The United Kingdom (the “UK”) and the European Union (“EU”) continue to negotiate an agreement outlining the terms of the UK’s withdrawal from the EU. As a part of these negotiations, in December 2017, the UK and the EU agreed that there should be a “backstop” protocol that would go into effect if no agreement was reached by the parties concerning the treatment of the border between Ireland and Northern Ireland by the deadline for Brexit.
In February 2018, the EU proposed a draft legal text on the “backstop” protocol. The EU proposal would maintain an open border between Ireland and Northern Ireland after Brexit by allowing Northern Ireland to remain a part of the customs territory of the EU, subject to certain EU single market rules, including those on tariffs, rules of origin, VAT and excise taxes, product safety, and animal health and welfare. The UK rejected this proposal.
On June 7, 2018, the UK published its own proposal on the “backstop” protocol in a policy paper for its negotiating team regarding a temporary customs arrangement. The UK’s policy paper proposes that the entire UK -- not just Northern Ireland – would either stay in the customs union and single market with the EU or create a new customs union with the EU. Both proposals would last for a temporary period until the UK and the EU could resolve the Irish border question. The UK suggested that any such arrangement should not last beyond 31 December, 2021, although no actual end date was offered in the policy paper.
The three main aspects of the UK proposal are:
• The elimination of tariffs, quotas, rules of origin and customs processes including declarations on all UK-EU trade;
• The UK would no longer be bound by the EU’s Common Commercial Policy (“CCP”), unless any aspect of the CCP was necessary for the temporary customs arrangement to function. The EU’s common external tariff (CET) and the Union Customs Code (UCC) would continue to be applied at the UK’s external border; and
• The UK would be able to negotiate, sign and ratify free trade agreements with third parties. The UK policy paper also proposes that the UK would be able to implement the terms of any free trade agreement, as long as a specific term does not affect the functioning of the temporary customs arrangement.
The proposed temporary customs arrangement is limited to the movement of goods between the EU and UK; the policy paper makes no proposals on the movement of services or people. Moreover, the proposal would also allow the UK to protect its interests through participation in relevant EU committees and in any new free trade agreements negotiated by the EU. However, as with the prior joint statement last December, significant details have been left out of this proposal, including those regarding regulatory control, and are being pushed down the road for discussion later.
As there are only nine months to go until Brexit day on March 29, 2019, there is a growing level of concern that the UK and EU are running out of time to finalize a Withdrawal Agreement and terms for a transition period to avoid a hard Brexit.
