The term “frictionless trade” is familiar to many by now, thanks in part to government ministers, officals, and the EU Commission, all of whom have been repeating the phrase in speeches and press releases on Brexit over the past few months.
In April of this year, David Davies outlined the UK’s desire for a “frictionless EU-UK border” that would be achieved through the use of technological solutions. The aim for the government, he said, was to ensure that any future trade is carried out with as little physical hindrance as possible, particularly on the UK’s land border on the island of Ireland.
The EU Commission’s Chief Brexit Negotiator, Michel Barnier, responded to the UK’s posturing with typical firmness in July, stating that the UK Government’s red lines on Brexit mean that friction-free trade is an impossibility: “I have heard some people in the UK argue that one can leave the single market and build a customs union to achieve ‘frictionless trade’ – that is not possible.”
A number of legal commentators are in agreement with the stance taken by Mr. Barnier. Dr. Katy Hayward of Queen’s University Belfast described the UK’s desire for a seamless frictionless border as “almost an oxymoron”, given the UK Government’s interpretation of the referendum result as being a vote to ‘take back control’ of immigration, laws, and trade.
Position papers on Northern Ireland and Customs
The publication of a number of position papers in August by the UK Government can be seen as an attempt to square that circle. On the 15th and 16th of August respectively, the Department for Exiting the European Union (DExEU) published papers on future customs arrangements between the UK and the EU and on future border arrangements in Northern Ireland. The first paper sets out two long-term options to replace the customs union: “The Highly Streamlined Customs Arrangement” and the “New Customs Partnership with the EU.”
The first “streamlined” model would see the creation of a new customs border managed by the UK. Under this arrangement the UK would unilaterally simplify its requirements on EU goods entering the country (as much as is possible) and provide border “facilitations” to reduce and remove trade barriers. These “facilitations” would involve the employment of technology-based solutions (e.g. the expansion of “trusted trader” schemes and the use of number-plate recognition cameras). The position paper does concede that the implementation of this proposal would lead to “an increase in administration”. It might also require firms to carry out self-assessments of their own customs duties.
The second model would involve the UK imposing the EU’s tariffs, standards, and rules on goods that are imported for the purpose of trade within the broader EU. In order to allow the UK to pursue new trade deals with third countries, it would impose its own regime on goods that are imported solely for the purposes of trading within the UK. This double policing system will require a degree of trust on the part of other member states that might be difficult to achieve (the paper itself describes this approach as being “innovative and untested”).
It is worth noting that a further paper was published on the 21st of August 2017, on the subject of continuity in the availability of goods for the EU and the UK. This paper helpfully acknowledges a link between the provision of goods and the provision of services, as well as setting out proposals that would ensure the availability of goods in the UK and EU markets during the withdrawal process.
Outcome and next steps
Although both models would lead to a reduction in administrative costs and waiting times for goods crossing the UK border, neither one alone would achieve the government’s stated aim of maintaining friction-free trade with the EU post-Brexit. Whilst these papers represent a positive step in negotiations, it is also important to recall that these are proposals made by the UK Government. To work in practice they need to be part of a bilateral agreement with the EU, and therefore need to be negotiated and agreed with the EU. Furthermore, it is worth noting the political sensitivities that would be involved in the installation of customs infrastructure on the border between Northern Ireland and Ireland.
When considering the impact that these papers may have on the ultimate EU-UK trade agreement, it is important to bear in mind the two-stage structure of the on-going negotiations. The EU has insisted on conducting the divorce settlement talks before negotiations on trade and customs can begin. The first round of negotiations are focused on the calculation of a divorce bill, the rights of citizens and the question of the border between Ireland and Northern Ireland. Once the EU deems that “sufficient progress” has been made in these three areas, talks on a future comprehensive EU-UK trade deal can be begin. Unless David Davis can convince his EU counterparts that the questions of customs and the Northern Irish border are inextricably linked, we may have to wait some time before knowing exactly what level of friction will exist on the UK’s borders post-Brexit.