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Europe Daily Bulletin No. 12285
Contents Publication in full By article 25 / 27
The B-word: Agence Europe’s newsletter on Brexit / The b-word

Trading insults

Tory leadership contenders Boris Johnson and Jeremy Hunt are not only trading insults but also insulting the global trading system - which is moving on quickly without them.

One of the more outlandish claims from the Johnson camp last week is the idea of using a World Trade Organization (WTO) treaty provisions to keep tariffs at zero post-Brexit. The ex-foreign secretary wants to employe Article 24 of the WTO’s general agreement on tariffs and trade (GATT) - which dates back to 1994 and essentially lays out exceptions to the ‘most favoured nation’ clause in Article 1 - to set up an interim trade agreement or a “standstill” on tariffs until a full deal can be done.

The claim has been shot down by lawyers and WTO officials, and even the UK’s own trade minister, Liam Fox, told the BBC this week that “it isn’t true”. Expert blogger and former member of the WTO Secretariat, Peter Ungphakorn, has written a lot on the subject and has a new easy-read explainer on it. While the rules are legally complex, the politics are not: if there is a messy no-deal Brexit, the EU will be very unlikely to agree to any kind of mini-deal that would benefit the UK.

Meanwhile, the EU is caught up in its own leadership battles and ongoing trade deals. With a special European Council to prepare, a G20 summit to attend and a potential trade deal with the South American Mercosur bloc to finish, it has been a busy week for the EU.

However, EU officials still found the time to discuss a different global trade conundrum: how to keep the Irish border open in the event of the UK rejecting the Irish border backstop, or leaving the EU without a withdrawal deal.

An interim report by the UK’s ‘Alternative Arrangements Commission’ - a cross-party group of politicians and experts led by Remain-supporting Conservative MPs Nicky Morgan and Greg Hands - said alternative arrangements to the backstop could be up and running in three years if work starts now.

Those alternatives include the use of 'special economic zones’ along the Irish border - based on existing WTO commitments - and a trusted trader system for larger companies. Smaller companies would be exempt from the rules, and mobile units would be used to carry out checks away from the border.

The suggestions resemble some of those made in a summer 2017 paper from the UK government - which were dismissed by the EU at the time - and suggestions by EU Brexit negotiator Michel Barnier.

The problem is, the backstop is there, by definition, because those arrangements will not be up and running in time, which the UK’s Commission acknowledges.

Irish Taoiseach Leo Varadkar said on Friday that Ireland and the EU “mean what we say” about the withdrawal agreement not being reopened and the backstop being a condition for any transitional deal with the UK.

To illustrate the complexity of the Irish border, the EU this week published an old ‘mapping’ exercise of north-south cooperation, which was central to the drafting of the backstop.

It shows 142 areas where Ireland and Northern Ireland effectively operate as a single unit, including agriculture, education, environment, health, tourism and transport (the six formal areas outlined in the 1998 Good Friday peace agreement) and other areas including policing, broadcasting and energy.

And, according to a report by a KU LEUVEN university professor, supported by the Flanders Department of Foreign Affairs (FDFA), the effects of a hard Brexit will spread far beyond Ireland, and even Belgium. The report, by Professor Hylke Vandenbussche, shows Portugal, Denmark, Sweden, Poland, Czech Republic, Hungary, Cyprus and Malta will be "seriously affected”, and would could have a "devastating impact" on the textiles, food and drink, agriculture and livestock sectors in countries such as Italy, Spain, Romania and Slovakia.

The report also calls for special supports from the EU budget in the case of a no-deal Brexit, and warns that any trade barriers at the ports of Zeebrugge, Antwerp, Rotterdam and Calais will cause knock-on effects throughout supply chains across Europe, and particularly in the UK.  (Sarah Collins)

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ECONOMY - FINANCE
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The B-word: Agence Europe’s newsletter on Brexit
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