A trade border of some kind between the Republic and the UK is now inevitable, a senior trade and customs expert has told The Irish Times.
PwC Ireland's John O'Loughlin said the UK's decision to exit the European customs union necessitates customs checks on goods moving between the EU and UK, including trade between the Republic and all parts of the UK.
This will, by definition, involve additional administration, costs, resource requirements, risks of delay and potential supply chain disruption, he warned.
Even if the UK secured a customs arrangement with the EU akin to what Turkey has, Mr O’Loughlin said trade between the EU and the UK would still involve a customs declaration of some kind, stating the origins of the goods and whether duty in the third country had been paid.
“Customs checks are a real reality of whatever solution comes out of the Brexit negotiations.”
Mr O'Loughlin was speaking as details of the EU's draft withdrawal treaty emerged, which proposes Northern Ireland would effectively remain part of the EU customs unions and adhere to the single market rules to avoid a hard border after Brexit.
The proposals are likely to prove unpalatable to the British administration because of the implications for UK unity.
Transition period
Mr O’Loughlin said that while the expectation is that an EU-UK free trade agreement (FTA) will be in place at the end of a transition period, “it’s important to note that an FTA does not guarantee elimination of customs duty on all products”.
If an FTA can be reached, it still requires a customs border to operate with administrative formalities and associated costs for importers and exporters, he said.
Mr O’Loughlin also noted that an FTA may not not eliminate customs duty on all products, particularly sensitive products such as agri-food items; and would not apply to products which originate outside of the UK/EU and which transit through the UK en route to Ireland.
An additional challenge for Irish business, he said, was the use of the UK as a land bridge, where products are transiting through the UK en route to/from Ireland.
“All these supply chain models have different and significant customs compliance requirements,” he said.
East-west trade
Mr O’Loughlin said while the focus here has been very much on the North-South implications of Brexit, the bigger impact in economic terms, will be on east-west trade between the Republic and Britain, said to be worth up to €1 billion a week.
“There are few good news stories regarding Brexit and, with a new trading relationship to be formed between the UK and EU [including Ireland], the reality is that that a border of some kind will be required irrespective of the type of deal reached,” he said.
“Understanding the Brexit impact across all parts of the business continues to be a critical action, and with much commentary in recent days regarding the relationship between the UK and EU and the EU’s stance that a transition deal is not a given, we must all continue to watch the clock tick towards March 2019,” he added.
