There is one striking feature of the customs union “backstop” plan as drafted in Britain’s withdrawal treaty from the EU: it is designed not to work.
Critics of the Brexit deal on both sides of the Channel fear what is supposed to be an insurance policy against a hard border on the island of Ireland will become the future UK-EU relationship through the 2020s and beyond.
Such concerns, however, overlook the flaws and shortcomings of a backstop that, if applied as written in the deal, would struggle to provide a sustainable or comprehensive basis for UK-EU trade. One senior UK official involved in talks argued it was almost a “self-destruct mechanism” that would ensure “it could never be used”.
What makes Brexiters furious is that the backstop could lull Britain into a never-ending state of affairs in which the UK maintains market access to Europe but loses control over its trade or economic policy.
Meanwhile, EU diplomats are nervous because they fear Britain would have “one foot” in Europe’s market, enjoying tariff-free access and no rules of origin while ruthlessly undercutting the business standards of the EU’s single market.
But in practice the “bare bones” customs union established for the UK would be unlikely to lead to either scenario, since it relies on additional future agreements to function properly and maintain the just-in-time supply chains that manufacturers and retailers rely on.
Under the backstop, Northern Ireland would be deeply integrated with the EU goods market, with arrangements that would permit the free circulation of goods with the bloc. But the more basic arrangements for the rest of the UK would not do so. “As it stands, it is not terribly helpful,” said one person handling Brexit for a big UK car manufacturer.
Sabine Weyand, the EU’s deputy chief negotiator, has told colleagues the backstop is an outcome neither side “actually wants to enter into force”. The drawbacks of the arrangement make clear why.
For example, the backstop includes no road transport agreements, which are essential to move goods to the continent. Without that, permits for UK hauliers would be strictly limited to those offered by an intergovernmental agreement, which the European Commission estimates would cover 5 per cent of existing traffic.
There are also no accompanying veterinary or phytosanitary agreements, which are crucial to ease the cross-border flow of agri-food products. The alternative of checks on 100 per cent of UK imports would create huge disruptions, and leave some UK exporters at a huge disadvantage.
Under the backstop, Britain would not be part of a common regulatory regime with the EU on goods. The concept of such a regime provided the basis of UK prime minister Theresa May’s Chequers plan for a post-Brexit trade deal. Without it, there would be extensive product standard checks at the border.
“Will this backstop create a frictionless trade environment?” asked Philippe Lamberts, a Green MEP in the European Parliament’s steering group on Brexit. “The answer is definitely ‘No’.”
The EU also has trade arrangements with dozens of countries, which the UK would no longer benefit from automatically once the backstop kicked in.
UK goods, or European products made with UK parts, might then no longer meet “rules of origin” set out in such trade deals, meaning the items would no longer qualify for preferential low tariffs elsewhere.
“It is very difficult to imagine a customs union that could function without a common commercial policy,” said Philippe De Baere, a trade and customs lawyer at law firm Van Bael & Bellis in Brussels. “It is also very difficult to imagine one that could achieve the objective of frictionless trade without what we would call a single market.”
He added: “If you have only a basic customs union but the two sides say ‘OK we will have seamless, frictionless movement of goods between the EU and UK’, well that will not work. That is what was tried with Turkey [which has a 1996 customs union for manufactured goods with the EU], where there is a very hard border with the EU.”
Even so, while the backstop has clear disadvantages, it would amount to more than a basic customs union with shared external tariffs. The EU insisted on significant accompanying restrictions on competition, taxation, environment and labour policy that aim to maintain a “level playing field” for business.
Such conditions to some extent replicate business standards in the single market, setting a floor that Ms Weyand saw as a “starting point” for discussions about a future trade deal — a negotiation that will begin in earnest after Brexit takes place on March 29 next year.
France, Germany, Denmark and the Netherlands are pushing for even more stringent provisions. But the European Commission has argued that packing too much into the agreement is unnecessary, since the EU will maintain considerable leverage after Brexit.
Ms Weyand told sceptical ambassadors last week that the backstop was designed to ensure Britain could not comfortably rely on it alone, according to a diplomatic note of the meeting. The EU, she said, would have overwhelming “bargaining power”.
Mrs May’s gamble, by contrast, is that the backstop will help her negotiators secure agreement on a more lasting arrangement more like her Chequers plan, in which Britain would abide by the EU’s rule book for goods.
EU leaders have rejected this idea in principle because it would allow Britain to enjoy free movement of goods without all the other obligations of the single market, such as free movement of EU nationals to live and work in the UK.
But the sophisticated governance system in the withdrawal agreement would potentially set precedents to allay some concerns, since it gives a leading role to the European Court of Justice in interpreting any EU laws followed by the UK.
Should the backstop become necessary, some close UK trading partners might support supplementary deals to make it function smoothly, perhaps encouraged by UK willingness to make financial contributions to the EU budget. It is a scenario that purists in EU capitals fear will become “Chequers by the backdoor”. But such an outcome is far from guaranteed by this week’s deal.backstop, Brexit, drawbacks, EU, Pose, Problems, UK