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ICOS Brexit Briefing

It has been a dramatic week in the Brexit process, but ICOS welcomes the conclusion last night with UK members of Parliament overwhelmingly voting to request a delay to the date of their exit from the EU, thereby reducing the risk of crashing out on 29th March, just two weeks from today.

However, while Brexit is now almost certainly postponed there is a question as to how long. The UK Parliament will vote for a third time on the negotiated (and amended) EU-UK Withdrawal Agreement next Tuesday evening (19th March).

Amendments to the exit deal were announced on Monday night (11th) ahead of a failed second vote on the agreement on Tuesday (12th). They include:

  • An addendum to the Withdrawal Agreement (known as an interpretative Instrument’), giving legal weight to EU’s assurances that the Irish Backstop is an insurance policy and not intended to be applied or used as a permanent solution. It sets out a legal path for one party to exit the Backstop in the event the other is negotiating in bad faith.
  • A supplement to the Political Declaration on the Future Relationship, committing to begin negotiations on the Future Relationship immediately following the signing of the Withdrawal Agreement, with the hopes it can come into force by the end of the transition period.  It additionally commits to the establishment of a specific negotiating unit which will focus on developing alternative arrangements to the Irish Backstop, including facilitative arrangements and emerging technology, which could be implements on the Irish border in the event an agreement on the Future Relationship is not reached.
  • A unilateral declaration by the UK, stating that they can walk away from the backstop at any time. However, that being said they must still follow the legal pathway outlined in the addendum to the Withdrawal Agreement, including an arbitration process, whereby the EU would need to be found to be negotiating in bad faith. It commits that should the UK leave the Backstop it will still need to adhere to its obligations under the Good Friday Agreement and ensure no hard border on the island of Ireland.

If the UK Parliament votes in favour of the Withdrawal Agreement on Tuesday, then a request for a short, technical delay will be made to the EU, to change the exit day to 30 June, in order to allow sufficient time to pass all the various legislative changes necessary to bring the Withdrawal Agreement into effect.  To achieve this the UK Prime Minister, Theresa May, needs to win over an additional 75 members of Parliament, a tall order.

However, if the Parliament once again rejects the exit deal, then a request for a longer delay will be made, to allow for the UK time to decide upon and negotiate a different exit settlement. This threat of a long Brexit delay is thought could persuade many Eurosceptics to support the vote on the Withdrawal Agreement on Tuesday, to avoid the risk of the UK staying in the EU for an indefinite amount of time. If the Withdrawal Agreement fails to gain approval, the Parliament will hold “indicative votes” at the beginning of April in order to determine which exit option is preferred among members. These options would include a permanent customs union with the EU, membership of the bloc’s single market and customs union, or a second referendum. Different options are already being discussed on the possible new Brexit date in this case, with the most likely considerations being a one-year extension, or pushing the exit day to the end of December 2020 (which marks the end of the current EU budget).

Either request for an extension will need the approval of all 27 EU leaders. A short, technical extension in the event the Withdrawal Agreement is passed on Tuesday, would be supported without concern. However, if the UK requests a longer extension, it will also need to outline its new approach to the negotiations. EU Leaders will discuss the UK’s request for a delay in a meeting on 21st March.

The European Commission has explicitly and strictly refused to re-enter negotiations with the UK based on their current red lines. Therefore, if Theresa May does not gain approval for the current negotiated Withdrawal Agreement or propose a new approach to the UK’s withdrawal, the default option is still for the UK to crash out of the EU without a deal on the 29th March. This is despite the vote by the UK Parliament on Wednesday (13th) against leaving the EU without a deal. Legally, this vote is not binding.

Ahead of that vote on Wednesday morning, the UK Government published two “Guidance documents” on their Tariff Policy in the event of a no-deal Brexit, which still currently apply. The key points are:

  • The tariff proposals, to be applied on certain agricultural products imported into the UK from all countries (including the EU) are considered to be temporary, to be applied for a 12-month period and then be replaced by a new long-term regime.
  • While the proposal is for reduced tariff rates in comparison to EU tariff levels, they are still very significant and would pose a serious threat to Irish exports. For example, in dairy, the UK would apply a tariff of €60.5/100kg for butter and €22.1 /100kg for cheddar. (Just to note, the EU tariff on Butter is €189.6/100kg and cheddar is €167.1kg/100kg). It is not outlined how quotas would be managed, whether it would be on a first come first served basis or be based on historical trade flows, which is an important consideration.
  • In order to maintain their commitment to no hard border on the island of Ireland, all tariffs and checks would be unilaterally waive on all goods exported from Ireland into Northern Ireland. Nor will there be any checks on goods traded between Northern Ireland and Great Britain. However exports from Ireland to Great Britain would have a tariff applied. If trade-flows were to shift towards moving product from Ireland through Northern Ireland to Great Britain with the purpose of tariff avoidance, it would be considered to be a breach of the system and would be investigated by the UK who have also this week produced a note setting out its position on tackling tax avoidance, evasion and other forms of non-compliance.

ICOS Reaction to the UK Guidance on Tariffs & European Commission Supports

“The tariff proposals published this week by the UK Government, to be implemented on a temporary basis in the event the UK leaves the EU without an approved exit deal on the 29 March, while marking a reduced rate in comparison to EU levels, still pose a serious threat to Irish agri-food cooperatives” warns ICOS European Affairs Executive, Alison Graham.  

“The proposed tariffs, which include duties of 32% on butter (€60.5/100kg); 13% on cheddar (€22.1/100kg); and 53% on beef (€160.10/100kg), are hugely alarming. Already impacted by the fall in the value of sterling, Irish agri-food products risk becoming significantly less competitive if such tariffs were to be applied and our position in the UK market would be greatly threatened by cheaper imports from third countries.  

“The potential impact of theses proposals is so dangerous and targeted, that it has been accused by European Commission for Agricultural Phil Hogan as being a poly to directly frighten Ireland and break the unity shown by EU member states, a disturbing indication of the level of acrimony which has seeped into the Brexit debate.”

Northern Ireland Tariff Waiver

“The additional proposal to waive all tariffs on goods entering Northern Ireland from Ireland is baffling.

“It is our belief that a unilateral approach to the Northern Irish-Irish Border is unworkable and entirely overlooks the need for sensible and practical measures to address trade flows going north and south in order to protect integrated supply chains, which of course flow in both directions. This proposal would lead to significant trade distortions in Irish/Northern Irish trade, while failing to protect Irish businesses and border communities.

 “We hope that last night’s vote in the UK Parliament to delay Brexit  means a no-deal exit can be avoided and that these proposals can be taken off the table and replaced by a new future relationship between the EU and UK, which allows for free access to each other’s markets and no hard border between Ireland and Northern Ireland and indeed between Ireland and Great Britain, preferably through the UK remaining within the EU Single Market and Customs Union.”

Launch of Commission Portal on Agricultural Supports

This week the Copa Cogeca Brexit Task Force, chaired by ICOS’s Alo Duffy, met with the European Commission’s Directorate General for Agriculture to discuss contingency plans and supports available to the sector, should this not be the case.

Chairman Alo Duffy highlighted to the Commission the need for direct help, to address the potential market disruption that would result from the UK crashing out of the EU, including the utilisation of market management tools, in particular Private Storage Aid for butter and cheese. Long term measures to address our changing relationship with the UK, whether an agreement on an exit deal is reached or not, such as trade promotion supports and structural and adjustment funding for products and businesses directly impacted by Brexit, are also urgently required.

Today, ICOS welcomes the launch of a new online portal detailing the Commission’s contingency plans for the agricultural sector and commitment to support  farmers and agri-food businesses through private storage aid, promotion programmes, targeted aid and advanced payments to farmers and flexibility in state aid rules. The portal can be accessed here: https://bit.ly/2TCB8D8

For any questions, comments or to be added to the mailing list for future Brexit Briefings, please find my contact details below.

Alison Graham

European Affairs Executive

Irish Co-operative Organisation Society Ltd

Tel: +32 (0)22 31 06 85

Fax: +32 (0)22 31 06 98

Mobile: +32 (0)487 64 86 80