Tried and tested processes can ensure frictionless trade across the Irish border post-Brexit

Tried and tested processes can ensure frictionless trade across the Irish border post-Brexit

The Good Friday Agreement – which was signed in 1998 – came into force on 2nd December 1999 and signalled the beginning of the end of 30 years of sectarian violence in Northern Ireland. It consisted of two inter-related documents:

  • a multi-party agreement by most of Northern Ireland’s political parties; and
  • an international agreement between the British and Irish Governments, known as the British/Irish Agreement.

The British/Irish Agreement relates to sovereignty, civil and cultural rights, the decommissioning of weapons, justice and policing. As far as I am aware, at no stage was the EU directly involved in these negotiations, although I suspect that interested parties – including the European Commission – were kept informed of developments.

Today, the Irish Government headed by Leo Varadkar is a shaky coalition between Fine Gael and Fianna Fáil, while Sinn Féin is probably seeking every opportunity to scupper the British/Irish Agreement for its own interests.

Media reports infer that Leo Varadkar has been assured by the British Government that there will be “no hard border” post-Brexit, and that the UK has entered into dialogue with a sceptical Commission about whether this is possible. The Commission has its own views about external borders to the EU, namely that unless it is “hard”, it will be an open invitation to fraudsters to undermine the integrity of the Union.

Yet this is a political red herring and Mr Varadkar knows it; and it does much to underline the EU’s inherent difficulty in changing its own rules to suit changing circumstances.

Low-level fraud is endemic in the EU, as it is throughout the rest of the world, and it is probably best left to local administrations and to law-abiding businesses to continue to seek to resolve it piecemeal at a national level. In other words, whether the UK is in or out of the EU, the status quo on low-level fraud is unlikely to change and estimated levels of cross-border fraud determined by statistical analysis will continue to trigger intervention by national customs authorities either side of the Irish border.

Customs authorities the world over work closely with legitimate traders in combatting fraud. Traders have no wish to see markets for their goods undermined by fraud and customs administrations have a dual interest both in collecting taxes and in supporting trade facilitation. Besides, it is in no-one’s interest to cause serious hold-ups at borders as this can cause businesses to go bust and put people on the dole… and it slows the collection of revenue.

Apart from VAT, two major taxes are collected from trade: customs and excise duties. Customs duties are collected by the EU on a wide range of goods imported from non-EU countries; and excise duties are collected by individual EU member states for their own purposes on certain goods such as beverage alcohol and oil.

Within the EU, there are different levels of excise duty and – as an anti-fraud measure – some years ago, the EU adopted a computerised Excise Movement and Control System (EMCS), leaving individual EU member states to introduce it over a phased timetable. This new system superseded a paper-based Accompanying Administrative Document (AAD) system that was susceptible to fraud, and it became compulsory throughout the EU in January 2011. EMCS works well and links traders in excise goods and national customs authorities via computer databases thus ensuring that duty is paid on time in the EU member state of destination.

It is inconceivable that the UK would wish to disassociate itself from EMCS, post-Brexit, not least because traders and customs authorities in both the Irish Republic and the UK (plus Northern Ireland) already use it to mutual advantage.

By contrast, customs duty is levied on goods moved across the external borders of the EU between it and trading partners such as Australia. Dutiable goods are subject to customs clearance procedures and businesses often appoint specialist agents to process documentation if they don’t have in-house expertise themselves.

Some years ago, the UK participated with other EU member states in a trade facilitation exercise aimed at simplifying and speeding up customs formalities and preventing fraud. The outcome was that freight forwarders and individual businesses were encouraged to qualify voluntarily for Authorised Economic Operator (AEO) status under the aegis of a broader WTO scheme known as SAFE. Other countries outside the EU introduced similar schemes, and in some cases bilateral arrangements were signed, all with the intent of adherence to the underlying principles behind SAFE, namely to facilitate trade, to strengthen supply chains and to reduce the opportunity for fraud.

To achieve AEO status, companies have to jump through a number of hoops so as to satisfy customs authorities that they are trusted traders and are of minimal risk to the revenue and to national security. In practice, the more AEO-accredited businesses that there are in a supply chain, the lower the risk that there is to the revenue; so the benefits of AEO status cuts both ways: AEO traders qualify for simplified customs clearance procedures and their goods move faster cross-border; and customs can deploy scarce resources to high risk supply chains.

In practice, whatever the status of the trader, customs clearance takes place at ports of entry, and documentation is completed by specialist Freight Forwarders acting as agents, or by specialists within the company in question. Very rarely are there hold-ups because of administrative errors. Before the UK leaves the EU, it would be quite possible to arrange matters so that customs clearance post-Brexit took place well before goods were scheduled to cross the UK/Irish border, as is the case with the movement of excise goods now.

Furthermore, UK and Irish customs administrations have worked closely together for many years to combat cross-border excise fraud, so it is obvious that satisfactory arrangements for customs clearance could easily be worked out to comply with ‘soft border’ requirements to take account of slight differences in the levels of customs duty.

In any case, when the UK leaves the Customs Union there is no rational reason whatsoever why AEO-compliant businesses either side of the Irish border would not wish to retain their AEO status; and sensible governments would want to continue to promote the benefits of AEO status to business in their own interests, namely to reduce the risk of fraud and to cut costs.

It has been said countless times by serious commentators that it is in the interest of all stakeholders to have a frictionless arrangement between the UK and the Republic of Ireland to facilitate trade and revenue collection. Therefore, I would be astonished if UK Customs and its Irish counterparts have not already shaped up perfectly feasible technical options for retaining a ‘soft border’ along the lines indicated.

On that basis, it would appear that lack of progress on facilitating a ‘soft border’ is not because of the technical difficulties of doing so but that it is being deliberately frustrated by EU dogma, intransigence and short term political opportunism to the disadvantage of trade.

As for assuring compliance with EU standards on goods manufactured in non-EU countries, this generally takes place by accredited auditors close to the point of production so products imported from ‘third countries’ are hardly ever stopped at national borders because of non-compliance. In any case, national laboratories in most jurisdictions (including the UK and the Irish Republic) carry out random checks on imported products for assurance purposes.

In sum, by keeping the UK/Ireland border issue on the Brexit agenda, the EU – which was not even a signatory to the Good Friday Agreement – and the Irish Republic are doing nothing more than using bully boy tactics in an attempt to force concessions out of the UK; and in doing so they are fanning the flames of dissent at the behest of those who would like to see the island of Ireland united as a Republic.

This approach is cynical, disingenuous and dangerous, and it has nothing whatsoever to do with pragmatism or with already tried and tested processes for managing cross-border trade.