoon (7 June),
Catherine Feore looks at what lies within.

The commitment to a backstop was agreed in the Joint EU-UK Report of December last year. Paragraph 49 laid out what a frictionless border would require. Just as ‘Brexit means Brexit’, paragraph 49 makes clear that ‘a backstop means a backstop’, that is to say something that will come into operation should no other solution be found.

Deadline?

The document sets out the UK’s proposal for the customs element of the backstop, which falls well short of what is needed. The government acknowledges that an approach on regulatory standards will also be needed to avoid a hard border.

Over the past 24 hours there were veiled threats that the Secretary of State for Exiting the EU, David Davis, might resign if a deadline was not set on the extension of customs arrangements. Davis was assuaged by vague wording that the UK ‘expects the future arrangement to be in place by the end of December 2021 at the latest’. There is no concrete suggestion on how such a time limit could be enforced, merely suggesting that there are a range of options, which the UK will propose and discuss with the EU. The UK is also very insistent on the use of the word ‘temporary’ in relation to the customs arrangement. It is deployed no fewer than 22 times in the document.

‘Customs end state’

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The UK wants the Withdrawal Agreement to contain ‘the new customs end state arrangement’, this is an issue that the Commission has hitherto considered to be part of the future partnership, it is unlikely that this renewed attempt to make one conditional on the other will be well received by the EU's article 50 task force.

Protocol on Irish border to refer to UK, not just Northern Ireland

The UK suggests a number of changes to the draft of the current protocol on the Irish border, these changes largely amount to replacing any references to Northern Ireland with references to the UK in its entirety and to its Crown Dependencies (Guernsey, Jersey and the Isle of Man) - this should appease the Democratic Unionist Party, (the Conservatives ‘supply and confidence’ partners in government), but the Commission will be wary of extending any concessions it will exceptionally allow for Northern Ireland to be extended to the UK as a whole.

Another peculiar suggestion in the document is the idea that the EU might allow the EU’s Common Commercial Policy (CCP) to only partially apply to the UK during the temporary extension. It would seem doubtful that this would fly with the EU and even less likely that the UK would be allowed to have operable trade agreements on elements outside the CCP while still being part of a ‘customs arrangement’. Cakeism appears to be alive and well!

The UK agrees that it would continue to be bound to free trade agreements. However, it wants a mechanism to be agreed to ensure that the UK’s national interest is represented in negotiations up until its formal departure; this may be somewhere where the EU could make a concession, but in no sense would it be obliged to.

In a section on governance and dispute settlement, the UK suggests it could create parallel laws and follow the judgements of the European Court of Justice. Again, this is unlikely to reassure the EU. The UK is currently challenging a recommendation by the European Union’s Anti-Fraud organisation (OLAF) to recover €1.9 billion in customs duties the UK failed to collect. The same investigation also found that abuse of customs procedures had led to more than €3.2bn loss of VAT revenue to Germany, Spain and Italy. In its annual report OLAF writes that it "repeatedly alerted the UK authorities to the need to take action and to investigate the fraud networks active in the UK". The UK could also face infringement procedures on these issues. People involved in the investigation have raised eyebrows at the idea that the UK would need anything other than the toughest surveillance.

What happens to the duties?

The UK questions how any duties collected will be allocated after the transitional period (or what it continues to insist on referring to as the ‘implementation period’) comes to an end at the end of 2020. At the moment, 80% of customs duties are collected as EU revenue and this is part of the EU’s budget, so-called traditional own resources, of which 20% is retained by the EU member state to cover its administrative costs for collecting the duty. The UK wants a further discussion with the EU on how a specific mechanism for Northern Ireland suggested in the European Commission's draft protocol could apply to the UK as a whole.

It is hard to believe that this document will receive anything other than a lukewarm welcome.

Barnier tweeted:

The answer to each of these questions has to be ‘No’. The UK continues to negotiate with a tin ear to Brussels and the EU-27’s requirements; with fewer than six months to October, it is hard to know what will shake their negotiating team into the pursuit of realistic proposals that are acceptable to its partners.

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