An Alternative to the Irish Backstop: An All-Ireland 'Common No-Custom Area' As a Frontier Traffic Area under Art. 24 of Gatt for Products Originating in the Island ('Ireland-Made'), Allowing Regulatory Divergence by the UK in Respect of the EU without Necessitating a Hard Border in Ireland

Abstract

Up to now it has been impossible to bridge the respective “red lines” of the UK and the EU in such a way that, as reaffirmed by the Boris Johnson government, after Brexit the UK – would be able to (a) regulate freely its internal market, diverging possibly from EU regulations, without distinction between the regime applicable to Northern Ireland (NI) and that of the rest of the UK, and (b) pursue an independent trade policy with third countries. The EU for its part seeks to preserve the unity of its single market and prevent the UK accessing it as a third country “a la carte”. No solution has yet been found that would allow coexistence of these two divergent requirements without establishing border controls between NI and the Republic of Ireland (RI), which both parties intend to avoid in order to preserve the Good Friday Agreement. The “backstop” does not solve this dilemma because in order to avoid a hard border in Ireland it prevents the UK from pursuing objectives (a) and (b) by tying the UK in a custom union with the EU. Rejection of the backstop with no alternative arrangement in place or a no-deal would, on the other hand, require a hard border to preserve the integrity of the single market. To resolve this conundrum, this paper proposes the alternative of establishing a “Common No-Custom Area” in Ireland – parallel to the Common Travel Area - applicable only to products originating in either part of the island (which represent a major part of intra-Ireland trade). This special regime conforms to the Frontier Traffic exception of Art. 24 of GATT/WTO and finds a “precedent” in the regime established by the EU in 2004 for trade between the Republic of Cyprus and Northern Cyprus. These products, duly labelled or certified as “Irish-made” under the authority of a Mixed Commission that would manage this special regime, would circulate freely as domestic products in both parts of the island. Products originating from outside the island, made in the rest of the UK or imported therein from third countries, entering NI but destined to the RI (or vice versa with respect to the EU and RI), would instead undergo the usual controls and custom duties for imported products, where such imports from outside the EU are currently cleared, thus not at the RI-NI border. Recent overtures of British officials that they would be willing to create a “single regulatory zone” covering all of Ireland for certain products go in the direction of what we propose. Their new flexibility has however been found by the EU Commission to be inadequate to protect the single market and to avoid a hard border, a requirement that our more comprehensive proposal would satisfy.