Backstop explained: everything you need to know about food & drink’s biggest Brexit conundrum

So what exactly is the Irish backstop? 

Agreed by the UK and EU in November 2018 as part of the Withdrawal Agreement, the Irish backstop is designed to ensure there is no hardening of the border on the island of Ireland and protect the EU single market’s integrity.

Under the backstop arrangements, if the UK and EU were to fail to agree on a trade deal or technical solution to keep the Irish border open by the end of the transition period in December 2022, the whole of the UK would enter a temporary ‘single customs territory’ with the EU, while Northern Ireland would also stay aligned to some rules of the EU single market.

The backstop could cease to apply if a technical or trade solution was subsequently found, but such a decision would have to be taken jointly by the UK and EU.

 

Why is it important to avoid a hard border? 

The explosion of a car bomb outside a courthouse in Derry last Saturday was a sobering reminder of why politicians are taking the issue of what happens to the Irish border after Brexit so seriously. The Police Service of Northern Ireland believes the “reckless attack” may have been carried out by dissident Irish republican paramilitary group the New IRA.

There are fears a return to a land border in Northern Ireland, with checks and infrastructure, would give rise to further violence. According to reports in The Guardian this month, 1,000 UK police officers are already being prepared for deployment to Northern Ireland in case of further disorder following a no-deal Brexit, which would by default create a hard border, the EU Commission confirmed this week.

“Many commentators have noted the legacy of the Troubles and the role the border played in sustaining civil strife,” says Michael Bell, executive director of Northern Ireland Food & Drink (NIFDA). “There needs to be recognition by both Europe and the UK government that the border between Ireland and Northern Ireland (like Brexit generally) is a unique issue, requiring a unique solution.”

A hard border would also prove “catastrophic” economically, business leaders have warned. Over the past two decades, Northern Ireland’s agri-food industry - which accounts for a fifth of its economy and 100,000 jobs - has become highly integrated with the Republic of Ireland. “More than half of every piece of trade going across the north/south border is currently agri-food. Those trade flows are largely balanced, so around £700m is flowing in both directions,” says Bell.

“We’ve had peace, we’ve had equality of standards and frictionless movement and the industry has adapted on an all-island basis to suit that.”

 

What are the implications for industry?

According to NIFDA analysis, NI imports a significant volume of pigs and cattle from the Republic, while 25% of NI’s milk pool and 36% of its lambs go to the ROI for processing. About half of NI’s milled flour also goes to the ROI. “To put it into context, there are more than 40 milk tankers crossing from NI into ROI every day for processing. Ironically, a lot of that dairy product is processed into butter and cheese ends up in the GB market,” says Bell. “Similarly there are only three flour mills on the island of Ireland, two in Belfast and one in greater Dublin, and most of the output of the two flour mills in Belfast goes into the ROI.”

A similar symbiosis has evolved east to west, with the UK by far the biggest agri-food customer of the Republic of Ireland. “The two-way trade flow in agrifood between Ireland and the UK equates to €4.5bn from Ireland to the UK and €4bn in exports from the UK to Ireland,” says Cormac Healy, senior director of Meat Industry Ireland. “Borders cause delays, costs and disruption to long-established trade flows.”

With NI’s food and drink sector currently exporting 80% of what it produces (while the rest of the UK is a net importer of agri-food), it looks set to be hit particularly hard by the additional costs, bureaucracy and delays a hard border would bring.

“We have an equilibrium within these islands at the moment, and Brexit will disturb that equilibrium,” says Bell, who points out most SMEs in the food sector are working on a 4% margin, which would be wiped out by WTO tariffs averaging 22%, as well as the additional costs created by customs checks and delays.

A hard Brexit without some sort of backstop might also result in regulatory divergence between the UK and EU, which would make trade between NI and ROI even more challenging, he warns. “SMEs are very concerned about how they continue trading into the ROI after Brexit,” he says. “In many cases more than a quarter of their turnover is with the ROI.”

Even businesses that are only supplying GB would be negatively affected by a hard border, he warns. “NI sends a lot of food to southern England and some of that is routed through Dublin,” he says. “Post-Brexit, it would be going third country, through the EU and back into third country.”

The ROI, which imports a lot of EU fresh produce via British ports, would face the same problem but the other way around, he adds. And switching trade routes or changing ports of entry to avoid this scenario wouldn’t be an easy undertaking. “More than half of all the lorries on the ferry route to GB are agri-food. A lot of that is short-life, fresh product which has to be in a major retailer’s depot in a one-hour window.

With a hard border potentially so damaging for NI’s agri-food industry, and its wider economy, many NI business leaders were fully supportive of the proposed EU withdrawal deal, backstop and all. “Faced with a choice of no-deal and WTO, which would be extremely damaging and grizzly, or a deal, we have strongly backed a deal,” says Bell.

However, as The Grocer went to press, the DUP had refused to budge on its objection to the backstop, as had the Tory MPs that opposed the arrangement because of its potential to lock the UK in a customs union.

 

Are there any solutions?

The Cabinet was reportedly this week urging Theresa May to back a plan to  add a time-limit to the backstop in the hope that would make it more palatable to Tory eurosceptics, many of whom are convinced technical solutions are available that would allow for continued frictionless and free trade without physical checks, even if the UK and EU’s regulatory regimes were to diverge.

However, the EU is unlikely to accept an arbitrary time-limit on the backstop, as it raises the possibility of the deadline arriving without a solution in place. Speaking to the press this week, the EU’s chief negotiator Michel Barnier insisted a temporary safeguard to prevent a physical border between Ireland and Northern Ireland after Brexit would be “useless”.

But there are ways to amend the backstop arrangement that might give more reassurance to the EU, suggests Holger Hestermeyer, a shell reader in international dispute resolution at King’s College London.

“The Withdrawal Agreement provides for the possibility that the backstop can cease to apply if it is no longer necessary, such as because technical measures become available,” he says. “However, such a decision would have to be taken jointly by the EU and the UK, and some UK politicians fear the EU would block it. So my idea is to  add an annex to the Withdrawal Agreement that would consist of a roadmap to how you put the technology in place to prevent a hard border.”

Both parties could agree on the parameters - which could involve test runs, agreed levels of border security (such as maximum levels of smuggling) and milestones for building the necessary infrastructure for behind-the-border controls, he suggests. “And they agree that as soon as those parameters are fulfilled, the need for the backstop falls away.”

Another potential solution to the Irish border conundrum suggested by Robert Hardy, commercial director of Oakland Invicta, is to adopt juxtaposed borders. A certified customs specialist and a Brexit advisor to the Institute for Government, his plan would potentially circumnavigate the need for the backstop altogether, he says.

“The island of Ireland seems to treat itself as one. So you have only got to worry about what arrives and what leaves, in which case - according to the EU - you need a border in the Irish Sea,” he says. “But a border in the Irish Sea is annexing NI from the rest of the UK and that’s a problem. It means any product from GB to NI has to go through a border.”

Establishing juxtaposed borders at the ports of Dublin and Belfast - just as we have juxtaposed borders at Dover and Calais for immigration purposes - would solve this dilemma, he argues.

“In Belfast on arrival from GB by ferry you would be confronted with either Irish customs or UK customs. And depending on your ultimate delivery you turn left for the south or right for the north,” he says. “So if you turned right for the north your goods would not be controlled, they would just be let into the country, perhaps with a spot check every now and then. Or if you were headed for ROI you’d turn left and go through Irish customs. And then you repeat that process in Dublin. So it’s only a border if you want it to be a border.”

 

What are the potential pitfalls? 

Hestermeyer’s solution would require some “compromise”, he admits, but both sides could also conceive it as a “negotiation victory”, he claims. “One gains a clear roadmap to a technical solution it is convinced exists, and the other would have the safety of agreed parameters ensuring that a technical solution must actually work before it is implemented.”

Crucially, because the agreed parameters could be drafted as an annex to the NI Protocol without touching the rest of the Withdrawal Agreement, it would respect the EU’s red line of not altering the wording of the agreement.

“There are of course some weaknesses in my proposal, which doesn’t address the content of the Good Friday Agreement and north/south co-operation,” Hestermeyer adds. “But it would provide better guarantees than a simple time-limit on the backstop.”

Meanwhile, Hardy’s juxtaposed borders could potentially be open to abuse by smugglers, he admits. “Someone could smuggle goods into the south by arriving in the north and taking the north lane rather than the south lane.”

However, there could be punitive measures introduced to prevent such behaviour, he suggests. “If a consignment has been shipped from the UK into Northern Ireland there is some VAT somewhere. There is VAT control sitting on that,” he adds. “So if you decide to smuggle it to the ROI, who has the VAT at that point? Someone in Northern Ireland has paid VAT on something they haven’t received and they can’t reclaim it. Why would someone do that?”

In essence, he argues, the system would be the same as a border in the Irish Sea, but on land and reciprocal. “The only place with a fence is the port, so do it at the port. Don’t put fences anywhere else. You have only got to control what arrives on the island of Ireland that isn’t produced there, or anything that leaves there. That’s fine, we are built for that.”

Whether the EU would agree to such a solution is unclear, though. As The Grocer went to press, a leaked statement from the European Parliament’s Brexit Steering Group reiterated that “the withdrawal agreement is fair and cannot be renegotiated”.

The best way to avoid the deployment of the backstop, it suggested, would be for Theresa May to change her Brexit red-lines on leaving the single market, customs union, jurisdiction of the European Court of Justice, and ending free movement. However, while that would please Labour MPs, who want the UK to remain in the customs union, it would further upset Tory Brexiters who are pushing for no-deal.

If May can’t find a solution, the UK could well crash out of the EU with no deal, making a UK-EU land border on the island inevitable. However, with an estimated 300 crossings along a 500km stretch - nearly twice as many as the entire border to the east of Europe - it would be extremely porous and difficult to police. Or, in the words of Hestermeyer, “a catastrophe” - for the island of Ireland’s economy, agri-food industry, and perhaps even its peace.