The New Cold War
America, China, and the Echoes of History
A new fight has been brewing over the consequences of Brexit for the border between Northern Ireland and the neighboring Republic of Ireland. Both British and EU negotiators have identified the border as one of the key political questions that have to be addressed early on in negotiations. It’s easy not to have a border between two states that are both part of the EU’s single market (the regulatory regime that allows easy trade across the EU) and customs union (the arrangement under which European states do not impose customs duties on each other and maintain a common customs policy toward all other countries).
Now, however, the United Kingdom is leaving the European Union, which means that Ireland’s northern border is about to become the land boundary dividing Europe and Britain. That has dangerous consequences. Since the signing of the Good Friday peace deal in 1998, Northern Ireland’s economy has become increasingly intertwined with its southern neighbor, especially in key sectors such as agriculture. Even more important, Northern Ireland’s peace arrangements rely on Irish nationalists acquiescing to British rule, which might evaporate if barbed wire, police, and customs posts suddenly appear along the border.
In an effort to avoid such tensions, all the key players agree that there should be no hard border between the north and south. Yet their agreement hides sharp political divisions, which could lead to failed negotiations.
A FLEXIBLE CUSTOMS ARRANGEMENT?
Tensions among the negotiating parties have come to the surface thanks to two position papers on the border that the United Kingdom released last month. In the first paper, London makes clear that it wants the Irish border to be invisible. In the second, it lays out a broad but ill-defined vision for how new British-EU customs arrangements as a whole might work. The two papers, however, present an interlinked argument in which a broader customs “partnership” would be an essential precondition for any “invisible” and “open” border between Northern Ireland and Ireland. The United Kingdom has effectively suggested that a deal on the Irish border issue will be impossible without a broader deal on customs.
This suggestion serves British interests very well. Notably, the new streamlined customs arrangements proposed in the papers would involve very little real costs for the United Kingdom. Exporters would not have to endure long waits as their goods go through border controls—these would instead be tracked through as yet undeveloped technologies and administrative procedures. British firms would have more or less unhindered access to European markets, without having to deal with the paperwork and delays that other importers to the EU manage every day. Recalling Foreign Secretary Boris Johnson’s notorious description of the British negotiating position over Brexit, this customs agreement would allow London to have its cake and eat it, too.
A broad customs partnership like this would maximize British flexibility, allowing the United Kingdom to make trade deals that serve its firms’ interests, perhaps at the expense of European competitors. In a true customs union, as Oxford economist Kevin O’Rourke points out, states have to agree on a common tariffs policy with respect to nonmembers. Otherwise, it becomes too easy for outside importers to cherry-pick markets with lower tariffs and export goods to them, which can then be re-exported to other member states with higher tariffs (since there are no internal border controls in a true customs union). In the “partnership” proposed by the papers, no such common tariff policy is required. This would allow, for example, the United Kingdom to make an independent trade deal with a nonmember country such as Argentina to lower tariffs on beef, to the considerable anguish of farmers in Ireland and other countries.
At the same time as the United Kingdom wants to link progress on the Irish border question to progress on a flexible customs relationship with the EU, it is at pains to try to delink EU funding of the Northern Ireland peace process from future negotiations about a financial settlement in which London will potentially have to pay billions of euro to satisfy its budgetary and other outstanding obligations to Brussels. In the eyes of European negotiators, Britain would like to have it both ways here, too—taking advantage of money from Brussels while refusing to make any commitments on the money that it owes.
PUTTING PEACE AT RISK
The position papers contrast the United Kingdom’s “flexible” position on the border with possible EU inflexibility and intransigence. Prominent pro-Brexit politician and commentator Daniel Hannan has suggested that London has come up with a way to avoid a land border, but that the EU is unlikely to reciprocate. Unsurprisingly, EU negotiators have a somewhat different interpretation of the logic behind the proposal. In a deliberately leaked admonishment to the United Kingdom, they have warned against turning the Northern Ireland peace process into a “bargaining chip” and complained of London’s “magical thinking” about Brexit negotiations.
Both Ireland and the EU are calculating that the United Kingdom will be forced to back down on the customs question.
The EU, too, wants to avoid a hard Irish border. It believes, however, that this can only be accomplished if London makes the necessary concessions to stay within the European Union’s customs union, or as close as makes no substantive difference. The United Kingdom’s vision of border controls, based not on customs posts and inspections but on technologies and procedures that can track the movement and quality of goods, appears hopelessly utopian and unfeasible. The EU has long and sometimes bitter experience with the ways in which administrative controls can be suborned by criminals and smugglers. Its value added tax system—which relies on a complex system of payments among firms—is notoriously vulnerable to manipulation through so-called carousel fraud, in which importers and exporters play complex games across member state borders to rip off tax authorities. Although Europe wants to support the peace process in Northern Ireland, it is not prepared to sacrifice what it sees as its core interests regarding regulation on trade to keep the United Kingdom happy.
The Irish government, unsurprisingly, is highly sensitive to the border question. But it has fallen in line behind the European position after some initial hesitation. Ireland’s Taoiseach (prime minister), Leo Varadkar, has been notably tougher on the British negotiating position than his recent predecessor, and has pointed out that there are physical customs controls even on the US-Canada border. His foreign minister, Simon Coveney, has recently made it clear that the “one clear way” to preserve an open border is for the United Kingdom to remain a member of the EU’s customs union. Coveney has furthermore expressed his full confidence in the EU’s negotiators, suggesting that Ireland is unwilling to break with other European states.
AVOIDING A HARD BORDER
Both Ireland and the EU are calculating that the United Kingdom will be forced to back down. They have plausible reasons for optimism. First, the British arguments are weak, even by the shambolic standards of its Brexit negotiating team. They depend on unrealistic hopes about the potential of technologies that have yet to be developed, let alone implemented. (British negotiators would be hard pressed to produce specifics if they were challenged.)
Second, there are divisions within the British government that can be exploited. So-called hard Brexiters would like as little involvement with the EU as possible and believe that the United Kingdom would be better off if it had complete freedom to negotiate on trade, customs, and standards with a variety of trading partners. Soft Brexiters would like instead to keep as many of the existing ties to Europe as voters will let them get away with. The British position papers try to fudge the differences between the two by proposing British-EU cooperative arrangements that would give the United Kingdom access to European markets without really limiting its options on trade and customs. Uncovering these divisions—and hence undermining the British negotiating position—should not be hard in a sane and rational world.
Finally, the British government now faces new difficulties in getting a Brexit deal through Parliament. The Labour party has just announced that it wants an “extended transition” toward Brexit, whereby the country would stay in the customs union and single market for a substantial period, and perhaps remain in the customs union indefinitely, depending on negotiations. That means that it is likely to oppose any deal without a customs arrangement. Prime Minister Theresa May’s Conservative government does not command a majority in Parliament and may suffer defections on both the left and the right, which means that it will be hard to shepherd a Brexit deal through.
It is possible, however, that the current British government—which relies on support from hardline Northern Ireland unionists—will stick to its guns. Even apart from the renewed tensions over Brexit, Northern Irish politics are going through difficult times. The country’s government has been nonfunctional for several months, stalemated between unionists and nationalists. If British efforts to exit the customs union continue, it may only succeed in forcing the EU to impose hard customs controls on the Irish border for the first time since the creation of the single market in 1992. This, in turn, could lead to an accelerating collapse in Northern Ireland’s governing arrangements and a new constitutional crisis in British politics, which, like Brexit, would be entirely of its own making.