EFTA and the Customs Unionefta4uk.eu/wp-content/uploads/2018/10/EFTA-and-the-Customs-Union_2.pdf · EFTA4UK Report: EFTA and the Customs Union Page 2 CONTENTS Brexit Timetable –

EFTA4UK Report: EFTA and the Customs Union

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EFTA and the

Customs Union Avoiding a hard border in

Ireland?

EFTA 4 UK Discussion document 26/09/2018


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CONTENTS

Brexit Timetable – PG3

Executive summary – PG4

Introduction/customs unions – PG5

What is the Customs Union? – PG6

Pros and Cons of a customs union with the EU – Pages 7-8

Problems pertaining to staying in a cu – PG9

What have Politicians said about customs union? – Pages 10-11

A bespoke customs partnership? – PG12

Graphic: Legatum Institute comments about customs union – PG13

Political declarations – Pages 14-15

No Silver bullet – PG16

In search of solutions – PG17

Smart Border 2.0 report – Pages 18-19

Policy Exchange Report – PG20

DCB Report - PG21

Hans Maessen Report – Pages 22-23

Legatum Institute Report – Pages 24-25

ERG Report – Pages 26-27

Analysis/CDS System – PG28 CDS & CHIEF – Pages 29-31

Customs 2020 and UCC – Pages 32-34

Analysis/RoO – PG35

RoO agreements – PG36

REX System – PG37

Common Transit Convention and SAD Pages 38-39

Common Travel Area – PG40

Article 8 – PG 41

Article 50 – PG42

WCO – PG43

UNECE – PG44

WTO Trade Facilitation Agreement – Pages 45-46

TIR Convention – Pages 47-48

GATT – PG 49

Swiss Borders - PG50

Norway-Sweden Border – PG51

EFTA – Pages 52-54

Norway then Canada? – PG55

HM Government report – PG 56

Summary / Leo Varadkar speech – Pages 57-59

EEA Agreement – Pages 60-63

Political Fudge? /Conclusions – Pages 64-65

How and when? – PG66

Chart of elements of new customs/trade arrangement – PG67

Is this possible? Pages 68-70

Afterword - PG71

Postscript One - controlling immigration? – pg72

Postscript Two Mrs May’s Misunderstandings – PG73

EU rules? – PG74 How much EU law? – PG75

Is EEA compatible with a customs union? – PG76

EFTA Free Trade deals explained/References – PG77

References – Pages 77-79


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Brexit Timetable:

• 23 June 2016 - the UK votes to leave the

European Union in a public referendum.

• 29 March 2017 - Theresa May sends Article

50 letter to European Council President

Donald Tusk to notify him of the UK’s

intention to leave the EU.1

• 19 June 2017 – Negotiations formally begin

in Brussels.2

• 29 March 2019 - UK is provisionally

scheduled to leave the European Union.3

• Planned transitional period/ implementation

phase scheduled to run to 31st December

2020.

“…Sed fugit interea, fugit inreparabile tempus”

- Virgil


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Executive Summary

• We believe the best option for the UK post-Brexit would be to

adopt an ‘off-the-shelf’ model such as the EFTA/EEA (European

Economic Area) relationship with the EU which is enjoyed by

countries such as Iceland.

• The Government is currently seeking a bespoke Free Trade

Agreement with the European Union, not to replicate any existing

arrangements between the EU and a third country.

• The Prime Minister is aiming for a new arrangement which is

more comprehensive than the EU-Canada CETA agreement.

• It is unlikely that the UK will be able to achieve such a deal; and

even if one is reached, it would take several years to negotiate,

ratify and be implemented. An FTA won’t solve Irish border

issues.

• There is at present a very real risk of a ‘no-deal’ Brexit which

would be damaging to the UK economy and international

relations.

• The UK Government has pledged that no new physical

infrastructure will be introduced on the ROI/NI border.4

• We believe that many Parliamentarians who otherwise would

support an EFTA-based Brexit model are disincentivised by the

apparent incompatibility of the model with frictionless borders

on the Island of Ireland.

• We believe that a solution is indeed possible to resolve these

apparent contradictions, which we will outline. It involves

entering into a transitional customs union with the EU.


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Introduction

It can be argued that there is insufficient time and goodwill for the

UK to negotiate a bespoke relationship with the European Union.

If a truly bespoke arrangement is ruled out, the following questions

arise - what remains? Does any extant model satisfy the needs of the

UK?

Once examined and understood, the precedents of Norway,

Switzerland, Liechtenstein and Iceland – the European Free Trade

Association (EFTA) countries offer the UK the best way forward.

While their relations with the EU are not uniform (Switzerland’s

arrangements with the EU are not the same as Liechtenstein’s;

Liechtenstein’s arrangements differ from those of Iceland) they

represent existing, established and robust relationships that we can

learn a great deal from.

The UK could negotiate its own ‘UK model’ based on these existing

agreements between the EU and the EFTA countries.

Customs Union?

However, while several parliamentarians are broadly supportive of

our ideas, many believe that we would also need to be in a Customs

Union with the EU after Brexit.

They believe this for two reasons – firstly, they believe that being in a

Customs Union with the EU would allow us to benefit from the EU’s

portfolio of Free Trade Agreements (FTAs) and secondly, they believe

that remaining in a CU is the only way to solve the issue of the Irish

border.

In this report we will look at all these issues and make appropriate

recommendations.


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What is the Customs Union?

A Customs Union is set up when two or more countries agree to

tariff-free trade between themselves but also agree to match a

commonly agreed set of tariffs between themselves and the rest of

the world (RoW).

The European Union contains many elements, but one of the most

important is that it is also a customs union. For simplicity’s sake we

will refer to this as ‘The’ Customs Union.

Since the UK is leaving the EU and won’t be a member state after

March 2019 we cannot be in the EU customs union.

The UK could however negotiate ‘a’ customs union or special

customs arrangement with the EU.

Turkey, Jersey, The Isle of Man (IOM)5, Guernsey, Monaco, San

Marino and Andorra all have special customs arrangements with the

European Union and the UK could do likewise.

This transitional customs union could be used until it could be

superseded by the new bespoke UK-EU customs partnership we are

proposing.


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Pros and Cons of a Customs Union with the EU

Advocates of the UK remaining in the EU’s Customs Union (or a custom

union or arrangement which mirrors it) generally do so for four main

reasons:

Ireland

The first and most important reason is a desire to avoid a ‘hard

border/physical infrastructure’ on the Island of Ireland which they

believe would not only be a negative symbol but also exacerbate

political tensions and potentially disrupt the Peace Process.

Border disruption

The second reason is to avoid costly and time-consuming delays at UK

ports and entries such as the Port of Dover and Eurotunnel. There are

concerns about the potential to disrupt companies that use the ‘just

in time’ (JIT) business model.

Existing Free Trade deals

The third reason is a desire to continue to share in the Free Trade

Agreement (FTA) portfolio that the EU has developed with third

countries. Some also believe that we could enter into any new ones

the bloc negotiates.

Tariffs

Members of a Customs Union traditionally abolish tariffs, quotas and

duties between themselves.

These are of course sensible reasons to support a cu, but to briefly

address them:

• A UK-EU customs union on its own would not prevent border disruption at

ports or land borders. Border staff and infrastructure doesn’t just deal with

tariffs.

• There is no guarantee that we could ‘roll over’ or ‘grandfather’ the EU’s existing

FTAs with third countries. As we wouldn’t be in the EU, the UK would not be

automatically party to them.

• Tariffs, quotas and duties between the EU and UK can be avoided by other

means.


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Opponents of the UK remaining in the EU’s Customs Union (or a

custom union or arrangement which mirrors it) generally oppose

it for two main reasons:

New Free Trade deals

Being inside a customs union would seriously inhibit the UK

pursuing new free trade agreements (FTAs) with third countries,

since we would be unable to unilaterally alter our tariffs.

Even if we stayed in the EU’s Customs Union there is no

guarantee we could share in their existing and future FTAs.

Sovereignty

By definition, being in a customs union places restrictions on UK

trade policy.

Symbolically remaining in the/a customs union with the EU

would be unacceptable to those parliamentarians and members

of the public who seek to ‘take back control’ from the EU.

In this report we will outline a model by which the UK and EU could

address each of these areas of concern.

In the following pages we will look at existing international and

regional agreements, we will look at relevant expert studies and the

text of the EU treaties themselves.


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What have Politicians said about the Customs Union?

PM Theresa May

The Prime Minister has stated that the UK will not be a member of

the EU’s Customs Union.

“The United Kingdom is leaving the European Union. We

will no longer be members of its single market or its

customs union.”6 – Theresa May

However, the Prime Minister has also stated:

“I know my emphasis on striking trade agreements with countries

outside Europe has led to questions about whether Britain seeks to

remain a member of the EU’s Customs Union. And it is true that full

Customs Union membership prevents us from negotiating our own

comprehensive trade deals.

Now, I want Britain to be able to negotiate its own trade

agreements. But I also want tariff-free trade with Europe and cross-

border trade there to be as frictionless as possible.

That means I do not want Britain to be part of the Common

Commercial Policy and I do not want us to be bound by the

Common External Tariff. These are the elements of the Customs

Union that prevent us from striking our own comprehensive trade

agreements with other countries. But I do want us to have a

customs agreement with the EU.

Whether that means we must reach a completely new customs

agreement, become an associate member of the Customs Union in

some way, or remain a signatory to some elements of it, I hold no

preconceived position. I have an open mind on how we do it. It is

not the means that matter, but the ends.”7


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Shadow Brexit secretary Sir Keir Starmer MP:

“Well, we’ve long championed being in a Customs Union with the

EU and the benefits of that; obviously it’s the only way realistically

to get tariff-free access.

It’s really important for our manufacturing base, and nobody can

answer the question how you keep your commitment to no hard

border in Northern Ireland without a customs union.

I mean, in the general election we consistently said the benefits of

a customs union must be retained. Then over the summer, as you

know, I laid out the position for the transitional arrangements, that

we’d be in a customs union, and said then that it ought to be an

option on the table.

The customs arrangements at the moment are hardwired into the

membership treaty, so I think everybody now recognises there is

going to have to be a new treaty [between the UK and the EU]. It

will do the work of the customs union. So it is a customs union.

Will it do the work of the current customs union? Yes, that’s the

intention. And in the end; we have obligations to our economy,

obligations to our manufacturing base, and also obligations in

Northern Ireland. There is nobody credible who is saying that you

can keep to the commitment in Northern Ireland to no hard border

without a customs union.

I think it will be a new agreement. The question is how close and

whether we really get the benefits of both the single market and

the customs union, and that’s been our focus throughout.”8


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A bespoke Customs Partnership?

Sir Keir Starmer’s concerns about tariff-free trade and the Irish peace

process are of course perfectly legitimate.

We maintain however that both his and Mrs May’s aims can be

achieved outside of a customs union.

Our proposed new Customs Partnership would build on several

elements as we will outline; but the most important precondition to

make it a success will be continued membership of the European

Economic Area (EØS / EEA).

• Retaining EEA membership solves many of the problems

associated with leaving the EU’s customs union and

ameliorates many others.

• Until the new Customs partnership can be ratified and enacted,

we believe the UK should participate in a transitional customs

union with the EU.

• Our proposed new Customs Partnership can be best described

as a hybrid solution, since it comprises many elements.

• In the following sections we will describe these different

elements; and the overall shape of the new Partnership.


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Even if the UK stays in a/the customs union, it would not by itself

prevent a return to a hard border on the Island of Ireland. As a

report9 by the Legatum Institute think tank explains:


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Political declarations

EU chief negotiator Michel Barnier has said:

“The consequences of Brexit should not and must not lead

to the return of a hard border, neither on maps nor in

minds. In December, the UK agreed that, unless and until

another solution is found, Northern Ireland will maintain

full alignment with the rules of the Single Market and the

Customs Union which support North-South cooperation,

the all-island economy, and the protection of the Good

Friday Agreement.

Both sides in this negotiation are firmly committed to a

backstop. It is a guarantee to avoiding a hard border on the

island of Ireland.

So, since we all agree that we do not want a border, and

since the UK agreed to respect Ireland's place in the Single

Market, then that means goods entering Northern Ireland

must comply with the rules of the Single Market and the

Union Customs Code.

That is our logic. Simple as that.

Ladies and gentlemen, The EU does not want to have a

hard border between Ireland and Northern Ireland.

We are seeking practical, practical and operational,

solutions to a complex problem. No more, no less. Finally,

the backstop will apply unless and until another solution is

found as part of the future relationship.

We are ready to look constructively at all options which

allow us to meet our objectives - all options.”10


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The 2017 Northern Ireland and Ireland Position Paper by HM

Government on behalf of the United Kingdom11 stated that

“Delivering our shared objective for a land border that is as seamless and

frictionless as possible cannot be achieved solely through preserving the

Common Travel Area and maintaining the free flow of people between

Northern Ireland and Ireland.

It is also important to ensure that there is no return to a hard border as a

result of any new controls placed on the movement of goods between the UK

and the EU. This will require detailed engagement on customs, agriculture,

and other relevant economic matters as negotiations progress.

The UK welcomes the clear commitment from the European Council and

Commission to work on “flexible and imaginative” solutions to avoid a hard

border. The nature of the border clearly means that we must aim for an

agreed, reciprocal solution.”

In this report the UK Government pledges to:

“Recognise the crucial importance of avoiding a return to a hard border for the

peace process in Northern Ireland. This must mean aiming to avoid any

physical border infrastructure in either the United Kingdom or Ireland, for any

purpose (including customs or agri-food checks).

Address other regulatory and customs-related barriers necessary to deliver as

frictionless a land border as possible including waivers from security and safety

declarations, and ensuring there is no requirement for product standards

checks or intellectual property rights checks at the border.”

Prime Minister Theresa May has said:

“…like any country sharing a land border with another nation, we have a duty

to seek customs and regulatory relationships with each other to ensure

borders work smoothly. I have said consistently that there can never be a hard

border between Northern Ireland and Ireland.

I said it in my letter triggering Article 50, in my speech at Mansion House and

many times besides. Both sides in the negotiation understand that and share a

determination never to see a hard border in Northern Ireland.”12

Clearly, both the EU and UK are desperate to avoid a Hard

Border in Ireland and have said so repeatedly. But how can

this be avoided?


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No ‘Silver bullet’?

We believe that previous commentators on the issue of the Customs

Union and the Irish border have failed to find a solution to it because

they are seeking a single ‘silver bullet’ solution to a raft of complex

issues.

As we discussed earlier, there is a solution; but it is a hybrid solution

building on some existing agreements, some new systems and an

ambitious new UK-EU customs partnership.

[Above graphic is reproduced in larger size later on in this document]

Before we outline our proposals, we will outline what has been said

on the subject by some others – from politicians and think-tanks, to

experts and various pressure groups.


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In search of solutions

Former Foreign Minister and Boris Johnson MP recently wrote in the

Daily Mail:

“…what I can say for sure is that there are far better technical

solutions than either of these hopeless ‘backstop’ arrangements.

Around the world, authorities are finding ways of abolishing

frontier checks – and doing them elsewhere. Why is that so

unthinkable for Ireland?

The Irish currently use their ports and airports to check only one

per cent of goods arriving from anywhere outside the EU, let alone

the UK. We live in a world of smartphone apps and electronic forms

and Authorised Economic Operator schemes. There is no need for

any kind of friction at the border at all.”13

In order to examine Mr Johnson’s claims, we have extensively

studied the extant material on this subject.

There have been several articles, reports, studies and discussion

documents which have attempted to outline how the UK and EU can

minimise border disruption after Brexit, if the UK leaves the Customs

Union.

We shall examine just a few of these reports in this section.


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Smart Border 2.0?

In 201714, the European Parliament's Committee on Constitutional

Affairs (AFCO) in conjunction with the European Parliament's Policy

Department for Citizens' Rights and Constitutional Affairs

commissioned a study on the effects of Brexit on the Irish border and

how negative impacts could be minimised.

The detailed study, entitled ‘Smart Border 2.0 Avoiding a hard

border on the island of Ireland for Customs control and the free

movement of persons’15 was authored by Lars Karlsson, a former

World Customs Organisation (WCO) Director of capacity building and

also a former senior officer in Swedish customs.16

In the report, Karlsson outlines how best practice from other

countries combined with existing technologies and new computer

systems could create a ‘Smart Border’.

This proposed smart border would feature Automatic number plate

recognition (ANPR) systems and new EU-UK information sharing

agreements in conjunction with:

“A Smart Border solution, with a

conceptually re-designed border based

on a combination of International

standards; existing Customs models;

Operational best practice examples

from other parts of the world”


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Mr Karlsson stated in the study that to make a Smart Border on the

Island of Ireland feasible there would need to be:

We believe that the suggestions and ideas contained in this study

could indeed help resolve many of the potential problems after

Brexit that might arise on the Island of Ireland.

However, it is our view that this study seems to be quite optimistic.

Mr Karlsson presents this solution as something that can be rapidly

achieved (by 29 March 2019 at 23.00) predominately by

technological means.

While laudable and worthy of praise, Mr Karlsson’s study cannot on

its own provide an answer to all the issues.

Mr Karlsson’s ‘Smart Border’ concept might also prove to be

upsetting to those groups and individuals to whom any visible new

border apparatus is unacceptable.

Nevertheless, some of the ‘Smart Border’ ideas, combined with EEA

membership, could form the nucleus of a solution. We will come

back to that later.


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Policy Exchange

The policy exchange think tank have written a report17 entitled ‘Getting Over

the Line’ in which they write:

“an Irish border without physical infrastructure is fully

attainable…arrangements based on the UK’s proposals for an expanded

trusted trader scheme and exemptions for small traders will suffice to

operate a border without infrastructure.

Modern technology means that physical customs posts, or even

cameras, are no longer essential at borders. This has been pointed out

by Lars Karlsson, a customs expert commissioned by the EU to look into

this subject, who envisages the use of mobile phone and GPS technology

to track HGVs, together with the computer-based customs clearing (the

norm across much of the world).

Computerised customs clearing consists of declarations of tariff duties

payable, including on import content, and also the necessary

certification of regulatory approval. Inspection of animal health and food

standards can occur at producers’ premises, is common in current

practice.

Customs clearance occurs at the exporter’s premises and the sealed

consignments can then cross the Irish border while being tracked

electronically by customs authorities.

Our conclusion is that the UK can deliver the promise of “no hard

border” in Ireland without remaining in the EU Customs Union…since

very few consignments are actually checked at existing EU borders, and

those checks are usually based on intelligence received, such checks can

easily be made away from borders.”

To make their proposals work in practice, they write:

“Because of the unique situation of Northern Ireland three additional things

are needed. 1. A wider adoption of the trusted trader scheme

2. Derogation for small traders (eg tradesmen crossing the border with their

tools and equipment).

3. A system of self-assessment (which is set out in the EU Customs Code and

which is the direction of travel for EU trade with third countries).”

This report is interesting, but like many similar reports, we believe it to be

overly optimistic.


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DCB

In his 2018 report ‘A Firm Solution to the Hard Border’18 British

Member of the European Parliament David Campbell-Bannerman

(known informally as DCB) wrote:

Later in the report he states that:

In an article for the Brexit Central website on the same subject, the

MEP wrote:

“a customs border will exist but will become academic if we have a

tariff-free and quota-free deal between the EU and UK, as is being

offered already by the EU Council and President Tusk.

Customs exist to levy duties, enforce quotas and check on

standards. Our laws and Sanitary & Phytosanitary (SPS) standards,

such for food or veterinary, are the same now so there will be little

need for customs checks.


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[Cont.] My Irish border paper seeks to suggest technical ways to

solve these issues.

Having had the great privilege to work on the beginnings of the

Good Friday Agreement as Special Advisor to the then Secretary of

State for Northern Ireland, Sir Patrick Mayhew, in 1996-97

(standing behind John Major and John Bruton the day the talks

started and proposing the original successful means of

decommissioning terrorist weapons through self-destruction

verified by neutral observers), I remain totally committed to

maintaining the peace on the island of Ireland – it has saved 300

plus lives a year for 20 years. It is absolutely right there should be

no hard border. But who is asking for one? No one.”19

Mr Campbell-Bannerman’s report and article both contain many

sensible arguments and interesting ideas.

However, he seems to believe that his vision for UK-EU frictionless

trade can be achieved rapidly and outside of both customs union and

EEA. We at EFTA4UK are not so optimistic.

Hans Maessen report

Recently the name of Mr Hans Maessen has been mentioned in

British Eurosceptic circles.

As reported by The Sun Newspaper:

“GOING DUTCH Brexiteer MPs led by Jacob Rees-Mogg have hired a

Dutch customs guru to solve Irish border headache

Hans Maessen, the ex-president of the Dutch customs association,

is drawing up the alternative solution to the Prime Minister’s

troubled Chequers blueprint. BREXITEER Tory MPs led by Jacob

Rees-Mogg have hired a Dutch customs guru to solve the Irish

border headache. The border-expert has been secretly advising the

Brexit hardline ERG group of MPs led by Jacob Rees Mogg.”20


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We don’t yet know what the details are of the plan he has produced

for the ERG, but we can make some educated guesses based upon a

recent document he wrote entitled ‘Drive through borders: a

comprehensive UK and EU customs strategy for Brexit.’21

The document is subtitled:

‘A set of innovative regulations and business concepts that meet the customs

requirements, inclusive the (Northern) Ireland border. To facilitate a

frictionless border between the EU and the UK’

In the document he writes:

“Regulatory checks are necessary to secure that all regulations concerning

health, safety and environment are met.

This paper assumes that there will be no import duties between the EU and UK

after Brexit. This will be the case if the UK stays in the customs union and also

if a comprehensive free trade agreement is agreed on.

If the UK stays in the customs union, it will not be able to form its own trade

policy as it will be bound to the EU trade deals with other blocks. Under a free

trade agreement, the UK can formulate its own global trade policy.

On day one after Brexit all regulations between the UK and the EU will still be

aligned. Only after changes take place by either the UK or the EU, and these

changes are not followed by the other party, regulatory alignment will diverge.

It is in the interest of both parties to stay aligned as much as possible to

facilitate trade.”

Mr Maessen goes on to explain that in the context of the Irish

border:

“There is only limited traffic on the Northern Irish

border with goods from outside the EU. It is not a

logical route to import third country goods into the EU

or the UK. Transactions in general have a repetitive

character and a limited variety of goods”


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He also states that:

“The Union Customs Code (UCC) already is fully equipped to

facilitate inland clearance. Please take notice that all customs

declarations are done digitally. Pre-clearance is already legally

possible within the UCC.

Mr Maessen seems to be suggesting that technological solutions

coupled with both regulatory alignment and a bilateral agreement to

avoid tariffs will lead to a frictionless border. It seems to us plausible

but ambitious.

Legatum Institute study

The Legatum Institute have produced a report of their own on these

matters, called ‘Mutual INTEREST - HOW THE UK and EU CAN

RESOLVE THE IRISH BORDER FOR BREXIT’ in which they declared:

“The reintroduction of customs controls on the Irish border does

not, however, mean a return to the 1960s, or even the 1990s, with

two border posts and uniformed customs officers.

The problems which Brexit will cause for the island of Ireland in

general, and at the border in particular, are serious but not

insoluble.”

In the report they explain that:


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They elaborate:

This section of their report outlines a key element of how they

believe a smooth border could work:

Legatum’s proposals are interesting (and similar to the Smart Border

2.0 ideas) but we believe that they cannot solve all of the

complexities involved.


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ERG Report: The Border between Northern Ireland and the

Republic of Ireland post-Brexit

The European Research Group (ERG) released a report recently22 in

which they claim that physical inspections at borders are an ever-

decreasing rarity:

“A key point to recognise from these studies is that, across the world, a

very small proportion of shipments are actually inspected physically. In

the UK, 4% of imports are currently subject to physical inspection, the

same proportion as in Italy. In France and Germany, the figure is 3%; in

Belgium and the Netherlands it is 2%.

The Republic of Ireland physically inspects only 1% of imports.

Filing of notification and declarations are completed electronically

except in the most exceptional circumstances. The Customs Freight

Simplified Procedures, for example, allow for freight movements to be

pre-notified electronically, enabling customs control to take place at the

premises of the importer.

This is not, however, merely an EU phenomenon. The United States

physically inspects 4% of its imports, and Australia 3%. In Norway and

Japan, only 1% of shipments are inspected. Where inspections are

carried out, they are chiefly intelligence-led and particularly aimed at

countering smuggling activities.”

They go on to say that:

“A “hard” border after Brexit between Northern Ireland and the

Republic of Ireland is totally undesirable, which is why no one is arguing

for new infrastructure at the border; not the UK, nor the EU, nor the

Republic of Ireland.

There is little third-country traffic in Northern Ireland, as it is not a

logical route to transport goods from outside the EU. In addition, there

are few goods which were originally produced outside the UK sold from

Northern Ireland to the Republic of Ireland and vice versa. This implies

that the overwhelming majority of goods will be of EU or UK origin, so

Declarations of Origin should not be a major issue on the border. In most

cases, the origin will be correctly declared by the REX statement on the

invoice of the seller.”


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The ERG also says (in regard to product compliance):

“At present all goods produced within or imported into the UK have

to conform with EU safety, environmental and other standards and

are then free to move throughout the internal market without

checks. When the UK leaves the EU, it will initially retain all the EU

product rules and regulations in UK law so its goods will in fact be

compliant.”

But what if problems did arise however? The ERG say in regard to

Ireland:

“Cross-border trader on the island of Ireland is characterised by

many regular crossings of goods, often from the same points of

origin, on the same routes, to the same destination, in the same

lorries. In any case, Northern Ireland has only five commercial

ports (Belfast – which handles 67% of port freight

– Coleraine, Larne, Londonderry and Warrenpoint) with a small

volume of freight handled by the two Belfast airports. If…”

[Problems were to arise]

“…on any scale, it would be easy to detect at points of

entry and continued cooperation between HMRC and Irish

customs could speedily identify it.”

The report seems to propose that the risks to frictionless trade

on the Island of Ireland have been significantly exaggerated,

which we don’t believe.

This report seems heavily inspired by both the smart borders 2.0

report and Hans Maessen’s ‘Drive through borders’ report.


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Analysis:

Many of the reports and essays we have looked at seem very similar.

The majority claim that technological solutions can resolve the

problems associated with leaving the Customs Union (both in general

and on the Island of Ireland) and that they can be implemented

rapidly.

However, as Mrs May has said:

“Both sides in the negotiation understand that and share a

determination never to see a hard border in Northern

Ireland. And no technology solution to address these issues

has been designed yet, or implemented anywhere in the

world, let alone in such a unique and highly sensitive

context as the Northern Ireland border.”23

We believe that a purely technological solution would not solve the

Irish border problems, but even if it could, it would not be ready for

April 2019. However, new technology and systems will be a key

element of any long-term solution. We will examine some in the next

section of this report.

Customs Declaration Service (CDS)

This new HMRC customs system will allow those who import or

export goods to calculate and pay the correct duty and taxes, as well

as complete customs information electronically.

As the UK government website explains:

“HM Revenue and Customs (HMRC) will begin a phased launch of

the Customs Declaration Service (CDS) in August 2018. CDS will

replace the existing Customs Handling of Import and Export Freight

(CHIEF) system, with all declarations taking place on CDS from early

2019.


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CHIEF currently processes declarations to facilitate the

international movement of goods between the UK and non-EU

countries. CHIEF will continue to run for a time to aid the transition

to CDS.

Why CDS is replacing CHIEF

CHIEF is one of the world’s largest and most sophisticated

electronic services for managing customs declaration processes, but

it’s nearly 25 years old and can’t be easily adapted to new

requirements.

The decision to replace CHIEF with CDS was made before the EU

referendum, however CDS will be scaled to handle any potential

increases in the volume of declarations that may result from the

UK’s exit from the EU.”24

You might ask why this is relevant to the situation in Ireland. Well as

an article for Wired magazine explained:

“Passing through borders is increasingly becoming less reliant on

paperwork, and the Irish border may be no exception. Both the UK

and the EU are in the process of creating fully electronic customs

systems; the UK is going to introduce a Customs Declaration Service

(CDS) for goods entering and leaving the UK by the end of this year,

and the EU's Customs Union Code says its "customs formalities are

still in the process of being gradually transitioned to electronic

systems."

These electronic systems could enable quicker movement between

different customs zones since - there is no time taken filling in

forms. This could be used for anyone crossing the border and ease

the flow of traffic.”25

In a letter26 to the Chair of the Treasury Select Committee, the

HMRC’s Jim Harra wrote that:

“HMRC’s assessment is that the CDS delivery schedule is feasible

and that current risks and issues are resolvable at this stage. The

timetable for delivery is challenging but achievable.


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HMRC is prioritising delivery of CDS for Day 1 of the UK leaving the

EU.

CDS will be implemented in a phased roll-out, with plans that all

customers will have been migrated onto CDS by January 2019.

We will continue to operate the current Customs Handling of

Import and Export Freight (CHIEF) service in tandem with CDS

during the transition from one system to the other. This will act as

extra contingency, should it be required for Day 1.

We are also planning for a technical upgrade to increase the

stability and capability of the current CHIEF service. The Customs

Declaration Service will replace the CHIEF system.

Brexit increases the importance to the UK of providing a modern,

flexible customs declaration service that can deliver functionality

that will facilitate the flow of trade from Day 1. CDS will deliver

simplification measures that facilitate international trade e.g. the

automation of current manual processes.

CHIEF currently deals with over 60m declarations a year. The new

service (CDS) is being designed to deal with the much higher

volumes we would expect.”

A 2018 report from the UK’s National Audit Office (NAO)27 reported

that:

“The UK and EU have made progress towards an agreement that

will leave customs arrangements unchanged until December 2020.

However, until this agreement is confirmed, the government has

directed HMRC to continue planning for a ‘no deal’ scenario with

the expectation that a fully scaled and operational customs system

will be in place in March 2019.

The Customs Declaration Service (CDS) will process customs

declarations from a variety of routes and will help to clear goods to

cross the border.

On 19 March 2018, the government published a draft agreement on

the withdrawal of the UK from the EU. The withdrawal agreement


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proposes an implementation period that will apply from 29 March

2019 until 31 December 2020. If the draft agreement is approved

and this preserves customs arrangements as they are, traders who

operate solely within the EU will not have to submit customs

declarations until after December 2020.

As a consequence, the assumption is that there would not be an

associated increase in the volumes of customs declarations until

after this date.

HMRC has accelerated work on its contingency option for handling

customs declarations in the event of ‘no deal’ in March 2019. In July

2017, we reported that

HMRC had identified contingency arrangements in case CDS was

not ready on time, but had not planned these in detail. HMRC has

now made progress with planning and implementing contingency

arrangements. These involve scaling up the existing CHIEF system

to manage up to 255 million customs declarations each year. HMRC

expects this to cost £8.7 million.

If it successfully completes this work, HMRC should have the

system capacity to handle customs declarations no matter what the

outcome of negotiations between the UK and the EU. Traders will

continue to have access to CHIEF, which HMRC intends to continue

running alongside CDS, for a period after January 2019. This will

help mitigate the risks of CDS not being ready as traders will be

able to revert to CHIEF.”

These reports suggest that:

• UK customs activities are increasingly moving towards

electronic systems, and away from physical paperwork and

checks.

• The new CDS system should be up and running well before

December 2020, but HMRC are updating and increasing the

capacity of the older CHIEF system as a precautionary measure.

It stands to reason that the more that the UK and EU can move away

from physical checks and paperwork to electronic declarations and


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communications, the more frictionless that EU-UK borders will

become.

The EU’s UCC and Customs 2020

As we have seen so far, the UK is modernising its customs systems

and increasing their capacity.

The EU is also moving towards more efficient (and more I.T. – based)

customs systems as a result of the adoption of the Union Customs

Code (UCC).

The European Commission’s website states:

“The UCC is the new framework regulation for the rules and procedures

for customs throughout the EU.

Modern IT systems are essential in order to allow customs systems to

work efficiently and they are at the heart of the new rules.

The new UCC puts in place IT systems that both customs administrations

and traders need for simple and fast clearance of customs procedures

while also ensuring that all necessary checks and controls are carried

out. The new rules are the outcome of a rigorous and comprehensive

dialogue involving all partners.

More specifically, it will:

– streamline customs legislation and procedures across the EU;

– offer greater legal certainty and uniformity to businesses and

increase clarity for customs officials;

– simplify customs rules and procedures to make customs

transactions more efficient and modern;

– complete the shift to a paperless and fully electronic and

interoperable customs environment;

– introduce more speedy customs procedures for compliant and

trustworthy businesses.

The UCC should be fully implemented by the end of 2020. During the

transitional period, the new rules will apply by using existing IT systems

and, in some cases, paper forms. Work to develop the new systems or to

upgrade existing ones has already begun.”28


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As the Irish Tax and Customs office website states29:

“The Union Customs Code (UCC) was introduced across the European

Union (EU) on 1 May 2016. It introduced a number of changes to how

goods cross EU borders and some transitional arrangements will operate

until 2020.

The UCC also introduced a number of new concepts and modernises many

existing procedures. Some of these changes will require the development

of new IT systems and enhancements to existing systems, which will be

introduced on a phased basis up until the 31 December 2020.

Revenue will undertake a large body of mandatory electronic customs

systems developments over the period 2016 to 2020. These are required

as a result of the introduction of the UCC and the related IT Work

Programme.

Among the principles enshrined in the UCC are:

The mandatory use of electronic processing techniques for the exchange

and storage of information between:

• customs authorities

• customs authorities and economic operators.

The uniform application of the UCC across all Member States including the

use of internationally accepted data models and message formats.

The adoption of a work programme to support the upgrading or

development of the electronic systems and associated processes. It also

includes the setting up of the transitional periods and the regular review

of that work programme.

The use of non-electronic processing techniques on a transitional basis, up

to 31 December 2020, where electronic systems are being upgraded or

developed.”30


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The ERG report discussed elsewhere in this report states that:

“The Union Customs Code allows an alternative to customs clearance at

the border. The exporter makes a customs declaration at the exporter’s

premises; this is followed by a transit declaration, which gives the

possibility to transport the goods to their destination without fulfilling

any formalities at the border.

Finally, the transit declaration is followed up by an import declaration

when the goods arrive at the premises of the importer on the other side

of the border. If customs want to inspect the goods, mobile teams can

do so when the goods are declared as they are loaded or unloaded.”

As well as implementing the UCC, the EU also has a related

programme called ‘The Customs 2020 Programme’.31

The programme, (with a budget of € 547.3 million) was created to:

“improve cooperation between customs authorities and

international organisations, third countries, other governmental

authorities, including Union and national market surveillance

authorities, as well as economic operators and organisations

representing economic operators.”

As the European Commission website explains:

“The specific objectives shall be achieved, in particular by:

(a) computerisation;

(b) ensuring modern and harmonised approaches to customs procedures and

controls;

(c) facilitating legitimate trade;

(d) reducing compliance costs and administrative burden; and

(e) enhancing the functioning of the customs authorities.”


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Analysis

Both the EU and UK are upgrading their customs procedures and I.T.

systems and are spending large sums to do so.

Perhaps fortuitously, both the setup of the UK’s new CDS system

(and upgrade of the old CHIEF system) roughly coincide with the

timetable for the completion of the EU’s UCC implementation and

Customs 2020 programmes.

If as we recommend, the UK remains in a customs union with the EU

for around two years after the March 2019 exit date, these systems

should be complete and interacting well, by the time the UK switches

to its new bespoke UK-EU customs partnership - likely 2020.

Rules of Origin?

If the UK was to be in the EEA after Brexit, or alternatively sign an FTA with the

EU, there would be no tariffs on trade in goods between them – however, this

fact alone does not resolve the problem of complex ‘rules of origin’ (RoO) on

goods.

This is because the parties who have a bilateral deal still need to prove that

their goods actually originate in their territories and not from outside of them

(or dependent on the agreement, what % of the product comes from their

territory or how much additional work was done on a product originating from

outside the territory).

[This has little relevance to trade between EU states since they all use the

same Common External Tariff and have free circulation of goods between

themselves.]

There are several arcane agreements and systems the UK could use to help

mitigate RoO issues, as we will explain.


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Protocol 4 of the EEA Agreement

Protocol four of the European Economic Area (EEA) agreement covers Rules of

Origin rules and also encourages administrative cooperation between the

customs authorities of the Contracting Parties (which include all EU and the

three EFTA/EEA states).

Expert Dr Richard North has written this regarding Protocol four:

“…implementation of that Protocol does not require border checks.

The system is based on a system of certificates proving origin and verification checks

are undertaken by the customs authorities of the exporting countries, usually by

auditing the certificate holders' processes at their places of business.”32

Pan Med RoO agreement

The Regional convention on pan-euro-Mediterranean preferential rules of

origin is a dense and legalistic agreement which few non-trade people can

understand but appears to confer significant benefits on its signatories in

terms of simplifying trade complexities. The convention is open to EFTA states:

“The system of Pan-Euro-Mediterranean cumulation of origin allows for the application of

diagonal cumulation between the EU, EFTA States, Turkey, the countries which signed the

Barcelona Declaration, the Western Balkans and the Faroe Islands. It is based on a network of

Free Trade Agreements having identical origin protocols. Those origin protocols are being

replaced by a reference to the Regional Convention on pan-Euro-Mediterranean preferential

rules of origin (PEM Convention). A single Convention will facilitate the on-going revision of the

PEM rules of origin aiming at modernising and simplifying them.

In addition to bilateral cumulation, diagonal cumulation applies within the pan-Euro-Med zone.

This means that materials which have obtained originating status in one of the Contracting

Parties may be incorporated in products manufactured in another Contracting Party without

those products losing their originating status when exported to a third Contracting Party within

the pan-Euro-Med zone.

In parallel, full cumulation is currently operated within the European Economic Area (the EEA

comprises the EU, Iceland, Liechtenstein and Norway) and between the EU and Algeria,

Morocco and Tunisia. The EEA countries apply full cumulation between them, the EEA being

considered as a single territory, with a common "EEA originating status". They also apply

diagonal cumulation with the other partner countries of the pan-Euro-Med zone. An important

point is that EEA members can apply diagonal cumulation of origin also between themselves

whenever it can confer preferential origin of an EEA country (in this case the declared origin will

be the one of the country, not the EEA origin itself).”33


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Rex system?

The European Commission website describes the REX system:

“The Registered Exporter system (the REX system) is the system of certification

of origin of goods that applies in the Generalised System of Preference (GSP) of

the European Union since 1 January 2017. It is based on a principle of self-

certification by economic operators who will make out themselves so-called

statements on origin. To be entitled to make out a statement on origin, an

economic operator will have to be registered in a database by his competent

authorities. The economic operator will become a "registered exporter".

The REX system will progressively and completely replace the current system

of origin certification based on certificates of origin issued by governmental

authorities and on invoice declarations made out under certain conditions by

economic operators.

The supporting IT system, which is called the REX system, is made available by

the European Commission.”

As Hans Maessen stated in the report we discussed earlier:

“The proof of the origin of goods is of major importance in a customs

declaration as duties depend on the origin of imported goods. In the coming

years, a new system to prove the origin of goods, called Rex, will be introduced

worldwide, including the UK and the EU. Unfortunately, origin rules are very

complicated, especially if goods are assembled or processed. Rex gives an

exporter the option to inform the buyer and customs about the origin of

traded goods on the invoice with a simple statement.”

The EU could extend access to REX to the UK as part of a UK-EU

customs partnership.

As the European Commission has stated:

“Progressively, the REX system will also be applied in the context of

bilateral trade agreements between the EU and the partner

countries. CETA, the free-trade agreement between the EU and

Canada will be the first such agreement.”34


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Common Transit Convention (CTC) and SAD

The Common Transit Convention is described on the European Commission

website:

“The common transit procedure is used for the movement of goods between the 28

EU Member States, the EFTA countries (Iceland, Norway, Liechtenstein and

Switzerland), Turkey (since 1 December 2012), the former Yugoslav Republic of

Macedonia (since 1 July 2015) and Serbia (since 1 February 2016). The procedure is

based on the Convention of 20 May 1987 on a common transit procedure.”

Alex Stojanovic, a researcher at the Institute for Government explains35 how

the CTC could be useful for the UK after Brexit:

“for customs at least, joining the Common Transit Convention does offer Britain one

lever to alleviate pressures at the border.

The Common Transit Convention allows a suspension of customs checks and payment

of duties until the goods reach the destination country. Its signatories include the EU

member states, the European Economic Area (EEA) states, Macedonia, Serbia and

Turkey.

It’s not just the agreement that matters but the technology that underpins it. The

New Computerised Transit system (NCTS) is only open to members of the Convention.

For both exporters and authorities, it increases the efficiency and security of the

procedure.

By supporting paperless customs clearance, NCTS reduces the cost of customs

procedures and the number of trucks queuing at the border, meaning a faster flow of

goods. From a customs authority’s perspective, NCTS connects customs offices across

the signatory countries.”

When negotiating its new bespoke customs partnership then, the UK should

attempt to retain access to the New Computerised Transit system (NCTS) and

Common Transit Convention.

A HM Government report on Future customs arrangements suggests they have

the same idea:

“we would look to simplify the requirements for moving goods across borders, for

example: through membership of the Common Transit Convention (CTC), which

simplifies border crossing for goods in transit, meaning that goods do not need to

complete import and export declarations each time they cross a new border - it


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would allow goods moving between the UK and the rest of the world, and vice versa,

to travel via the EU, without paying EU duties, providing cash-flow benefits to

traders, and would make border clearances easier at key ports and airports, such as

Dover and Holyhead.”36

The single administrative document (SAD)

As described on the European Commission website:

“The single administrative document (SAD) is a form used for customs

declarations in the EU, Switzerland, Norway, Iceland, Turkey, Macedonia

and Serbia. Since the 1987 Convention on the simplification of formalities

in trade in goods it also applies to the territories of the EFTA countries

(Switzerland , Norway and Iceland), Turkey (since 1 December 2012), to

the former Yugoslav Republic of Macedonia (since 1 July 2015) and to

trade between these countries and the EU.”37

The related 1987 Convention on the simplification of formalities in trade in

goods states:

“This Convention lays down the measures to simplify formalities in

trade in goods between the Contracting Parties, in particular by

introducing a single administrative document (hereinafter referred

to as the single document) to be used for any procedure at export

and import and for a common transit procedure (hereinafter

referred to as transit), applicable to trade between the Contracting

Parties regardless of the kind and origin of the goods.”

It goes on to say:

“Nothing in this Convention shall preclude the Contracting Parties from

applying simplified procedures, whether or not based on the use of

computers, with a view to greater simplification for operators.

Simplified procedures may, in particular, consist in allowing operators

not to have to present to a customs office either the goods in question or


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the declaration relating to them, or in allowing them to draw up an

incomplete declaration. In such cases, a declaration, which, if the

competent authorities agree, may be a general periodic declaration, must

be submitted subsequently within the time-limits laid down by those

authorities.”38

The Convention on the simplification of formalities in trade in goods is open to

EFTA states – adding weight to the idea that the UK should rejoin that august

trading organisation.

Common Travel Area

The Common Travel Area is a pre-existing arrangement. The House of

Commons Library39 says of the CTA:

“The Common Travel Area (CTA) is a special travel zone between the Republic of

Ireland and the UK, Isle of Man and Channel Islands. It dates back to the

establishment of the Irish Free State in 1922.

Nationals of CTA countries can travel freely within the CTA without being

subject to passport controls. Although both the Republic of Ireland and the UK

maintain their own visa and immigration policies, there is a significant degree of

practical cooperation and policy coordination in order to ensure the security of

the CTA. Controls on the Irish border are also generally regarded as impractical

and undesirable.

Irish nationals have a special status in UK law which is separate to and pre-dates

the rights they have as EU citizens.

In short, the Republic of Ireland is not considered to be a ‘foreign country’ for

the purpose of UK laws, and Irish citizens are not considered to be ‘aliens’.”

Maintaining the CTA would clearly reduce the need for any hard border in

Ireland.


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Lisbon Treaty ‘Article 8’

Can the EU’s treaties themselves offer any help to the UK if we

pursue a new bespoke Customs Partnership? Possibly so.

Article 8 of the European Union’s consolidated Treaties40 states that:

“The Union shall develop a special relationship with

neighbouring countries, aiming to establish an area of

prosperity and good neighbourliness”

If the UK leaves the EU in 2019, we will no longer be an EU

member state but a ‘neighbouring country’.

While Article 8 is undoubtedly vague and more of a general

declaration of goodwill than a specific legal obligation, it

certainly corresponds well with our idea for a bespoke customs

partnership. We could cite this to the EU when negotiating our

new bespoke customs partnership.


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Article 50

The EU’s Article 50 suggests some kind of agreement with the UK

should be concluded after the two-year Article 50 period, but it is

very vague:

“Article 50

1. Any Member State may decide to withdraw from the Union in

accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European

Council of its intention.

In the light of the guidelines provided by the European Council, the

Union shall negotiate and conclude an agreement with that State,

setting out the arrangements for its withdrawal, taking account of the

framework for its future relationship with the Union.

That agreement shall be negotiated in accordance with Article 218(3) of

the Treaty on the Functioning of the European Union. It shall be concluded

on behalf of the Union by the Council, acting by a qualified majority, after

obtaining the consent of the European Parliament.”41

On their own, the provisions of Article 50 text don’t really help us,

but taken in conjunction with Article 8, we believe they could be

used to convince the EU that they should accept the proposals set

out in this document.

If the government does decide to go down the route we suggest,

then Mrs May should cite Article 8 regularly in talks.


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WCO - World Customs Organization

With 182 Members, the WCO is the world’s largest and most important

customs body. The EU member states are members of the WCO and the EU

itself has in their words “Status akin to WCO membership”.42

The WCO website explains its

vision and goals:

“The WCO provides leadership, guidance and support to Customs

administrations to secure and facilitate legitimate trade, realize

revenues, protect society and build capacity”43

“WCO Goals - Promote the security and facilitation of international

trade, including simplification and harmonization of Customs

procedures.

The WCO, as the global centre of Customs excellence, plays a central role

in development, promotion and support for the implementation of

modern Customs standards, procedures and systems and has positioned

itself as a global leader in Capacity Building delivery”44

The UK should consult with the WCO, specifically its European section - ROCB

Europe (European Regional Office for Capacity Building) to help the UK and

EU draft their new bespoke customs partnership.

This would certainly fall within their remit, as ROCB Europe describe

their aims as:

“ROCB Europe is the 6th and final ROCB that also comprises WCO’s largest

region with its 51 member states and the European Union.

The regional capacity building aims at modernizing Customs Services by taking

into consideration global directions, standards, Customs in the 21st century

policy document by the WCO, WCO Framework of Standards to Secure and

Facilitate Global Trade (SAFE), Revised Kyoto Convention, WCO Capacity

Building Compendium and such.”


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United Nations Economic Commission for Europe (UNECE)

International Convention on the Harmonization of Frontier Controls

of Goods (1982)

The UNECE International Convention on the Harmonization of

Frontier Controls of Goods (to

which the EU, UK, Ireland and

France are signatories45) is one of

the international agreements

which the UK and EU would be

forced to fall back on; in the

undesirable event of a no-deal

Brexit.

As the UNECE website states:

“The Convention applies to all goods being imported or exported or

in transit, when they are moved across one or more maritime, air

or inland frontier.

Its objective is to reduce barriers to international trade and

facilitate the movement of goods by reducing the requirements for

completing formalities as well as the number and duration of

controls, in particular by national and international coordination of

control procedures and of their methods of application.”46

This agreement could be useful as one of many building blocks

making up our new customs partnership. Specifically, our new

agreement would reaffirm both the UK and EU’s commitments under

this existing agreement.

Article 6 of the Convention is particularly useful:

“The Contracting Parties undertake to co-operate with each other and to seek any necessary

co-operation from the competent international bodies, in order to achieve the aims of this

Convention, and furthermore to attempt to arrive at new multilateral or bilateral

agreements or arrangements, if necessary.”


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WTO Trade Facilitation Agreement

The World Trade Organisation (WTO)

ratified a new agreement last year47 –

the Trade Facilitation Agreement

(TFA).

This agreement could help the UK and

EU maintain a frictionless border after Brexit.

The TFA is relevant because not only is the UK a WTO member, but

also the EU itself has been a WTO member since 1 January 1995.

All48 member States of the EU are also WTO members.49

The WTO website explains the purposes of the TFA:

“The objective of this Agreement is to boost global trade by

expediting the movement, release and clearance of goods.”50

“Release and clearance of goods

Time is a valuable commodity. Several TFA provisions will facilitate

more rapid movement of goods across borders such as through the

release of products even before the final determination of customs

duties, expediting shipments from certain air cargo, and prioritizing

perishable goods.

Automation and e-services

Going digital can help make trade easier. Under the TFA, there are

provisions requiring WTO members to accept e-payments and

electronic versions of certain documents where appropriate and

possible

Harmonized processes and standards

Traders find it helpful when rules and procedures are predictable and

familiar across borders. They like it too when authorities coordinate

with one another. The TFA contains articles on Border Agency

Cooperation and Customs Cooperation and it states that WTO


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members establish a single window or entry point to participating

authorities or agencies.”51

The TFA official text contains many interesting elements:

“Members,

Recognizing the need for effective cooperation among Members on trade facilitation

and customs compliance issues;

Hereby agree as follows:

ARTICLE 7: RELEASE AND CLEARANCE OF GOODS

1 Pre-arrival Processing

1.1 Each Member shall adopt or maintain procedures allowing for the submission of

import documentation and other required information, including manifests, in order to

begin processing prior to the arrival of goods with a view to expediting the release of

goods upon arrival.

1.2 Each Member shall, as appropriate, provide for advance lodging of documents in

electronic format for pre-arrival processing of such documents.

2. Electronic Payment

Each Member shall, to the extent practicable, adopt or maintain procedures allowing

the option of electronic payment for duties, taxes, fees, and charges collected by

customs incurred upon importation and exportation.

ARTICLE 8: BORDER AGENCY COOPERATION

1. Each Member shall ensure that its authorities and agencies responsible for border

controls and procedures dealing with the importation, exportation, and transit of

goods cooperate with one another and coordinate their activities in order to facilitate

trade.

2. Each Member shall, to the extent possible and practicable, cooperate on mutually

agreed terms with other Members with whom it shares a common border with a view

to coordinating procedures at border crossings to facilitate cross-border trade. Such

cooperation and coordination may include:

(a) alignment of working days and hours;

(b) alignment of procedures and formalities;

(c) development and sharing of common facilities;

(d) joint controls;

(e) establishment of one stop border post control.


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ARTICLE 9: MOVEMENT OF GOODS INTENDED FOR IMPORT UNDER CUSTOMS

CONTROL

Each Member shall, to the extent practicable, and provided all regulatory requirements

are met, allow goods intended for import to be moved within its territory under

customs control from a customs office of entry to another customs office in its territory

from where the goods would be released or cleared.”

The TFA could clearly help to alleviate some of the problems

connected to leaving the EU Customs Union, but on its own, it is no

panacea.

TIR Convention

As the UNECE website states:

“The Customs Convention on the International

Transport of Goods under Cover of TIR Carnets (TIR

Convention, 1975) is one of the most successful

international transport conventions and is so far the

only universal Customs transit system in existence. To

date, it has 74 Contracting Parties, including the

European Union. It covers the whole of Europe and

reaches out to North Africa and the Near and Middle East.”52

But what precisely does the TIR convention do? The website goes on

to explain:

“The TIR Convention facilitates the international carriage of goods from one

or more customs offices of departure to one or more customs offices of

destination (up to a total of four customs offices departure and destination)

and through as many countries as necessary. As a rule, the vehicle remains

sealed throughout the TIR transport and, thus, goods are generally not

inspected at border crossings. However, customs authorities remain

entitled to perform inspections whenever they suspect irregularities or

randomly. The Convention applies to transports with road vehicles,

combinations of vehicles as well as containers and allows for the use of the

TIR Carnet for all modes of transport, provided that some portion of the

journey is made by road.”53

The European Union itself, Norway, Switzerland, the UK and Ireland

are just some of the 68 signatories to this agreement.


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Clearly this agreement will prove useful after we leave the EU’s

Customs Union and help to maintain frictionless trade.

“TIR (Transports Internationaux Routiers, International Road

Transport)

Each EU Member State, including the Union itself, is a

Contracting Party to the TIR Convention 1975.”

– European Commission website54

Interestingly, the TIR system is to be supplemented by a new system

called E-TIR55 which aims to

“ensure the secure exchange of data between national

Customs systems related to the international transit of goods,

vehicles or containers according to the provisions of the TIR

Convention”

Our proposed bespoke customs partnership with the EU should

reaffirm the UK and EU’s commitments, duties and responsibilities

under the TIR convention.


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GATT

The General Agreement on Tariffs and Trade (GATT)56 is

another of the international agreements which the UK and

EU would be forced to fall back on; in the undesirable event

of a no-deal Brexit.

The GATT agreement (signed 1947, updated 1994) is still in

force as it has been incorporated into the WTO.

Crucially, The EU has been a WTO member since 1st of January 1995. The 28

current member States of the EU are *also* WTO members in their own

right.57

Some of the GATT clauses could be useful for the UK and EU when trying to

create a legal basis for their new bespoke customs partnership.

Article XXIV of GATT says (emphasis ours):

“The provisions of this Agreement shall not be construed to prevent advantages

accorded by any contracting party to adjacent countries in order to facilitate frontier

traffic.

The contracting parties recognize the desirability of increasing freedom of trade by the

development, through voluntary agreements, of closer integration between the

economies of the countries parties to such agreements. They also recognize that the

purpose of a customs union or of a free-trade area should be to facilitate trade between

the constituent territories and not to raise barriers to the trade of other contracting

parties with such territories.”

GATT offers us little else in relation to the NI/ROI border issues. It does speak

in positive language however.

For example:


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Switzerland/EU borders

The Swiss borders with the EU are undoubtedly efficient but not

frictionless.

The UK could certainly learn a lot from studying their methods, as a

non-EU country that trades a great deal with it.

Interesting however, was oral evidence58 given to the Northern

Ireland Affairs Committee by Dr Christian Bock, Director General,

Federal Customs Administration (Switzerland), and Lieutenant

Colonel Rebekka Straessle, Chief of Staff, Swiss Border Guard.

The below exchange took place:

Unlike the reports we looked at earlier which emphasised primarily

technological solutions to border issues, Dr Bock identifies the need for close

co-operation and joint strategies also. He clearly believes an invisible border is

possible on the island of Ireland.


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Norway/Sweden border

The Norway/Sweden border has been examined repeatedly

since the EU referendum as an example of a low-friction

border.

Professor in public law Henrik Wenander of Lund University

explains:

“Norway and Sweden…have close ties, characterized by a high

degree of trust. This is indicated by the fact that several of the

border crossings in the sparsely populated areas along the 1,630km

long border are unattended.

The decisive factor for the success of Norwegian-Swedish cross-

border movement is undoubtedly the European Economic Area

(EEA) treaty. This agreement between the EU and Norway (as well

as Iceland and Liechtenstein) means that Norway is connected to

the EU common market.

Norway can trade most goods with its EU neighbours, without

customs duties being levied. There are, however, some exceptions,

such as agricultural products and food.

The success of Norwegian-Swedish cross-border mobility may thus

be explained by a combination of cultural features, including a high

degree of mutual trust – and legal arrangements. The importance

of the EEA treaty cannot be overlooked. Without an overarching

arrangement of this kind, cross-border movement would probably

be much more difficult.

Given the historical differences, the relation between Norway and

Sweden cannot, of course, be directly transferred to Ireland or

other parts of Europe. It does indicate, however, that extensive

legal cooperation, problem solving mechanisms on different levels

and mutual trust are key features of successful cross-border

mobility.”59


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A 2017 BBC report on the Norwegian border60 contained an

interesting claim:

EFTA/AELE

Whatever form of relationship the UK reaches with the EU,

the UK should seek to rejoin the European Free Trade

Association (EFTA) of which we were a founder member.

This Free Trade Association has 27 FTAs covering 38

countries and territories outside the EU including

Canada.61

Unlike the EU, EFTA has a unique ‘two-track’ trade deal system.

EFTA’s negotiators work to negotiate trade deals for the bloc as a whole,

while allowing member states to negotiate their own bespoke trade

deals.

An example of this is that all of EFTA has a trade deal with Hong Kong, but

EFTA member Switzerland has a separate trade deal with China. EFTA has

many experienced trade experts and negotiators on the payroll, while the


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UK hasn’t had to negotiate its own trade deals for decades and is now

currently scrambling to recruit sufficient personnel.

Britain could become part of the extensive EFTA trade network and still

sign her own separate deals when we have re-established the necessary

negotiating teams; a win-win situation for the UK.

If the UK rejoined EFTA, it would of course boost the organisation’s

profile and clout during negotiations (both with the EU27 and third

countries).

The EFTA countries are not subject to the EU’s “ever closer union” as

EFTA is an economic project not a political one.

Joining EFTA is essential, since when we leave the EU; we stand to

lose access to all the EU-third country trade agreements that the EU

has signed in the last few decades. In addition, EEA membership is

only available to EU or EFTA states.

Former Prime Minister Margaret Thatcher stated in her book

‘Statecraft’:

“There are, though, useful precedents. In 1992, Norway Iceland and

Liechtenstein – that is the remaining EFTA countries bar

Switzerland – concluded negotiations with the EU which

established a European Economic Area (EEA). These countries now

enjoy free trade with the European Union; that is the freedoms of

movement of goods, services, of people and of capital. They also

enjoy the unhindered access guaranteed by the operation of the

European Single Market.

But they remain outside the customs union, the CAP, the CFP, the

common foreign and security policy and the rest of the

legal/bureaucratic tangle of EU institutions. But Britain is in a

different league from countries like Norway (population 4.4

million) or Iceland (population 270,000), let alone Liechtenstein

(population thirty-two thousand.)


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We could press for Britain to be represented in the drawing up of

all Single Market Legislation.”

Mrs Thatcher also wrote that:

“Switzerland is unique in many ways. But whatever Switzerland has

secured in its dealings with Europe, Britain too could certainly

obtain without great difficulty. Switzerland enjoys free trade with

the EU. The EFTA model is perhaps not ideal: but it is certainly an

acceptable option.”

Former Labour Prime Minister Tony Blair said in 2000:

“Of course, Britain could survive outside the European Union.

We could probably get access to the Single Market, as Norway

and Switzerland do.”

Norway then Canada?


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Some MPs (notably Nick Boles) and commentators such as Mr George

Trefgarne and Professor George Yarrow have discussed the idea of the UK

joining EFTA/EEA as a stepping stone towards a ‘CETA+’ or ‘SuperCanada’ free

trade deal down the line.

While there is undoubtedly some merit to their ideas we would suggest three

points to them:

1. We believe the UK will find that life as an EFTA/EEA member is actually a

great fit for us (we helped create it!) and not wish to leave.

2. The EFTA countries might not like the UK simply using them as a

waystation. For that reason, the UK should commit in advance to a

respectable period of time as an EFTA/EEA member – say 10 years.

When that time is close to an end, MPs could discuss extending

membership or seeking a new relationship.

3. A CETA-style deal probably wouldn’t be enough to keep frictionless

trade in Ireland. We would probably need a DCFTA combined with an

Association Agreement, as we described in our publication ‘the last

parachute’.

HM Government report on Future customs

Arrangements

The Government’s report on future customs arrangements62 advocates that

the UK should remain a party to the CTC (as we covered earlier) but it also

contains some other interesting ideas:

“The United Kingdom wants to build a new, deep and special partnership with the

European Union. As we leave the European Union and therefore the EU Customs

Union, the Government seeks a new customs arrangement that facilitates the freest

and most frictionless trade possible in goods between the UK and the EU, and allows

us to forge new trade relationships with our partners in Europe and around the

world.”

The report contains this section which chimes well with our own proposals:


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“Our ultimate customs arrangement will depend on our negotiations with the

EU…both the UK and EU Member States would benefit from time to fully

implement the new customs arrangements, in order to avoid a cliff-edge for

businesses and individuals on both sides. The Government believes a model of

close association with the EU Customs Union for a time-limited interim period

could achieve this.”

The report says the government is seeking:

“bilateral implementation of a technology-based solution for roll-on, roll-off ports

which could consist of pre-arrival notification of consignments on a port IT system,

linked to customs declarations and vehicle registration numbers so that vehicles were

not required to stop at the border, enabling traffic to flow smoothly.”

Also:

“The border between Northern Ireland and Ireland is the UK’s only land

border. We must avoid a return to a hard border, and trade and everyday

movements across the land border must be protected as part of the UK-EU

deal.”

They also outline:

“A highly streamlined customs arrangement between the UK and the EU, streamlining

and simplifying requirements, leaving as few additional requirements on EU trade as

possible. This would aim to: continue some of the existing arrangements between the

UK and the EU; put in place new negotiated and potentially unilateral facilitations to

reduce and remove barriers to trade; and implement technology-based solutions to

make it easier to comply with customs procedures.”

There are several good ideas in this report which could be implemented

between March 2019 and the end of the transitional period.

Summary


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As we have seen in this report, different experts have different views

on how to resolve the problems which may arise from leaving the

EU’s Customs Union.

We at EFTA4UK believe that on the whole, they collectively have an

overly-optimistic view of what can be achieved and in what

timescale. But before we elaborate, lets focus on some of the

positive and constructive points:

• Existing International agreements and conventions on customs and trade

matters could potentially provide a decent ‘baseline’ for trade with the EU

after Brexit even if no special bilateral deal was agreed.

We are thinking here specifically of GATT, TIR Convention, SAFE and the WTO

TFA. These agreements (amongst others) would help protect the integrity of

supply chains. As the Legatum Institute report we mentioned earlier states:

“modern customs borders are both efficient and low-impact.”

• The UK is recruiting thousands of new Border Force staff63 and the ROI is

hiring 1,000 new customs officers and vets.64 Other EU countries are also

hiring new customs staff. These additional personnel should help mitigate any

problems at ports and airports.

• New Technology and systems are being set up/implemented which will

replace outdated systems and boost capacity – specifically the UK’s new ‘CDS’

system and the EU’s ‘Customs 2020’, ‘UCC’ and ‘Registered Exporter system

(REX)65’ programmes; as well as international programmes such as the E-Tir

system.

Despite these positive factors, we maintain that even when taking them

into account they still may not be enough to allow the UK to leave the EU

in 2019 and maintain frictionless trade.

In order to maintain frictionless trade, the UK should first be realistic

about the Timescale.

By remaining in a form of customs union until 2020, we allow time for

new systems to mature, be tested properly and synchronised.

We give time for recruitment and training of new personnel, both on the

EU side and UK side.


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The extra time would allow officials from the UK and EU to learn lessons

and best practice from borders around the world, most notably the

Norway-Sweden border, Swiss-EU crossings and USA/Canada border.

Greater preparation time is therefore of paramount importance.

For this reason, the UK should agree to stay in a

form of customs union with the EU until 2020.

But even if we stay in it until 2020 and new technological and procedural

systems are successfully implemented, it still may not be enough to

maintain a frictionless border.

The question is therefore, what should we do?

The Irish Taoiseach Mr. Leo Varadkar has said:

“We will do all we can, in Brussels, in London and in Dublin, to

achieve the best outcome for everyone on this island - to protect

our peace, our freedom, our rights, and our prosperity.

We will talk, as I have in recent weeks, to the First Ministers in

Scotland and in Wales, two people with whom I share a common

view which favours the UK remaining in the single market and a

customs union.

However, there are people who do want a border, a trade border

between the United Kingdom and the European Union and

therefore a border between Ireland and Britain and a border across

this island.

These are advocates of a so-called hard Brexit.

I believe the onus should be on them to come up with proposals for

such a border and to convince us and convince you; citizens,

students, academics, farmers, business people that it's in your

interest to have these new barriers to commerce and trade.

They’ve already had fourteen months to do so.

If they cannot, and I believe they cannot, we can then talk

meaningfully about solutions that might work for all of us.


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For example, if the United Kingdom does not want to stay in the

Customs Union, perhaps there can be an EU-UK customs union.

After all, we have one with Turkey. Surely we can have one with

the United Kingdom?

If the UK does not want to stay in the Single Market, perhaps it

could enter into a deep Free Trade Agreement with the EU and

rejoin EFTA of which it was a member prior to accession. And if this

cannot be agreed now, then perhaps we can have a transition

period during which the UK stays in the single market and customs

union while these things are worked out.

This is the space in which agreements are made.

These are the practical solutions I am proposing.”66

Mr Varadkar’s suggestions correspond well with our own ideas,

namely the UK could apply to join EFTA and then have a phased

transition period inside both single market and customs union “while

these things are worked out”.


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The EEA Agreement

The European Economic Area

(EEA/ EØS) Agreement entered

into force on 1 January 199467,

bringing together all the

European Union Member States

and three EFTA/AELE States —

Iceland, Liechtenstein and

Norway.

As a 2018 report by the House of Commons Library summarized:

“Advocates of EEA membership argue that this is the best option from

an economic point of view as it would mean the UK remains a member

of the single market.

Membership of the single market facilitates trade with other members

by removing tariffs and quotas and by reducing non-tariff barriers such

as differing technical specifications and labelling requirements. Unlike

the customs union, which is relevant only for trade in goods, the single

market covers both goods and services.

This agreement allows tariff-free trade in goods and services between

the EEA countries; but also eliminates most non-tariff barriers (NTBs).”

The EEA Agreement goes far beyond a simple free-trade agreement:

The agreement has several features which make it valuable if the UK

was to maintain EEA membership, specifically in regard to customs

co-operation and border co-operation.


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Protocol 1068 of the EEAA is entitled ‘On simplification of inspections

and formalities in respect of carriage of goods’ and contains clauses

such as those below:

Article 9(2) of the EEA Agreement is a key element to our proposals:


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As Professor Henrik Wenander has explained:

“The decisive factor for the success of Norwegian-Swedish cross-

border movement is undoubtedly the European Economic Area

(EEA) treaty. This agreement between the EU and Norway (as well

as Iceland and Liechtenstein) means that Norway is connected to

the EU common market. Norway can trade most goods with its EU

neighbours, without customs duties being levied.”69

As the report by the Legatum Institute outlined elsewhere in this report stated:

“membership of the single market would mitigate the need for

controls on SPS and product regulation to be in place at the Irish

border”.

While the EEA Agreement provides for tariff free trade in goods and services

and eliminates more non-tariff barriers than any standard free trade

agreement, it does not provide complete coverage, as trade in agricultural and

fisheries products is largely not covered by the EEAA.

However, the EEA Agreement and its additional protocols do contain clauses

pertaining to agriculture and trade in fish, for example:


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The EEA countries can negotiate country-specific amendments with

other EEA members, which are then enshrined in new protocols or

amendments to the EEAA.

Retaining EEA membership alone would not be sufficient to maintain

frictionless trade between the EU and UK after Brexit. But as the

example of the Norway-Sweden border shows, EEA membership

makes things much simpler.

So in addition to EEA membership; we believe the UK should

negotiate a bilateral customs deal with the EU, which would be

reflected in the form of a new protocol to the EEA Agreement.

Interestingly however, the EEA expert Dr Richard North believes that

the EEA agreement itself is sufficient for frictionless trade without

any additional deals on customs issues:

“Bearing in mind that the EEA Agreement is an adaptive framework, and

includes provision for the elimination of customs duties on imports and

exports, and any charges having equivalent effect (Article 10), there is

actually no need for Efta/EEA states to sign up to a customs agreement.

There is nothing to be gained from it, in terms of improving the cross-

border flow of goods and, as a result, none of the Efta states are

members of a customs union with the EU.

This should be known to Mrs May and her negotiating team. The EEA

Agreement, with specific adaptations to suit the specific needs of the UK,

is a means by which we can get as close to frictionless trade with the EU

as makes no difference.”70


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Political ‘Fudge’?

Despite everything we have outlined in this document, there is still a

chance that some critics on either side of the debate will say our

proposals contravene the rules of the European Union.

To them we would highlight the many examples such as Vatican City,

Jersey, Guernsey, Monaco and the Isle of Man – all of whom enjoy

longstanding ‘special’ relationships with the EU but aren’t in it.

If the political will is there on both sides, any remaining difficulties

can be either ‘kicked into the long grass’ or settled using that age-old

political tool – the fudge.

Conclusions

The UK is leaving the European Union in 2019.

If the UK simultaneously leaves the EU, European Economic Area and

EU Customs Union at this time, the economic repercussions are likely

to be immense on both sides of the channel.

Perhaps in recognition of this, the Prime Minister has in principle

negotiated a transitional period/ implementation phase scheduled to

run from 29 March 2019 to 31 December 2020.71

During this period the UK will be a de facto a member of the Single

Market and Customs Union. Mrs May has said that the UK will leave

this customs union in 2020.

So how should the UK proceed?

Our best hope for a ‘Smart Brexit’ and to avoid a ‘no-deal’ crash out

therefore, is for the UK to apply as soon as possible to rejoin the

European Free Trade Association (EFTA), (which the UK helped to

create in the 1960s) and create a new relationship with the EU based

on the precedents of the EFTA countries.


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Using this method, we could still enjoy significant access to the Single

Market, better control migration into the UK, regain control over our

fishing grounds, regain our WTO seat and repatriate swathes of

borrowed sovereignty from Brussels.

We should also consult the World Customs Organization (WCO) and

seek their advice regarding new technologies and simplification and

Acceleration of Customs Procedures.

We can use the period from 29 March 2019 to 31 December 2020 to

move from being an EU/EEA state inside the Customs Union (as we

presently are) to an EFTA/EEA state with a bespoke customs

partnership agreement with the EU.

By that point CDS and UCC should be fully implemented.


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How and When?

While the exact timetable will of course be a matter for negotiation,

and some of these steps may happen concurrently, we believe the

general sequence should follow the order below:

• MPs and Peers should create an APPG (All-Party Parliamentary

Group) on EFTA.

• The UK government should make clear its intention to remain in

the EEA. The UK is a signatory to the Agreement already and

legally has to give 12 months’ notice if it wishes to leave the

Agreement (it hasn’t).

• The UK should agree to remain both in the EEA and a customs

union for approximately two years after Brexit.

• Discuss with the WCO’s think-tank on how best to co-ordinate EU

and UK customs systems.

• The UK should apply to rejoin EFTA.

• Remain in the EEA (European Economic Area) by switching from

the EU pillar to the EFTA pillar.

• Apply ‘in principle’ to become a party to the EFTA network of

FTAs, to take effect when the UK leaves customs union with the

EU.

• Ask countries who already have preferential trade with the UK via

the EU is they would like to ‘roll-over’ or ‘grandfather’ their

present relations with the UK.

• Negotiate an additional protocol to the EEA agreement dealing

with NI/ROI cross border trade.

• When CDS/UCC are up and running effectively and UK – EU

customs organisations have established the necessary synergy,

the UK (and Smart Border 2.0 ideas like networked ANPR systems

are in place) the UK can leave the customs union with the EU,

transferring to the new bespoke customs partnership (a bilateral

UK-EU agreement) which will work together with the new EEA

protocol.


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The chart below represents to what degree we believe different elements will contribute towards

frictionless trade as part of a new UK-EU Customs Solution. Percentages approximate.


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Is this possible?

We at EFTA4UK believe that the ideas set out in this report are both

realistic and achievable, specifically a new relationship based on the

‘Norway’ model plus additional agreements on Ireland, customs and

cross-border border trade.

Is such a deal with the EU possible? We say yes.

Firstly, all parties involved have pledged to avoid a Hard border.

Secondly, customs expert Hans Maessen has stated:

“It is in the interest of both parties to stay aligned as much

as possible to facilitate trade.”

Thirdly, as we outlined earlier in this report, the EU’s article 8 states:

“The Union shall develop a special relationship with

neighbouring countries, aiming to establish an area of

prosperity and good neighbourliness”


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In addition, let’s also take into consideration that the EU’s chief

negotiator Michel Barnier has recently said:

“We are prepared to offer Britain a partnership such

as there never has been with any other third

country”72

Mr Barnier also said recently (3rd September 2018):

“We are prepared to discuss a customs agreement of some

sort that simplifies customs arrangements between the

United Kingdom and the EU.”73

He has also said:

“We are ready to look constructively at all options

which allow us to meet our objectives - all options.”

Irish Prime Minister Leo Varadkar has stated74:

“Europe needs a deal. Britain needs a deal. We're

not going to be preparing for a hard border - we're

not preparing for any sort of land border between N

Ireland and Ireland."75

Finally, the Prime Minister has said, pragmatically:

“I do want us to have a customs agreement with the EU.

Whether that means we must reach a completely new customs

agreement, become an associate member of the Customs Union in

some way, or remain a signatory to some elements of it, I hold no

preconceived position. I have an open mind on how we do it. It is

not the means that matter, but the ends.”

In conclusion then, our plan would not only be possible and legal but

also enable all sides to accept it.


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• Our proposals would deliver on the referendum result – we

would be out of the European Union

• It would not lead to the break-up of the UK

• It would protect jobs and the economy

• The EU could accept such an agreement

• UK could sign its own free trade agreements (FTAs) around the

world

• We could take part in beneficial European programmes such as

reciprocal healthcare arrangements and EUROPOL

• It would secure the peace process by avoiding a hard border on

the Island of Ireland

Mrs May should pitch this model to Parliament, her party and the

media as a ‘bespoke British Brexit model’. If she did so, we believe it

would command widespread support both at Westminster and in the

country at large.

If you agree with the proposals in this document, please ask your

Member of Parliament and Members of the European Parliament to

support them.

https://www.facebook.com/EFTA4UK/

https://twitter.com/EFTA4UK

http://efta4uk.eu/

[email protected]


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Afterword: The purpose of this document

Whether you voted to leave or remain in the EU, we must accept that the

decision has been made and the government has a duty to try and

implement it.

That said, all possible steps must be taken to preserve the Union (UK),

safeguard jobs and avoid the return of a hard border on the Island of

Ireland.

While some commentators and politicians have dismissed the risks with a

wave of their hands or a shrug of their shoulders, we feel that it is our

responsibility to make sensible, thought-out proposals to minimise any

risks.

We believe that the best way forward is for the UK to adopt a EFTA model

similar to Iceland or Liechtenstein; with a few UK-specific tweaks perhaps,

but no overt ‘cherrypicking’.

It may be the case that few policymakers read this report, and fewer still

may take notice of its contents. It is a labour of love that we do not

expect to receive any recompense for.

But we believe that morally, those with the necessary knowledge and

ideas to contribute something to this debate should do so.

Any solution to the issues surrounding leaving the Customs Union must

include not just technological but also political ideas. We have tried to

provide them.

If the government adopt as official policy the ideas contained in this

report, we believe that there will be no return to a hard border in Ireland.

In addition, we believe that not only will there be no net job losses in the

UK; there will actually be a net jobs increase.

We have done all we can to explain our ideas. The torch must now be

passed to Parliamentarians and to the public to read them, discuss them

(perhaps even improve on them) and implement them.

- EFTA4UK Campaign group, 22/09/2018


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Postscript One – controlling immigration?

What about Immigration/Free movement of people (FMoP)?

It is true that accessing the single market via the EEA means signing up to a version of the

EU’s ‘four freedoms’ including free movement. But this need not be a deal-breaker.

Firstly, UK businesses and the NHS currently depend heavily on EU/EEA workers. And UK

citizens will still want to live work study and retire in the EU; so some kind of reciprocal

deal will have to be struck anyway.

If the UK joins EFTA/EEA it could use articles of the EEA agreement to better regulate any

excesses or surges in migration.

Example: Article 28 EEA allows for tweaks and temporary measures to control migration

from the EEA "justified on grounds of public policy, public security or public health".

If over time these measures proved insufficient the UK could put a unilateral brake or

restriction on migration from the EU/EFTA under the Safeguarding measure described in

Article 112 EEA. This would force the EU and EFTA countries to come around the table as

per Article 113:

"Article 113 1. A Contracting Party which is considering taking safeguard

measures under Article 112 shall, without delay, notify the other Contracting

Parties through the EEA Joint Committee and shall provide all relevant

information. 2. The Contracting Parties shall immediately enter into

consultations in the EEA Joint Committee with a view to finding a commonly

acceptable solution."

How would the EU respond to the UK using the emergency brake if it was needed?

The procedure is set out in EEA Article 114.

“If a safeguard measure taken by a Contracting Party creates an imbalance between the

rights and obligations under this Agreement, any other Contracting Party may towards

that Contracting Party take such proportionate rebalancing measures as are strictly

necessary to remedy the imbalance. Priority shall be given to such measures as will

least disturb the functioning of the EEA.”

This means that if the UK used the safeguarding measures to restrict EU free movement the

EU:

- Could only take steps which are both “proportionate” and “strictly necessary”

- Would be obligated to “immediately enter into consultations in the EEA Joint

Committee with a view to finding a commonly acceptable solution."

What commonly acceptable solution was ultimately decided upon would of course be a

matter for diplomacy and negotiation.


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Postscript Two – Mrs May’s misunderstandings

On the 21st of September 2018, Mrs May gave a speech in

response to the Salzburg talks. In this speech she said:

“the EU is still only offering us two options.

The first option would involve the UK staying in the

European Economic Area and a customs union with the EU.

In plain English, this would mean we’d still have to abide

by all the EU rules, uncontrolled immigration from the EU

would continue and we couldn’t do the trade deals we

want with other countries.

That would make a mockery of the referendum we had two

years ago.”76

You might legitimately ask - how does this speech affect what we have

outlined in this report? There are a lot of elements packed into these

paragraphs, so lets go through them:

• The EU is happy for us to stay in the European Economic Area

(EEA) – good.

• The EU seem to be suggesting we should stay in a Customs Union

with it. As we have described earlier in this document, a

transitional customs union may well be required but not a

permenant one.

• Re: uncontrolled immigration from the EU – see Postscript One.

• “we’d still have to abide by all the EU rules” – Wrong. See below.

• “we couldn’t do the trade deals we want with other countries.”

– Wrong, see below.


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What about the EU rules we would have to follow?

A 2015 report in the Icelandic press entitled ‘Iceland has adopted 10% of EU laws’ stated

that a:

“…study was carried out for the Foreign Ministry a decade ago

regarding the period from 1994, when Iceland's membership of the

EEA Agreement came into effect, to 2004. Based on the two replies

from the Foreign Ministry a total of 62,809 pieces of legislation

were passed by the EU from 1994 to 2014. Some 6,326 of those

were included in the EEA Agreement or about 10%.”77

The Norwegian Nei Til EU campaign group reported in 2016 that:

“In the period of 2010-2013, EU adopted 14,117 pieces of

legislation, while 1,605 directives and regulations were

incorporated into the EEA agreement. This amounts to 11.37

per cent of the total.”78

An article on the website of The Alliance of European Conservatives and

Reformists (AECR) stated that:

“…the EU adopts about ten times as many laws as are

introduced in Norway through the EEA Agreement. During

the period 2000-2013, a total of 4,724 acts were

incorporated into the EEA Agreement. Over the same

period, the EU simultaneously adopted 52,183 directives,

regulations and other legal instruments. Only 9.05 percent

of the new EU laws were thus incorporated into the EEA

Agreement.”79


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In 2015, Dr Richard North contacted the EFTA secretariat, to see if they could clarify further.

They reported that 10,862 acts had been incorporated into the EEA Agreement since its

inception in 1992, but that there were only 4,957 acts remaining in force at the time of their

reply. Dr North stated in response that:

“By contrast, the very latest count of the EU laws in force (today)

stands at 23,076. As a percentage of that number, the EEA acquis of

4,957 acts currently stands at 21 percent. In effect, the EEA (and

thus Norway) only has to adopt one in five of all EU laws – not the

three-quarters that is claimed.”80

So exactly how much EU law is incorporated into EEA law is difficult to say, but based on the

above sources, a figure somewhere between 15 and 20 percent seems likely.

But what is this ‘EU Law’ and where does it come from?

Michael Emerson, Associate Senior Research Fellow at the Centre for European Policy

Studies and former EU Ambassador to Moscow wrote in 2015:

“The large majority of EU rules are those governing health and

safety standards of industrial and food products for consumers and

workers, of which about one quarter are international (ISO)

standards, these being usually copy-and-paste identical to EU

ones.”81

Mrs May herself has previously admitted herself that a lot of the rules we would have to

continue to follow (regardless of what trade arrangements we have with the EU really) are

inspired by international bodies (where we would regain our vote and voice after brexit):

“The UK will need to make a strong commitment that its

regulatory standards will remain as high as the EU's. That

commitment, in practice, will mean that UK and EU

regulatory standards will remain substantially similar in

the future.

Many of these regulatory standards are themselves

underpinned by international standards set by non-EU

bodies of which we will remain a member - such as the UN

Economic Commission for Europe, which sets vehicle safety

standards. Countries around the world, including Turkey,

South Africa, South Korea, Japan and Russia, are party to

the agreement.”82


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Documents

EFTA and the Customs Unionefta4uk.eu/wp-content/uploads/2018/10/EFTA-and-the-Customs-Union_2.pdf · EFTA4UK Report: EFTA and the Customs Union Page 2 CONTENTS Brexit Timetable –