Brexit: Where are we now? Part Four – Ireland

Tom Arnold13th February 201810min
Part Four of the IIEA’s February 2018 Brexit Status Report series, written by Tom Arnold, former Director General of the IIEA, sets out the Irish perspective on the negotiations to date, as well as the options for the negotiations ahead.

Part Four of the IIEA’s February 2018 Brexit Status Report series, written by Tom Arnold, former Director General of the IIEA, sets out the Irish perspective on the negotiations to date, as well as the options for the negotiations ahead.

 

Introduction: From referendum to ‘sufficient progress’

From the time the UK government announced its intention to hold a referendum on the UK’s future membership of the EU, the Irish government recognised the potential negative consequences of a Brexit for the Irish economy and society, North and South. Even though there was a working assumption at Irish government level – or at least a hope – that the UK electorate would vote to remain in the EU, detailed contingency planning was done in preparation for a possible ‘No’ vote.

When the UK ultimately voted to leave in June 2016, the Irish government launched a political and diplomatic initiative to raise awareness among the other 26 Member States that Ireland would be more significantly impacted by Brexit than any other member state and that specific Irish concerns should be taken into account during the exit negotiations.

The most comprehensive statement of Irish concerns and priority issues for the negotiations was made in Taoiseach Enda Kenny’s address to the IIEA at the Mansion House on 15 February 2017. The Taoiseach stated that Ireland wished to remain at the heart of the EU, consistent with the approach adopted since the country’s entry to the then-EEC in 1973. In the negotiations, Ireland would seek to protect the hard-won peace on the island, as reflected in the Good Friday Agreement (GFA). This would mean, among other matters, no hard border on the island of Ireland and the preservation of the UK-Ireland Common Travel Area (CTA). Ireland would also seek the maintenance of EU funding for cross border areas and the protection of the rights of Irish citizens, North and South of the border.

The special European Council meeting of 27 Member States on 29/30 April 2017 recognised the Irish concerns and agreed that three issues would be covered during the first phase of the negotiations:

  1. Protecting the rights of EU citizens in the UK, and UK citizens in the EU
  2. The framework for addressing the unique circumstances in Northern Ireland, including the need to uphold the Good Friday Agreement and avoid a hard border
  3. The UK’s financial settlement.

An important development in this phase was the agreement between the EU and UK that a ‘mapping exercise’ should be conducted. This was designed to examine in greater detail the degree to which EU membership touched upon North-South cooperation in the six areas of cooperation and implementation overseen by North South Ministerial Councils under the GFA. This mapping exercise showed that there were 142 areas where EU membership was now an important part of cooperation on the island of Ireland.

In November 2017, the EU Task Force presented a working paper on Ireland to the British government. This paper noted that joint UK and Ireland membership of the EU underpinned key parts of political, economic, security, societal and agricultural activity on the island of Ireland and the well-being of the all island economy. The paper concluded that in order to guarantee no hard border, there would have to be no regulatory divergence on either side of the border on the rules of the Single Market and Customs Union.

The deadline for agreement between the EU and UK on the three issues of citizens’ rights, Ireland and the financial settlement was set for 4 December in order to allow the European Council of 14-15 December to sign off and agree to move to Phase 2 of the talks, regarding the transitional arrangements and the future trading relationship between the EU and UK. On 4 December, however, the delicacy of the Northern Ireland political situation was underscored when Prime Minister May was not able to agree to the proposed text of the agreement which would commit the UK to ‘continued regulatory alignment’ between Northern Ireland and the Republic due to objections from the Democratic Unionist Party (DUP). The DUP were of the view that this formula would imply trade barriers between Northern Ireland and the rest of the UK. Negotiations during the subsequent days allowed a final text,  to be agreed on 8 December for presentation to the European Council meeting on 14-15 December.

In advance of the Council meeting, the European Parliament (EP) adopted a resolution on 13 December calling on all parties to ensure that the commitments made with respect to Northern Ireland and Ireland are fully enforceable, in order to ensure the EP’s consent to the withdrawal agreement. The Council formally agreed on 15 December that sufficient progress had been made on these three issues to move to Phase 2 of the negotiations, while acknowledging the general caveat that ‘nothing is agreed until everything is agreed’.

 

Agreement on Phase 1 Negotiations, December 2017.

The Council’s decision was based on a 15-page joint report from the negotiators of the EU and UK, consisting of 96 paragraphs. A section in the document ‘Ireland and Northern Ireland’, covered in paragraphs 42 to 56, deals with the Irish dimension of the agreement.

From an Irish perspective, the agreement in overall terms:

  • Solidifies the agreement in principle on the continuation of the CTA and securing rights for Irish citizens in Northern Ireland.
  • Recognises the importance of upholding the GFA and all its constituent parts
  • Recognises that protection of the all-island economy is essential
  • Aims to find means to guarantee the rights of Irish citizens in Northern Ireland.
  • Provides commitments from the UK side to a resolution of the Irish border issue, which Ireland and the other Member States consider acceptable.

Preserving the Good Friday Agreement and avoiding a hard border.

Three key paragraphs in the agreement, 43, 49, and 50, address the issue of the GFA, the hard border and Unionist concerns which had prevented EU/UK agreement on the text on 4 December.

Paragraphs 49 and 50 are worth quoting in full:

  1. The United Kingdom remains committed to protecting North-South cooperation and to its guarantee of avoiding a hard border. Any future arrangements must be compatible with these overarching requirements. The United Kingdom’s intention is to achieve these objectives through the overall EU-UK relationship. Should this not be possible, the United Kingdom will propose specific solutions to address the unique circumstances of the island of Ireland. In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all island economy and the protection of the 1998 Agreement.
  2. In the absence of agreed solutions, as set out in the previous paragraph, the United Kingdom will ensure that no new regulatory barriers develop between Northern Ireland and the rest of the United Kingdom, unless, consistent with the 1998 Agreement, the Northern Ireland Executive and Assembly agree that distinct arrangements are appropriate for Northern Ireland. In all circumstances, the United Kingdom will continue to ensure the same unfettered access for Northern Ireland’s businesses to the whole of the United Kingdom internal market.

The finely balanced wording of these two paragraphs was sufficient to achieve agreement at the end of Phase 1 of this negotiation.  But Phase 2 of the negotiations on the future trading relationships between the UK and the EU will require considerable ingenuity to enable the terms of both paragraphs to be respected.

Put simply, the stated UK government objective to leave the Customs Union and Single Market does not appear to be compatible with achieving the objective of avoiding a hard border on the island of Ireland.

Alternatively put, referencing the final sentence of paragraph 49, UK alignment with the rules of the Single Market and the Customs Union does not appear to be compatible with the wider UK objective of leaving the Single Market and Customs Union, while also respecting the provision in paragraph 50 that ‘no new regulatory barriers develop between Northern Ireland and the rest of the United Kingdom’.

 

Moving to Phase 2 of the negotiations.

Phase 2 of negotiations will have two key parts: the period and terms of the transitional period between the UK formal exit from the EU on 29 March, 2019; and the agreement of the future trading relationship between the UK and EU in the post-transitional period.

The outcome of both of these negotiating issues will be highly significant for Ireland, for the border, and for the North-South relationship.

For the transitional period, the EU has proposed an arrangement which would essentially extend the terms of the UK’s membership – though the UK would not be represented in the EU institutions or agencies and would have to accept new EU legislation without any formal input into its creation. Furthermore, the UK would not have the right to vote on said legislation in the Council or Parliament.

This arrangement – essentially a time-limited prolongation of the status quo in many respects – would be close to the ideal outcome for Ireland. However, the lack of UK influence on EU decision making during the transition period has raised political tensions within the Conservative Party, with prominent Brexiter Jacob Rees Mogg claiming that the UK risks becoming a ‘vassal state’ during the period.

This debate is part of the wider debate about the outcome the UK will seek in its longer-term future relationship with the EU. The ‘Hard Brexiters’, including in the Conservative Party, want a clear exit from the Single Market and Customs Union; in contrast, Chancellor Philip Hammond has called for ‘very modest’ changes to Britain’s relationship with the EU after Brexit.

In overall terms, Brexit presents the UK with a deep political dilemma during 2018, and how this dilemma is resolved will inevitably have implications for Ireland.

Should the divisions within the Conservative Party result in a leadership change or a general election and a change of government, this tight timeframe may be impossible to deliver, and the unpalatable choices of either a ‘No Deal Brexit’, with the UK exiting on the basis of applying WTO rules, or reaching a new political agreement on the transition period or an extension of Article 50 may have to be faced. The option of a ‘No Deal Brexit’ would be costly to both the UK and EU and would represent a seriously bad outcome for the Irish economy, especially given its high dependence on Agri-food exports to the UK market.

 

Irish priorities for the next phase

Key Irish priorities for the Phase 2 negotiations include the translation of the commitments made in the December agreement into the Withdrawal Agreement; contributing to an overall EU-UK agreement; and dealing with specific issues under the separate Irish strand in the Phase 2 negotiations provided for in Paragraph 56 of the December Agreement.

Drafting of the binding Withdrawal Agreement has already commenced and the Irish government expects to see the commitments made by the UK in the Phase 1 agreement translated faithfully into legal form.

On the overall future EU-UK relationship, the optimal outcome from an Irish perspective would be for the UK to remain in the Single Market and Customs Union or, if this is not possible for political reasons, to remain as close as possible to the current trading arrangements.

Given how critically the Ireland/Northern Ireland situation featured in the Phase 1 negotiations, it is important that the December Agreement provides for a distinct Irish strand to Phase 2 negotiations.  The tensions inherent between Paragraphs 49 and 50 in the December Agreement will ultimately have to be addressed by the Irish and UK governments and the EU.

 

Conclusion

In summary, Irish political objectives were largely delivered on in Phase 1 of the negotiations.  Phase 2 will bring a new set of major challenges. The division within the UK government as to the future trading relationship between the EU and UK is one such challenge. If politics dictate that the UK seeks a version of a Hard Brexit, it will be difficult to simultaneously avoid a hard border within the island of Ireland. At that point, the ingenuity of interpreting Paragraphs 49 and 50 of the December Agreement to square an apparent circle will be required.

There is no doubt that Brexit continues to represent a major threat to Ireland’s future economic welfare. But the combination of a strategic political and diplomatic initiative by the Irish government, supported by the broad political system and wider civil society, allied to solidarity from its EU-26 partners, has meant that Ireland’s interests during Phase 1 of the negotiation have been well served. The hope is that the efforts in Phase 2 will be similarly successful.