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Artillery Row

Do UK plans really threaten the Good Friday Agreement?

Here’s what the boss of Ireland Revenue had to say…

With the Northern Ireland Protocol bill beginning its second reading on 11 October and formal talks taking place today, there have once again been many comments suggesting the UK’s Northern Ireland protocol bill — intended to ensure largely unfettered trade between Great Britain and Northern Ireland — threatens the Good Friday/Belfast Agreement (GFA) because it would introduce cross border trade friction and necessitate a hard border on the island of Ireland to protect the EU SM.

First, let’s deal with the often quoted argument that the Good Friday Agreement explicitly prohibits any trade friction or a hard border on the island of Ireland. After reading it I find that there are zero mentions of the word friction in the document and only one use of the word trade — as part of the phrase “Trade Union”. There are, however, ten uses of the word “border”.

Nine are in the phrase “cross-border” and relate specifically to cooperation between the Republic of Ireland and the United Kingdom or devolved Northern Ireland Assembly. The other relates to “a new regional development strategy for NI … tackling the problems of a divided society and social cohesion in urban, rural and border areas … ” So, in total there is not a single mention of the actual border on the island of Ireland and how it relates to trade in the whole document.

Is the UK is guilty of magical thinking?

The GFA does not preclude trade friction or a hard border on the island of Ireland. But what about the December 2017 Joint report? It has been suggested that the UK promised to prevent any increase in trade friction on the island of Ireland in this (non-legally binding) agreement.

How many times is the word “friction” found in this document? Zero times. What about “trade”? Zero times. What about “trade friction”? Nope, the document does not mention or discuss the idea of trade friction at all. It does however mention the phrase “hard border” twice: “the UK … commitment to the avoidance of a hard border, including any physical infrastructure or related checks and controls” and “the UK remains committed to … its guarantee of avoiding a hard border”.

What the UK actually promised in the Joint Report was to ensure that there is no hard border on the island of Ireland and no physical infrastructure or checks and controls at the border. Not no trade friction. No hard border.

Do the UK plans for red and green lanes (distinguishing goods destined for NI or the ROI) require a hard border on the island of Ireland? Are critics correct to argue that the UK is guilty (again) of magical thinking, believing in unicorns and that unfettered trade is impossible without the whole UK fully and permanently aligning with EU rules and regulations?

To answer this question I shall refer to the oral evidence provided to the Irish Parliament (Dail) by the Head of Ireland Revenue (Customs) Niall Cody on 25 May 2017. Please note that this evidence was provided when Ireland still expected the border between the UK and EU to operate on the island of Ireland. You can read it all here.

First, some quotes on how Revenue Ireland currently operate Customs for third country imports:

In 2016, 6 per cent of import declarations were checked and less than 2 per cent were physically checked. The vast majority of these checks were carried out in approved warehouses and other premises with a very small number at a port or airport.

Two points here. First on the number of checks: 94 per cent of imports are not checked at all. Nothing. Not even the paperwork. Less than two per cent of all imports are actually physically checked — but note that almost all of these checks are made away from the border

When the UK suggested that checks could be made away from the border, that was described as unicorn thinking. However, the head of Ireland revenue confirms that this is exactly how Ireland Revenue largely operates today. How does Ireland Revenue achieve this feat?

The low level of import checks is the result of pre-authorisation of traders, advance lodgement of declarations and an extensive system of post-clearance checks, including customs audit, which are carried out at traders’ premises.

Ireland achieves this through trusted trader schemes and computer-led intelligence checks made away from the border. Sounds awfully similar to the UK “unicorn thinking” plans doesn’t it?

Mr Cody goes on to explain that “authorised economic operators, AEOs, have a special status in the system and under agreed protocols are allowed to operate greatly simplified customs procedures. There are currently 133 AEOs, which account for 82 per cent of all imports and 89 per cent of exports.”

One hundred and thirty-three AEOs cover 82 per cent of imports. Doesn’t that point out a flaw in the UK model? Surely cross border trade would include lots of smaller companies which don’t have AEO status? Mr Cody has an answer to that as well: “The new customs code opens the possibility for smaller traders to receive this authorisation and we expect the number of AEOs to rise sharply, perhaps by a factor of ten, with the addition of a wide range of traders, including smaller businesses.”

EU customs code allows for checks away from the border

Ireland Revenue stated in May 2017 that the EU customs rules allow for a more than ten fold increase in the number of Trusted Traders with little or no checks and all away from the border. Perhaps the UK plan is not such a glaring example of “unicorn thinking” after all? 

What about UK plans for no physical paperwork? Over to Mr Cody again: “The Union customs code envisages the development of paperless customs systems, managed entirely on the basis of electronic processing. Revenue’s objective is to facilitate trade by maximising the free flow of goods. We are aiming to have the most advanced systems possible and we will continue to maximise the simplification provided for within the Union customs code.”

In May 2017 Revenue Ireland seemed to argue that the UK’s border plan was very much not wishful thinking. What else did Mr Cody have to say on the subject? 

The way the customs code works is that it provides for simplified procedures, authorised economic operators and the checking is done for goods at the destination point … it is not brought somewhere to have the check carried out. When we talk about approved warehouses, we are talking about logistics operations that support the transport of the goods. The goods go to their destination and we can facilitate that … by having a Revenue presence to carry out the physical examination of the goods.

What about the need for border infrastructure on the island of Ireland? Niall Cody: 

Very soon after we began considering this issue nine months ago, we concluded that the diversion and impact of having to call a designated Revenue customs post does not make sense and the volumes would not justify it … If the Deputy had asked me that question nine months ago, I probably would have visualised a map with the necessities because this is how it worked prior to the Single Market. Now, however, the way the customs code works is that it provides for simplified procedures, authorised economic operators and the checking is done for goods at the destination point.

No need for any border infrastructure, and the EU customs code allows for simplified procedures, trusted traders and checks away from the border. “We do not envisage physical checks taking place at Revenue offices. Currently, 2 per cent of goods are selected for physical checks. There is a series of rules and risk indicators involved in being selected.”

Just because Ireland currently inspects less than two per cent of ROW imports, that doesn’t necessarily mean the risk profile is the same for GB/NI trade. What did Cody think? 

From a customs point of view, it is very unlikely that there will be anything approaching 2 per cent referral for physical goods in regard to the type of goods that move between the North and the South … it is unlikely that goods of that type would be selected for physical examination, particularly if the destination was an approved operator.

What about the threat to the EU Single Market of such a system? The EU tells us now that the risks are too high. What was Cody’s view in May 2017? “Much of what is transported in both directions is construction material. There is also agrifood produce. Something that will distort the EU market will not be sourced from Northern Ireland into the South.”

In May 2017 the Head of Ireland Revenue gave evidence to the Dail stating that there was no need for a hard border on the island of Ireland, no need for physical infrastructure or paperwork, and that the very small number of checks needed could be done away from the border. “Something that will distort the EU market will not be sourced from NI into the South.”

In short, Revenue Ireland boss Niall Cody’s testimony to the Irish Parliament in May 2017 demonstrates exactly why UK plans for largely unfettered trade between GB and NI are not unicorn thinking, does not threaten the Good Friday Agreement and does not require a hard border on the island of Ireland.

Maybe it is time the EU and other critics of the UK plans listened to him?

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