Theresa May's Withdrawal agreement has been dubbed the "worst deal in history". Not least because of the NI backstop, which partitions the UK, locks us into a customs union, without an exit route. But that should not distract us from the other many and various unacceptable facets of the agreement:
- Paying £39bn we do not legally owe, with no guarantee of a future trade agreement.
- Covertly signing up for EU Defence Union, including yet more UK cash contributions.
- Continued role for ECJ as final arbiter.
- Conceding on "Level Playing Field" and Geographical Indications with no guarantee of a future trade agreement.
- Despite May's claims, the deal does not guarantee an end to EU Freedom of Movement,
- etc. etc,
UK partitioned
The backstop annexes NI into "the" EU's customs territory, separated from the rest of the UK. It's hidden away under layers of reference, but it is clear when you analyse Article 15 of the NI protocol.
- "the territory defined in Article 4 of Regulation (EU) No 952/2013" (this article in the Union Customs Code defines the territory of the EU Customs Union by listing the EU member states)
- "shall be read as including the part of the territory of the United Kingdom to which Regulation (EU) No 952/2013 applies by virtue of Article 6(2) of this Protocol." (Article 6(2) of this protocol identifies the Union Customs Code as applying to NI).
Third country trade barriers
This is really a "bare bones" customs union between GB on one side and EU+NI on the other. So the GB-NI (and GB-EU) border will resemble the EU-Turkey border. Frictionless, it ain't.
- An Irish Sea VAT & Excise border is formed by Article 9 of NI protocol, which makes NI subject to EU VAT & excise law.
- Full third country customs controls (i.e. as per WTO rules) will apply to trade between the two parts of the "single customs territory", i.e GB-NI trade and GB-EU trade (Annex 3 Art 1 of NI protocol).
- Full third country regulatory controls (i.e. as per WTO rules) on goods traded between the 2 parts of the "single customs territory". The only concession EU have offered is that they'll try and do GB-NI checks away from NI ports. (Article 7 of NI protocol).
How much benefit is tariff-free trade in agriculture when GB exporters will still be faced with the EU's steep regulatory barriers, i.e. SPS checks / veterinary inspections at the border (especially for high tariff goods in meat/dairy sector) ? GB could of course reciprocate steep SPS barriers to imports of EU agricultural goods. Except that we depend on EU for most of our food imports and a "bare bones" customs union prevents us from sourcing tariff-free food from elsewhere in the world. What a ridiculous position to be in.
So all we really gain from a "bare bones" customs union is tariff-free trade in industrial goods, for which the EU trade weighted average tariff is just 2.3%. Which is outweighed by non-tariff barrier costs, not least the admin cost involved in the A.UK movement form.
Emasculated UK Trade policy
The "bare bones" Customs Union also means UK has to adopt EU's tariffs and trade defence measures. (NI protocol Annex 2 articles 3 & 4). We will have no independent trade policy and will be unable to agree our own FTAs. Nor will our exporters benefit from preferential access to third countries via EU's FTAs.
But - all third countries with an EU FTA will get preferential access to GB market without having to reciprocate. A permanent built in disadvantage for GB traders. How is Liam Fox going to persuade the 50+ countries with EU FTAs to roll them over to a GB bi-lateral when they will get preferential access to UK for free by virtue of the "bare bones" customs union ? This a ludicrous position to be in.
The idea that the "bare bones" Customs Union is uncomfortable for the EU is laughable. The EU bakes in its £100bn trade surplus, while preventing GB from seeking better trade terms elsewhere. The EU has all the leverage and none of the risk.
But - all third countries with an EU FTA will get preferential access to GB market without having to reciprocate. A permanent built in disadvantage for GB traders. How is Liam Fox going to persuade the 50+ countries with EU FTAs to roll them over to a GB bi-lateral when they will get preferential access to UK for free by virtue of the "bare bones" customs union ? This a ludicrous position to be in.
The idea that the "bare bones" Customs Union is uncomfortable for the EU is laughable. The EU bakes in its £100bn trade surplus, while preventing GB from seeking better trade terms elsewhere. The EU has all the leverage and none of the risk.
Worse than WTO
It amazes me that so many politicians who are scared of a so-called cliff-edge scenario in March 2019 seem to think the "bare bones" customs union backstop just 21 months later is perfectly acceptable. Exactly the same non-tariff barriers apply in both cases, mitigated only by saving industrial tariffs (averaging just 2.3%).
When you also take into account the partitioning of the UK and emasculation of UK trade policy, it is clear that the "bare bones" customs union backstop leaves us in a much worse position than reverting to WTO rules in March 2019. Not to mention the small matter of £39bn bill, EU Defence Union, ECJ supremacy, Level Playing field etc. that comes with May's deal. Added to that, May's deal prolongs the uncertainty indefinitely, which is toxic for business and for our politics / governance.
Nor is the backstop good for NI, given that 86% of NI's economy is based on trade within the UK internal market. A further 6% is based on trade with the Rest of the World, so 92% of NI's economy does not rely on the EU/RoI. Major barriers to GB-NI trade makes no sense at all for NI economy.
It really does not matter whether the backstop is "temporary" or comes with an exit clause. May's deal is unacceptable and clearly the worst of all worlds - and still does not avoid a cliff-edge. It is much the better path to take the initiative and revert to WTO terms in March 2019. We can chart a new course taking advantage of the freedom we gain (and spare £39bn cash). Most importantly, outside the customs union, we would retain the freedom to seek better trade terms elsewhere, which is what the EU fears most and hence is our best leverage for eventually reaching a mutually acceptable deal.
When you also take into account the partitioning of the UK and emasculation of UK trade policy, it is clear that the "bare bones" customs union backstop leaves us in a much worse position than reverting to WTO rules in March 2019. Not to mention the small matter of £39bn bill, EU Defence Union, ECJ supremacy, Level Playing field etc. that comes with May's deal. Added to that, May's deal prolongs the uncertainty indefinitely, which is toxic for business and for our politics / governance.
Nor is the backstop good for NI, given that 86% of NI's economy is based on trade within the UK internal market. A further 6% is based on trade with the Rest of the World, so 92% of NI's economy does not rely on the EU/RoI. Major barriers to GB-NI trade makes no sense at all for NI economy.
It really does not matter whether the backstop is "temporary" or comes with an exit clause. May's deal is unacceptable and clearly the worst of all worlds - and still does not avoid a cliff-edge. It is much the better path to take the initiative and revert to WTO terms in March 2019. We can chart a new course taking advantage of the freedom we gain (and spare £39bn cash). Most importantly, outside the customs union, we would retain the freedom to seek better trade terms elsewhere, which is what the EU fears most and hence is our best leverage for eventually reaching a mutually acceptable deal.
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