UK Withdrawal and the ‘Backstop’ for Northern Ireland: The EU and the UK Proposals The UK and the EU are committed, in the process of Brexit, to having no hard border between Northern Ireland and Ireland, including no physical infrastructure or related checks and controls. This was set out by both the UK and EU negotiators in the ‘Joint Report’ in December 2017. This also stated that: “In all circumstances, the United Kingdom will continue to ensure the same unfettered access for Northern Ireland's businesses to the whole of the United Kingdom internal market” (Article 50). In order to protect these commitments to avoiding a hard Irish border and maintaining the 1998 Agreement, the EU included in the draft Withdrawal Agreement a Protocol on Ireland/Northern Ireland. (see summary in slide 2) This is a so-called ‘backstop’ option, to come into effect at the end of a transition period only if there is no UK-EU trade agreement, or if that deal is insufficient to meet the commitments of the Joint Report. The Protocol is envisaged as being a temporary insurance policy, specific to the needs of Northern Ireland/Ireland – not a precursor to the future UK-EU deal. The UK government has since published its own ‘backstop’ proposal in the form of a Technical Note on temporary customs arrangements, to apply at the end of an implementation (i.e. transition) period in limited circumstances and for a time-limited period. It focuses solely on the issue of customs (tariffs, quotas) but notes that ‘regulatory standards will also need to be addressed’. It would maintain the status quo in customs processes by having the whole of the UK in the EU’s customs territory and applying the Union Customs Code. The UK is though seeking exemption from the Common Commercial Policy to be free to do trade deals elsewhere. Dr Katy Hayward & Prof David Phinnemore Work in Progress; Comments welcome. @hayward_katy @DPhinnemore These slides present answers to four important questions: 1. What does the EU’s Protocol involve and what has been agreed? 2. What does the UK Technical Note propose to add to/change in the ‘backstop’? 3. What could this ‘backstop’ mean for trade and regulatory divergence between Northern Ireland (NI) and the rest of the UK? 4. If there’s a backstop, how ‘hard’ could the Irish sea border become, according to scenarios for the future UK/EU relationship?

Common Regulatory Area Establish an area without internal borders in which free movement of goods is ensured and North-South cooperation is protected (Article 3) Movement of People Common Travel Area and associated rights to continue (Article 2) Rights of Individuals No diminution of rights, safeguards and equality of opportunity as set out 1998 Agreement; UK to facilitate work of human rights and equality bodies (Article 1) Preamble Positions derived from Joint Report and other statements Free Movement of Goods Northern Ireland… shall be considered to be part of the customs territory of the EU; EU law on VAT and excise duties to apply (Article 4) Agriculture and Fisheries EU law on (a) sanitary and phytosanitary rules and (b) production and marketing of agricultural and fisheries products to apply to NI (Article 5) Single Electricity Market EU law governing wholesale electricity markets to apply to Northern Ireland (Article 6) Environment EU law on environmental protection concerning movement of goods to apply to NI (Article 7) Other Areas of North-South Cooperation Maintain conditions for continued cooperation, including in the areas of environment, health, agriculture, transport, education and tourism, as well as energy, telecommunications, broadcasting, inland fisheries, justice and security, higher education and sport (Article 8) State Aid EU law governing state aid to apply in respect of trade between NI and the EU (Article 9) Specialised Committee Establish a Specialised Committee to facilitate and implementation and application of Protocol including discussion of proposals from North- South Ministerial Council (Article 10) Supervision and Enforcement EU institutions and bodies – including Court of Justice – to have jurisdiction over Common Regulatory Area (Article 11) Common Provisions Application and implementation of Protocol; application of new EU law; representation in EU decision-shaping; risk assessments; personal data protection (Article 12) Safeguards Safeguards in cases of serious economic, societal or environmental difficulties (Article 13) Protection of Financial Interests Counter fraud and any other illegal activities relating to EU and UK interests in Northern Ireland (Article 14) Subsequent Agreement Replacement in part or in full of Protocol by future UK-EU agreement (Article 15) Annexes Lists of relevant EU law in three annexes to be integral part of the Protocol (Article 16) The EU’s draft Protocol on Ireland/Northern Ireland Agreed Agreed in principle Under discussion Dr Katy Hayward & Prof David Phinnemore Work in Progress; Comments welcome

Common Regulatory Area Establish an area without internal borders in which free movement of goods is ensured and North-South cooperation is protected (Article 3) Rights of Individuals No diminution of rights, safeguards and equality of opportunity as set out 1998 Agreement; UK to facilitate work of human rights and equality bodies (Article 1) Preamble Positions derived from Joint Report and other statements Free Movement of Goods Northern Ireland… shall be considered to be part of the customs territory of the EU; EU law on VAT and excise duties to apply (Article 4) Agriculture and Fisheries EU law on (a) sanitary and phytosanitary rules and (b) production and marketing of agricultural and fisheries products to apply to NI (Article 5) Single Electricity Market EU law governing wholesale electricity markets to apply to Northern Ireland (Article 6) Environment EU law on environmental protection concerning movement of goods to apply to NI (Article 7) State Aid EU law governing state aid to apply in respect of trade between NI and the EU (Article 9) Supervision and Enforcement EU institutions and bodies – including Court of Justice – to have jurisdiction over Common Regulatory Area (Article 11) Common Provisions Application and implementation of Protocol; application of new EU law; representation in EU decision-shaping; risk assessments; personal data protection (Article 12) Safeguards Safeguards in cases of serious economic, societal or environmental difficulties (Article 13) Protection of Financial Interests Counter fraud and any other illegal activities relating to EU and UK interests in NI (Article 14) Annexes Lists of relevant EU law in three annexes to be integral part of the Protocol (Article 16) UK’s proposed amendments to the draft Protocol (7 June 2018) Dr Katy Hayward & Prof David Phinnemore Work in Progress; Comments welcome Relevant customs legislation to apply to the whole of the UK & to the Crown Dependencies. UK in EU’s customs territory OR creation of a new UK/EU customs territory. (Para.11) [UK’s Framework for economic partnership (May 2018) proposes ‘remaining in step with the EU’s state aid and competition regimes’] ‘The UK and the EU will need to work together to develop governance arrangements’; ‘it may make sense for UK courts to look at the appropriate ECJ judgements’ (Para.22) ‘Administering the EU’s trade and customs policy … would require the UK to adopt existing and new rules in these areas for the duration of the temporary customs arrangement… it is important that the UK has the ability to continue to help develop the rules that govern trade and customs policy.’ (Para.21) ‘The full detail of all elements required to give operational effect to the arrangement will need to be negotiated and addressed as part of the Annex to the protocol.’ (Para.12) In UK Technical Note 7 June ‘18 Agreed in principle Under discussion

Implementing the EU’s ‘Backstop’: Resulting trade and regulatory divergence between NI and GB Currently, the idea of a UK ‘single market’ sits alongside regulatory divergence that already exists between NI & GB. Such divergence exists as a result of competences devolved to NI relating to EU integration (e.g. agriculture). There are currently no controls on GB-NI trade except relating to sanitary-phytosanitary measures protecting animal & plant health on the island of Ireland. Possible scenarios for end of transition period: EU’s Protocol with: Potential for Regulatory Divergence Required Checks and Controls on GB->NI trade 1. No final UK-EU customs or trade deal • Customs arrangements • Rules governing trade in goods, agriculture, fisheries + areas of North-South cooperation • Laws on VAT and Excise duties • GB and third country products entering NI (tariffs, quotas, rules of origin [RoO] to see how much of the product) • GB and third country products entering NI (standards) • VAT and Excise Duty payments on entry 2. UK in a Canada- or Ukraine- style free trade deal with EU • Customs arrangements • Certain Rules governing production/trade in goods, agriculture, fisheries • Rules in areas of North-South co-operation • GB products entering NI (RoO) • Third country products entering NI (tariffs, quotas, RoO) • GB and third country products entering NI (standards) • VAT and Excise Duty payments on entry 3. UK in a customs union with EU • Rules governing production/trade in goods, agriculture, fisheries • Rules in areas of North-South cooperation • GB and third country products entering NI (standards) • Controls on any GB products (e.g. agricultural) entering NI not covered by customs union (tariffs, quotas, RoO, standards) 4. UK in the European Economic Area (EEA) • Customs arrangements • Certain rules governing production/trade in agriculture, fisheries • Certain rules in areas of North-South co-op. • GB products entering NI (rules of origin) • Third country products entering NI (tariffs, quotas, RoO; standards) • Controls on any GB products entering NI not covered by EEA (tariffs, quotas, standards) 5. UK-wide alignment on customs and single market rules • Certain rules in areas of North-South cooperation • As per current arrangements (see (i) and (ii) above) • Controls on any GB products (e.g. agricultural) entering NI not covered by EEA or customs union (tariffs, quotas, standards) Dr Katy Hayward & Prof David Phinnemore Work in Progress; Comments welcome

Dr Katy Hayward & Prof David Phinnemore Work in Progress; Comments welcome How ‘hard’ could the ‘Irish Sea border’ be? Levels of GB to NI* friction** in various scenarios on top of a NI-specific backstop (as per EU’s draft Protocol) NI-specific backstop + a UK deal that has… Customs rules for 3rd country goods (i.e. CET, RoO) Trade in goods: customs (i.e. tariffs, quotas) Trade in goods: standards: (i.e. free movement) Agriculture *** Services [not included in backstop] Other (e.g. broadcasting, transport, environment) No trade deal ? CETA equivalent (‘Canada model’) DCFTA equivalent (‘Ukraine model’) Customs Union (‘Turkey model’) FTA + sectoral agreements (‘Switzerland model’) ? EEA (‘Norway model) UK-wide alignment with CU & SM rules ? Key: Actual Friction Potential Friction Negligible Friction * There may be differences in controls GB to NI compared to NI to GB. This only considers GB to NI ** ‘Friction’ meaning divergence leading to restrictions on movement and checks/controls *** Free movement of agricultural goods is not normally included in EU trade agreements