Brexit talks zero in on UK Customs fix amid deal optimism

British flag dart hits bulls-eye on black and gold dartboard

October 10, 2018 - British and European Union officials are locked in talks in Brussels over a compromise Brexit deal that could see the U.K. remain temporarily in the EU’s customs regime, people familiar with the negotiations said.

With just a week before a crucial summit of EU leaders that could determine the outcome of Brexit, officials from each side are wrangling over a potential solution to the biggest sticking point: how to keep the Irish border free from customs infrastructure. The U.K. is now unlikely to present any fresh proposals publicly and negotiators have not waited for one, the people said.

U.K. and EU diplomats said that intense negotiating over the next five days could result in a provisional agreement on the issue Monday. However, while there is positive momentum, many issues remain unresolved, they said.

“Decisive progress must be made” before next week’s summit, European Commission spokesman Margaritis Schinas told reporters in Brussels on Wednesday. He was speaking after the EU’s chief negotiator Michel Barnier updated commissioners on the talks.

The negotiations are focusing on the so-called “backstop” for the Irish border – an insurance clause to make sure that whatever future trade deal is eventually drawn up between the two sides, no hard border will go up on the island of Ireland. It would only apply as a last resort in case an overarching trade deal doesn’t address the issue.

Under the U.K.’s latest plan, Theresa May’s government would back down on opposition to new regulatory checks on some items moving between the British mainland and Northern Ireland. In exchange, May’s team would need the EU to compromise and allow the whole of the U.K., not just Northern Ireland, to stay in the bloc’s customs regime.

Willingness to Compromise

That’s thrown up legal problems that the negotiators say must be resolved if there’s to be a deal. EU officials say only Northern Ireland-specific solutions can be part of the Brexit divorce agreement. U.K.-wide provisions must form part of the wider political declaration on the two side’s future relationship, but that’s not legally binding.

One solution floated by officials is to have only the regulatory checks element—relating to items such as food and livestock moving across the Irish Sea—to be set out in detail in the divorce agreement, officials said. There would be a legally binding reference to the customs arrangement, which would be described in more detail in the declaration on future ties.

The issue is sensitive because the Democratic Unionist Party, which props up May’s government, says it won’t accept a deal that treats Northern Ireland differently from the rest of the U.K. But after meeting EU chief Brexit negotiator Michel Barnier in Brussels on Tuesday, DUP leader Arlene Foster signaled a willingness to compromise.

“You should not say ‘which is worse and which is better, a border in the Irish Sea or a border on the island of Ireland?” Foster told reporters. “It’s not a binary choice.”

The U.K. believes it can argue for different treatment of the two types of checks by saying that regulatory controls are a matter for the quasi-autonomous Northern Ireland assembly, while customs arrangements remain the prerogative of the central government in London.

In London on Tuesday, Brexit Secretary Dominic Raab indicated he still favored separating the customs regime from the regulatory checks. When pressed on his stance on the backstop during a question-and-answer session in Parliament, Raab said there mustn’t be a customs border between different parts of the U.K.—but that answer leaves the door open to a regulatory border between Northern Ireland and the British mainland.

The minister also underlined the U.K.’s demand that any backstop agreement to stay in the bloc’s customs rules must be strictly time-limited, something the EU is reluctant to accept. “We have been clear that the backstop would need to be a temporary and finite bridge to the future relationship,” Raab told lawmakers.

In addition to the Irish border issue, negotiators are also working on other outstanding issues in the divorce treaty, including the protection of geographical origin labels on products such as Champagne and Parma ham and a regime to settle disputes arising from the deal, as well as a draft of the declaration on the future relationship.

Source: Bloomberg