Why Northern Ireland remaining in the Customs Union is a nonstarter

This week the Irish government reportedly threatened to block EU/UK trade talks if the UK did not agree to Northern Ireland staying in the single market and customs union, even if the rest of the UK left both.

Economically, Ireland will be badly hurt by Brexit. Most of its exports go to the UK, many to Northern Ireland and most of its exports to Europe go through the UK, as it is Ireland’s land bridge to European markets. If the UK is outside the single market and customs union, Ireland’s economy will take a massive hit, potentially even bigger than any potential damage to the UK as Ireland will not be able to mitigate it through opening markets to third countries as it will be bound by the EU’s common trade policy.

Ireland seems to have accepted, reluctantly, that the UK will leave both the customs union and the single market, but its main hope is that it can persuade the UK to keep Northern Ireland in both, in order to keep the markets there open to Irish produce, vitally important in agriculture, and, more importantly as the best way to preserve the Good Friday Agreement and avoid the re-emergence of a border between the North and the Republic.

It seems a neat and simple solution focusing on Ireland’s most important issue, the border. It is portrayed as keeping the status quo, but in reality it is nothing of the sort, for many reasons.

If such a scenario occurred it would mean that Northern Ireland would be separated economically from the rest of the UK. It would therefore be cut off from by far its biggest market. Northern Ireland sells four times more to the rest of the UK than to the Republic. Goods produced in Northern Ireland but destined for continental Europe would face the same problem as those produced in the Republic. Two border checks, one on entry to mainland UK and one on leaving the mainland to enter Europe, as opposed to just one if Northern Ireland remained in the UK single market.

This would be economically devastating for Northern Ireland and we would be in the strange situation where goods produced in the UK would not be able to be sold in part of the UK, splitting up our own internal market.

So there is no economic reason for agreeing to this, as it would make Northern Ireland much poorer. However it is politics which is an even bigger obstacle to the Irish proposal. It is, quite simply, a proposal that no British government could ever agree to.

Border

Putting a border in the Irish Sea would effectively make the island of Ireland one economic unit, with the same (EU) rules governing the economy. Anyone or any good from Northern Ireland would have to go through a border check to enter the rest of the UK. The UK government would lose sovereignty over most of the rules governing the economy of Northern Ireland (ceding it to the EU). Without a say in decisions governing those rules Northern Ireland would have to rely on the Irish government to defend its corner in EU negotiations over new laws. Effectively it would create a United Ireland in all but name.

This would in itself breach the Good Friday agreement, which recognises UK sovereignty over Northern Ireland and also the Irish constitution, which also recognises UK sovereignty over the province.

Many communities in Northern Ireland would also oppose this as it would risk undermining the delicate balance and ambiguity that has existed and worked well over the past twenty years. There is a real risk it could inflame significant tensions in the province.

So it is a nonstarter, yet for the Irish government to threaten to block any agreement until the UK agrees to this makes little sense. Firstly any negotiator knows that you can’t ask for something which is impossible for the other side to give and secondly, if that course of action is followed to its logical conclusion, it would mean no agreement between the EU and the UK at all, which means a hard border (the worst outcome for Ireland) will be inevitable.

However, an old adage in politics is that all politics is local, and that is probably the biggest driver of the current Irish position. The government is currently on the edge of falling, with snap elections looming and Sinn Fein snapping at the heels of the two major parties. Sinn Fein, until recently lifelong opponents of EU membership, are outspoken both on eventual reunification and on the UK remaining in the customs union. The major parties, Fianna Fail and Fine Gael are losing ground to them and need to stem the tide quickly, hence the sudden hardening of the Irish government position.

So if there is a snap election, and the resignation of the Irish Deputy Prime Minister makes that slightly less likely, there is little chance of any Irish party giving ground on this until the elections are finished. It is Ireland’s most important issue and no party will be helped by going soft on it now.

Taoiseach building

The problem is it is an impossible aim, which will never and can never be realised. A future Irish government will therefore have to decide if it follows through with its threats and vetoes an agreement, thus ensuring a hard border, or if it can accept that the UK government proposals (technological solutions, no hard border, free movement between Ireland/UK) are enough to ensure that the Good Friday agreement isn’t undermined.

The irony here is that despite the fact that Ireland is well within its rights to be very angry about Brexit, given the affect it will have in the Republic, both the UK and Irish governments agree that the Good Friday agreement must be protected. That is a crucial and positive starting point.

The divergence is over how to do it, and to be fair, so far there have been no good ideas. Technological solutions would still require a presence at the border, WTO rules mandate that. The UK staying in the customs union is a nonstarter. Staying in the single market could conceivably be more achievable if the issue of governance was resolved, but there is no will from the EU for that.

So new approaches are needed, but it is absolutely clear that we cannot develop them until the trade talks start, and we cannot even start them if the Irish government vetoes them.