What would a hard Irish border mean for UK and EU trade?

Questions surrounding what happens to the border between the Republic and Northern Ireland continue to plague Brexit negotiations. David Sapsted takes a look at what a 'hard border' could mean for UK and EU trade.

David Sapsted

11 April 2018

The decades-old joke used to be that every time the British tried to solve the Irish Question, the Irish changed the question. Not any more – everyone now agrees the question centres on what happens to the 500-kilometre border between the Republic and Northern Ireland after Brexit. The snag is coming up with an answer acceptable to all.The fact is that after the UK leaves the European Union in March next year – or, at least, after the following 21 months of transition – there will be no single market, customs union or free movement of people between the two sides.Yet that is not compatible with what anyone says they want on the island of Ireland. Indeed, it is not compatible with what both sides have signed up to. But agreement on paper is one thing and practical implementation on the ground is another. And if there is no solution found, it could scupper the whole Brexit deal process.The laudable aim might be a frictionless; ‘invisible’ divide between north and south, with a ‘hard’ border avoided through a comprehensive trade model. But how do you oversee trade on the only land border between the UK and EU in the post-Brexit era?What happens about the imposition of any tariffs and different regulations, particularly for meat exports, between the two?Basically, how do you control the border between commercial rivals in different markets and prevent the Republic from becoming a ‘back door’ into British markets for goods and immigrants, and vice versa?

What could a ‘hard border’ mean?

These might be questions for politicians and bureaucrats, but the ramifications for ordinary people are real.In an analysis this spring of 4,500 products imported by the Republic from the UK, the Economic and Social Research Institute in Dublin found that a return to a ‘hard border’ could add between two and three per cent to the cost of living south of the border, adding up to €1,400 a year to average household bills.It found that the price of bread and cereals in the Republic could rise by up to 30 per cent while milk, cheese and egg prices could increase by 46 per cent.This spring, UK Brexit Secretary David Davis and Michel Barnier, the chief EU negotiator, signed up to a protocol stating that, in the absence of an alternative, mutually acceptable agreement on trade, Northern Ireland would remain part of the customs union and, for the most part, the single market.This so-called ‘backstop’ position would certainly retain the softest of borders but would also effectively divide Ulster from Great Britain and create a new border running down the middle of the Irish Sea.

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Few believe Prime Minister Theresa May could sell this idea to many of her own Conservative MPs, still less to the ten Democratic Unionist Party (DUP) MPs whose votes are the only thing giving the Tories a parliamentary majority.Well aware of that, Mrs May stressed in a letter to Donald Tusk, president of the EU Council, that while she was committed to avoiding a hard border, the agreement with the EU “also provides clear recognition for Northern Ireland’s constitutional status, the principle of consent, and protecting Northern Ireland’s place in the UK internal market”.

A productive economyAccording to a Eurostat 2016 report, Irish labour productivity – the amount of GDP produced by each unit worker in the economy – was 78 per cent above the EU28 average, overtaking Britain, France and Germany.

Yet Simon Coveney, the Republic’s deputy premier and foreign affairs minister, made it clear recently that, unless a better solution to the border problem could be found, it would have to be the ‘backstop’ arrangement or, as far as Brexit was concerned, nothing. “Without that backstop agreement in place in the withdrawal treaty there will be no withdrawal treaty and there will be no transitional arrangements, which are part of the withdrawal treaty,” he warned.Various alternatives to the ‘backstop’ have been floated.

Are hi-tech solutions the key to measuring cross-border activity?

On trade, UK foreign secretary Boris Johnson has suggested it would be simple to find hi-tech solutions to measure cross-border activity.But Kay Hayward, a political sociologist at Queen’s University, Belfast, who has analysed every possible post-Brexit scenario, rejects this and says some physical checks at the border will be inevitable.“Smart border technology is primarily a means of enhancing efficiency. It cannot make a hard border frictionless. It does not obviate the need for inspections. A hard border is not just determined by its visibility,” she says. It is a view backed up by the House of Commons’ all-party Northern Ireland Committee, which concluded after an exhaustive investigation this spring that there was no technical solution anywhere in the world that would obviate the need for a physical infrastructure at the border.And Seamus Leheny, policy director of the Freight Trade Association in Belfast, agrees. “Cameras might be able to recognise a number plate but they won’t be able to inspect what is inside a truck, nor will the freight owner necessarily know what truck his consignment ends up in if it transits through a distribution centre,” he says.

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The amount of trade is not insignificant. According to most recent official estimates, Northern Ireland exports about £4 billion worth of goods and services to the Republic over the course of a year, while about £1.3 billion of goods head the other way (Dublin estimates do not include a figure for services).Graeme Leach, founder and chief economist at the Macronomics consultancy, accepts that the conundrum of a post-Brexit solution at the border appears “unfathomable”. But he says, “All of this can be addressed in one fell swoop. If the UK chose to pursue genuine free trade post-Brexit, the border issue would become an ex-problem. If Britain decided to exercise its sovereign power and implement zero tariff and non-tariff barriers to imports, the border issue would disappear like an early morning mist over County Down.“The key point is that a genuine free trade solution does tick all the boxes. The UK would be outside the single market and customs union, the DUP would be happy because there would be equivalence with the rest of the UK, and there would be no physical border presence to threaten the peace settled by the Good Friday Agreement.”“Job done? Not quite. In this scenario, the entire problem would move from London to Dublin and Brussels. The EU and the Irish government would have to explain why they might oppose a solution which meant that imports into Northern Ireland could pass tariff-free into the Republic, thereby avoiding the EU Common External Tariff.”

Dublin – a failed relocation opportunity

Not coincidentally, perhaps, the preoccupation with the border has run in parallel with disappointment in Dublin over the small number of firms in the financial sector, which have chosen to establish post-Brexit European hubs in the city.While there were hopes initially of many hundreds of jobs relocating from London across the Irish Sea, it now seems the final tally will be counted in terms of tens.Not only did Dublin lose out to Paris in its bid to become the new home of the European Banking Authority, but only two major banks, Barclays and the Bank of America, have so far chosen the Irish capital for their new hubs.Some analysts believe Ireland’s lack of appeal stems from the fact it hosts far fewer corporate and institutional clients than the likes of Frankfurt and Paris, while others believe Dublin does not have the homes and international schools to satisfy relocating staff.Talks will begin on a free trade deal between the UK and EU next year, potentially to come into force after the transition period ends in December 2020.But Brussels simply does not want to give Britain seamless access to its markets lest it give other nations the idea that, by quitting the EU, they can continue to enjoy all the benefits of market access without any of the responsibilities - and costs - of membership of the bloc.

Question of border control in Ireland

Then there is the problem of people crossing the border. Each day, 34,000 workers, from medical staff to business people, commercial drivers to farmers, routinely cross the border in order to get to work.Then there are the many leisure and business visitors, and even train drivers on cross-border routes.Some 1.8 million cars are estimated to cross the border every month: a border along which there are about 400 road crossings.Recently, the UK government floated the idea through the media of a pre-registration scheme to avoid the need for personal checks at the border, even though any registration for travel would be counter to the common travel area deal already agreed by Brexit negotiators.The suggestion was immediately rejected by Taoiseach Leo Varadkar.Then there is the issue of regulatory and standards checks, including animal welfare and sanitary inspections and phytosanitary checks. “This is a key element of cross-border trade with ‘food and live animals’ accounting for a third of Northern Irish exports to the Republic,” says Katie Daughen, head of Brexit policy at the British-Irish Chamber of Commerce.“These checks need to take place at borders and will be mandatory if the North diverges on regulations. The failure to address this shows why we need to look for alternative, wide-ranging solutions such as a new customs arrangement between the UK and the EU.”Peter Leary, research fellow at the Institute of Advanced Studies at University College London and author of Unapproved Routes: Histories of the Irish Border, 1922-72, contends, “There are, broadly, three ways to avoid the return of customs checks and stations to the long-troubled Irish border: a united Ireland, the kind of special arrangement for Northern Ireland outlined in the European Commission’s draft agreement (the ‘backstop’), or a settlement covering the whole United Kingdom involving something similar to the existing customs union and probably some sort of commitment to regulatory alignment.”But, he believes, none of these options is open to Mrs May, not least because of her political reliance on the DUP. Meanwhile, David Davis maintains that the UK’s intention is “to achieve a partnership (with the EU as a whole) that is so close as to not require specific measures in relation to Northern Ireland”.Mr Varadkar agrees, saying on a visit to Germany in March that resolution of the border issue would hinge on a future EU-UK trading relationship. “If it is something that is very close to a customs union then I think that would solve a lot of the problems related to the Irish border,” he said. “But if it is something much less and much weaker than that, then it would not. We need more detailed written proposals from the UK government, and written in such a way that they can be made legally binding and work in the context of European law.”Both sides are beavering away behind the scenes in Brussels and London to come up with such a deal for what Jean Claude Juncker, president of the European Commission, describes as “not an Irish issue, but a European issue”, adding, “The European Union - the 27 member states - stand firm and united when it comes to Ireland.”Consequently, if the British did not understand before, they now know very clearly that the Irish Question is, in fact, a European one and is no easier to solve because of that.Are you finding an increase in demand for Irish immigration services as a result of Brexit? If you have any queries relating to Ireland, send them to editorial@relocatemagazine.com so we can help recommend organisations to navigate you through employee or client immigration applications.

Think outside the box

Explore what the future holds for global mobility teams. Don’t miss our Festival of Global Mobility Thinking on 11 May 2018. The full-day interactive event will feature a host of speakers, exhibitors and roundtables to explore how innovation and new technologies are driving companies through a rapidly evolving business landscape. Book now.Gala Awards Dinner, Thursday 10 May: Join us for a night of celebration at the UnderGlobe beneath Shakespeare’s Globe Theatre, London SE1 9DT. Book here.

Read more about the implications of Brexit on relocations in the Spring issue of our magazine

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