Westminster Reflections: Bernard Jenkin MP discusses the customs partnership proposal and its political consequences
As I write, the Brexit debate is centred around the future UK-EU customs relationship. The UK government set out its thoughts in its Future customs arrangements: A future partnership paper in August.
It proposes a ‘new customs partnership’ (NCP). The UK would mirror the EU’s requirements for imports from the rest of the world where their final destination is the EU. The EU would be required to reciprocate. This is a highly novel approach and is unprecedented, but the government argues that this would remove the need for a UK-EU customs border. It is hard to see how – without the UK accepting regulatory alignment with the EU – so, along with a uniform EU tariff, other UK free trade agreements would be off the table.
The second approach, referred to as a highly streamlined customs arrangement, ‘maxfac’ (maximum facilitation), would aim to remove the need for customs checks at the border, using technological-based customs procedures conducted at the exporter’s or importer’s warehouse. Many countries are pursuing this in order to reduce friction at customs frontiers.
The clock is ticking, and it is clear to most people that the NCP won’t fly. Back in August last year, the government admitted that “this is an innovative and untested approach that would take time [five years] to develop and implement.” Unfortunately, no one serious has emerged to back the idea. Peter MacSwiney, the Chairman of ASM (UK) Ltd and of the Joint Customs Consultative Committee (JCCC), an HMRC-sponsored forum, said to the Treasury Select Committee: “I think it is a ridiculous suggestion. It seems to be based partly on the IPR [Inward Processing Relief] regime, which is probably the single largest regime within HMRC that has fiscal anomalies and non-compliance…. I am very sceptical that that solution would ever work.”
Even if the idea did work, it would surely still require either a regulatory border for UK products not made to EU standards, or UK conformity with EU laws while importing goods that are not. So would this serve any better than a standard customs frontier? Turkeyhas a customs union agreement with the EU, but the latter still insists on very substantial border infrastructure for goods on its frontiers with Greeceand Bulgaria.
We must end the uncertainty about the UK’s new relationship now, so that people can start planning for the future. Only one of the government’s proposed options works. It is this one that it should therefore pursue.
By the time you read this, all may well have been decided, or we will be wasting time. The EU has agreed that the objective of the talks should be zero tariffs and no quantitative restrictions. We should press on to conclude a comprehensive free trade deal, which is so clearly in the interests of both sides.
Although Michel Barnier continues to insist that if the UK leaves the EU Customs Union checks will be needed on the border between Northern Ireland and the Republic of Ireland, others say that technology and the highly streamlined proposal is viable.
Jon Thompson, the Chief Executive and Permanent Secretary of HMRC, told the Exiting the EU Committee in November that streamlined arrangements could include a derogation for small traders, a system of self-assessment, and the expansion of Authorised Economic Operator programmes. In the context of the border between Northern Ireland and the Republic of Ireland (which accounts for a tiny proportion of EU trade) where a small number of traders account for a high proportion of trade volume, Thompson asserts that these measures would cover the vast majority of trade between Northern Ireland and the Republic of Ireland. Any checks required would be risk-based and intelligence-based, taking place well away from the border.
A study commissioned by the European Parliament’s Policy Department for Citizen’s Rights and Constitutional Affairs identifies a range of further technologies and practices that can be used to avoid a hard border. These include: automatic number plate recognition, which can allow faster or no processing at the border; a ‘single window’ that allows businesses to electronically submit standardised information required for importing or exporting through one portal; and a ‘gateway solution’, which uses existing infrastructure for customs-related information messages and can be used to follow vehicles through real-time GPS positioning.
The previous government of the Republic of Ireland under Enda Kenny supported this proposal. Niall Cody, Chair of the Irish Revenue told a Dáil committee in May 2017, “we will not be providing new trade facilitation bays. We are not looking at this type of traditional customs point.” He warned of “the scepticism around IT solutions: you always have to be very careful of who you are listening to and what’s their various different vested interests.” He advocated “simplified procedures: Authorised Economic Operators in which the checking is done on goods at the destination point. It’s not brought somewhere to have the checks carried out.” He added, “you’re not looking at something that’s going to distort the EU market.”
We have all affirmed our commitment to the Northern Ireland peace process and the Good Friday Agreement. Additionally, Theresa May has repeatedly said that she is committed to avoiding a hard border, including any physical infrastructure or related checks and controls. The solutions exist. If the EU or the Republic of Ireland put infrastructure on the border, it will be their choice, not ours.