EU may offer British PM a UK-wide customs union

The European Union will offer British Prime Theresa May a UK-wide customs union as a way around the Irish backstop issue, but it will have to be negotiated beyond the Withdrawal Agreement as a separate treaty, RTÉ News understands.

The Withdrawal Agreement will contain a specific commitment to a UK-wide customs arrangement by way of a legal article, but that commitment will say that a formal EU-UK customs union will require a separate agreement.

However, the EU, and the Irish Government still insist that a Northern Ireland-specific backstop remains in place, even if a separate UK-wide customs arrangement is negotiated.

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London has long sought a UK-wide customs arrangement as a way to avoid customs checks on both the Irish land border and along the Irish Sea.

Re-worked elements of the draft Withdrawal Treaty have been seen by RTÉ News.

They appear to be in conflict with Mrs May’s demand that the Withdrawal Agreement contain a UK-wide customs backstop that is "legally-binding" and temporary, and her position that a Northern Ireland-specific backstop remains "unacceptable".

It is not clear that London will be content with a legal "commitment" to arrange a UK-wide customs backstop if it has to be negotiated as a stand-alone agreement that sits outside the Withdrawal Agreement.

Yesterday in the House of Commons, Mrs May outlined four steps that the UK was demanding in order for an agreement to be reached, including "the commitment to a temporary UK-EU joint customs territory legally binding, so the Northern Ireland only proposal is no longer needed".

RTÉ News understands that the promise of a UK-wide customs backstop will feature prominently near the top of a re-drafted Withdrawal Agreement, and that previous references to Northern Ireland being part of the EU's "customs territory" will be dropped.

Northern Ireland will be referred to in more oblique terms further down the text, according to a draft.

However, the text will say that in the event of the Northern-Ireland specific backstop coming into effect, a separate annexe will set out how that would work.

That annexe will refer to the EU's Union Customs Code (UCC) applying in Northern Ireland, according to a draft text.

These drafts could change further when negotiations resume.

Customs remains the most sensitive issue in the negotiations, with the UK regarding any customs differential between Northern Ireland and the UK as unacceptable, and tantamount to having a customs border along the Irish Sea.

The European Commission has been attempting to "de-dramatise" the issue, by suggesting customs checks on goods between Britain and Northern Ireland could be electronically pre-cleared away from ports, and through the use of scanning and barcode technology.

While the EU has shifted its position to accommodating a UK-wide customs arrangement, it seems certain it will not be agreed and finalised within the Withdrawal Treaty.

Officials say such an agreement would be highly complex and would take some time to negotiate.

"That's complicated," one EU source told RTÉ News. "It's much more complicated than it sounds.

"The first point is the legal basis. You can't do it under Article 50. That's always been our stance. The second point is the practical aspects. It's very complicated to work out all the details in a short period of time. These things need to be negotiated properly."

The EU will want to know which part of the Union Customs Code acquis (body of law) the UK is willing to swallow in order to be part of such a customs union.

In particular, it would have to be decided whether or not the UK will seek to negotiate, sign and implement its own trade deals, or whether it will still avail of free trade agreements (FTAs) the EU currently has with third countries.

The EU will also need to know whether, as it continues to negotiate its own trade deals around the world, it is doing so on behalf of 27 or 28 countries.

The other problem is that the only off-the-shelf arrangement the EU operates, aside from its own, is a customs union with Turkey.

The EU-Turkey customs union does not absolve Ankara of having to carry out checks for regulatory compliance.

Furthermore, Turkey must abide by EU-third country trade agreements, but not in a reciprocal way.

In the case of the EU-Canada trade deal (CETA), Turkey has to allow Canadian goods into its market on the same terms as they enter the EU, but Turkish goods are not given the same privileged access to the Canadian market.

"The EU-Turkey Customs Union has lots of issues," says the source. "Those are bound to be raised. But it's very difficult right now under the pressure of time, in the current context of the [Withdrawal Agreement] negotiations."

The other problem is regulatory compliance.

In order to avoid checks for industrial goods, live animals and food products on the Irish border, there would have to be alignment of the EU's single market rules.

However, a UK-wide backstop does not address that issue, implying that some kinds of checks would be required between GB and Northern Ireland.

EU officials were taken aback by Mrs May's very public new red lines, as there was an expectation that any new ideas would have been presented in private by the British negotiating team, who had been operating with their EU counterparts in highly secretive conditions in the run up to the last summit.

EU sources say member states will want to see firm details of the proposal she outlined in the House of Commons.

It is expected that the British negotiating team, lead by Mrs May's Europe adviser Olly Robbins, will return to Brussels shortly present to details of the new UK demands.