Last week, the cabinet agreed to a ”backstop” that would see
the UK aligned to EU tariffs after 2020 if the two sides cannot agree on
customs arrangements. Predictably, the Brexiteers in government were concerned
that this might represent an attempt to remain in the customs union, although
the prime minister appears to have convinced them it is a backstop that is
unlikely to be triggered. I would not be so sure about that.
The government essentially has two plans on the table ahead of the EU summit in late June. Theresa May’s preferred plan is the customs partnership in which the UK collects external tariffs on behalf of the EU. Under this option, goods would cross borders with tariffs levied at the highest of the UK or EU rates with refunds claimed at a later date (in the same way as VAT is treated today). This would require far more cross-border tracking than is currently necessary, which would hugely increase the administrative burden. This plan has been dismissed by EU negotiators as “magical thinking” and it is opposed by Brexit supporters who view it as maintaining ties with the EU that they wish to see ended.
Consequently, they favour the so-called maximum facilitation (max fac) option in which the application of technology and the implementation of a “trusted trader” scheme will obviate the need for a physical border. But the technology to ensure that such a procedure can be implemented does not yet exist. Moreover, it would require the EU to put a similar system in place in order to work and it has been dismissed out of hand.
On the assumption that neither the customs partnership nor the max fac plans are acceptable to the EU, the backstop certainly has its attractions. Whilst it would give the UK a bit of breathing space to iron out its own internal difficulties, it may not be an easy sell in Brussels. Although the prime minister’s plan assumes that current arrangements can continue beyond end-2020, the EU may well decide to play hardball since it regards the border problem as a Northern Irish issue and appears to have no interest in applying a UK-wide solution in order to resolve it. In addition, it would fly in the face of the EU’s desire to set a limit on the transition period. But a more serious objection from the EU’s perspective is that it would allow the UK to remain a “quasi member” of the EU and thus escape the adverse consequences of a hard Brexit.
It is thus pretty obvious that a resolution to the Irish border problem is not imminent. Moreover, the UK government appears to be furiously back-pedalling on its more aggressive positions because it realises the intractability of the problem. But there is nothing new in any of this. I recently came across a filmed presentation that I gave in March 2016 when I explicitly warned that a Brexit vote would simply swap one set of problems for another and that no thought had been given by Brexit supporters to the consequences of their actions. Almost two years on from the referendum, the questions I am increasingly asking myself are “who owns Brexit” and “what do its supporters want out of it?” It seems to me that government rhetoric has pandered to the demands of those who want to pull up the drawbridge against the outside world whilst simultaneously trying to placate those who believe Brexit is a great opportunity to promote free trade. The trouble is that no one is satisfied – primarily because no-one in government is prepared to take responsibility for implementing a policy which is likely to have major adverse economic consequences.
What the government wants is a Schrödinger’s Brexit where we are simultaneously both in and out of the EU, thus delivering all the benefits of membership and all the gains from being outside. Schrödinger’s Cat was, of course, a thought experiment. And the further away we move from the heated rhetoric of spring 2016, the more it looks like the referendum exercise was a giant experiment in how not to conduct policy. More Frankenstein’s Monster than Cat.
The government essentially has two plans on the table ahead of the EU summit in late June. Theresa May’s preferred plan is the customs partnership in which the UK collects external tariffs on behalf of the EU. Under this option, goods would cross borders with tariffs levied at the highest of the UK or EU rates with refunds claimed at a later date (in the same way as VAT is treated today). This would require far more cross-border tracking than is currently necessary, which would hugely increase the administrative burden. This plan has been dismissed by EU negotiators as “magical thinking” and it is opposed by Brexit supporters who view it as maintaining ties with the EU that they wish to see ended.
Consequently, they favour the so-called maximum facilitation (max fac) option in which the application of technology and the implementation of a “trusted trader” scheme will obviate the need for a physical border. But the technology to ensure that such a procedure can be implemented does not yet exist. Moreover, it would require the EU to put a similar system in place in order to work and it has been dismissed out of hand.
On the assumption that neither the customs partnership nor the max fac plans are acceptable to the EU, the backstop certainly has its attractions. Whilst it would give the UK a bit of breathing space to iron out its own internal difficulties, it may not be an easy sell in Brussels. Although the prime minister’s plan assumes that current arrangements can continue beyond end-2020, the EU may well decide to play hardball since it regards the border problem as a Northern Irish issue and appears to have no interest in applying a UK-wide solution in order to resolve it. In addition, it would fly in the face of the EU’s desire to set a limit on the transition period. But a more serious objection from the EU’s perspective is that it would allow the UK to remain a “quasi member” of the EU and thus escape the adverse consequences of a hard Brexit.
It is thus pretty obvious that a resolution to the Irish border problem is not imminent. Moreover, the UK government appears to be furiously back-pedalling on its more aggressive positions because it realises the intractability of the problem. But there is nothing new in any of this. I recently came across a filmed presentation that I gave in March 2016 when I explicitly warned that a Brexit vote would simply swap one set of problems for another and that no thought had been given by Brexit supporters to the consequences of their actions. Almost two years on from the referendum, the questions I am increasingly asking myself are “who owns Brexit” and “what do its supporters want out of it?” It seems to me that government rhetoric has pandered to the demands of those who want to pull up the drawbridge against the outside world whilst simultaneously trying to placate those who believe Brexit is a great opportunity to promote free trade. The trouble is that no one is satisfied – primarily because no-one in government is prepared to take responsibility for implementing a policy which is likely to have major adverse economic consequences.
What the government wants is a Schrödinger’s Brexit where we are simultaneously both in and out of the EU, thus delivering all the benefits of membership and all the gains from being outside. Schrödinger’s Cat was, of course, a thought experiment. And the further away we move from the heated rhetoric of spring 2016, the more it looks like the referendum exercise was a giant experiment in how not to conduct policy. More Frankenstein’s Monster than Cat.
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