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THE IRISH TAX AND WELFARE COMMISSION REPORT

The Report of the Commission on Tax and Social Welfare contains some proposals that would have a dramatic effect in rural Ireland.

 The Commission, which reported last week,  was set up in fulfilment of a commitment in the Programme for government. It was given a very tight deadline to complete its work, and this may explain the gaps in its analysis.

UNREPRESENTATIVE MEMBERSHIP

The Commission was chaired by an academic. It had two civil servants in its membership, a tax consultant, an accountant, two members from economic research institutes, one person from a homeless charity, a businesswoman, one from an environmental charity, someone from IBEC…..but NOBODY representing agricultural or rural interests!

In addition, it received at least 28 submissions, mostly from other civil servants, state agency employees and academics but not one, as far as I can see, from the food and agriculture sector. This is surprising.

SPENDING IGNORED

The terms of reference of Commission seem to assume that a steadily rising level of spending by government in Ireland will be necessary, equitable and inevitable.

Its task, as it saw it, was simply to

“ensure sufficient resources would be available to meet the cost of public services” as if that cost was a given that could not be altered.

More “resources” in the form of more taxes are simply assumed to be required.

 Deciding on the details of the tax changes the Commission recommends, as a consequence of this assumption, is to be left to elected representatives.

 The Commission offers them a long , and  unpalatable,  menu of tax changes from which they may  choose.

 But the Commission does not look at the expenditure side of government at all!

 Over the last fifty years, the functions taken on by government have steadily increased. Child care, Free GP services, subsidised elder care, and insurance against use of defective building materials, are examples of responsibilities being shifted onto the shoulders of the general taxpayer in recent years.

 We are also about to substantially increase our armed services, and  to increase benefits for those affected by the energy cost squeeze.

 Do we have an agreed basis for prioritizing these expenditures? I do not think so.

 Should a Commission have provided politicians with advice on how to prioritize spending, before advocating tax increases? Yes, I think it should.

A more balanced approach by the Commission would have started with a rigorous analysis of present and future spending commitments, on the basis of explicit criteria.

 Such an approach might not necessarily have meant the rejection of the Commission’s tax proposals, but it would have made them more understandable.  Ideally, the Commission should have identified different levels of government spending relative to GDP, and what each would have meant in service and taxation levels. 

Unfortunately the tight time limit set for the Commission would not have allowed the time to do an exercise like this.

In fairness to the Commission, it does suggest that our ageing population will mean increases in present levels of health and pension spending. It says adapting to climate change will cost a lot of money. Corporation tax revenues will fall from their presently artificially high levels.

UNPALATABLE PROPOSALS

The Commission report contains a number of unpalatable proposals .

Below are some examples

  • It says a tourist tax should be imposed on accommodation.
  •  PRSI should be extended to incomes below 352 euros per week.
  •  Pensioners should pay PRSI.
  • Capital Gains tax should apply to gains made on the sale of family homes.
  •  The Local Property Tax on houses should be increased and a higher rate of tax applied to second homes.
  • The lower rate of VAT should be increased and zero rate VAT restricted.
  • Parking spaces should be taxed and road use charges introduced.
  • It advocates this on the basis of what it calls the principle of equity.
  •  It defines equity as treating people in similar situations similarly.

DEPENDNENT CHILDREN IGNORED

But it  favours the infamous principle of “individualisation” in the income  the tax code, which does the exact  opposite. A taxpayer on 50000 euros a year with a dependent spouse and 5 dependent children is not in the same position as a single person on 50000 euros a year. But under individualisation they would be treated for income tax purposes as if they were in a similar position.

SEVERE PROPOSALS FOR AGRICULTURE WILL REDUCE THE VALUE OF LAND

Turning to Agriculture, all land, including agricultural land remote from towns, should be subject to a Site Value Tax according to the Commission. This Site Value Tax would eventually be merged with Commercial Rates.

Obviously agricultural land. that had little prospect of being needed for housing or roads , would be valued and taxed at a lower level than agricultural land near a town. .

But land that had the POSSIBILTY of being needed for housing, might go up in value and thus  in tax liability, even though the housing development might never take place .

This proposal amounts to a reintroduction a centrally administer red form of agricultural rates.

Let us not forget that the Site Value tax would have to be paid  out of after tax income, by borrowing or by selling of  land or stock.

 I can see a Site Value Tax becoming the subject of a lot of litigation between landowners, the Valuation office and the Revenue.

 The Commission gives no idea of the likely rate of Site Value Tax….would it be 1%, 2%,  or 0.5% per annum? How might the rates be altered and by whom?

It is impossible to assess the social effect to this proposal without having answers to these questions.

As well as paying the is annual Site Value Tax, the Commission recommends that holders of agricultural land pay substantially more Capital Acquisitions Tax (CAT) on the transfer of the farm to their children.

 The CAT exemption limits for transfers to children would be reduced.  Again the Commission does not say by how much .

 Again the “experts” on the Commission leave that unpalatable task to the politicians!

 The present system, whereby agricultural land is valued at less than market value when it is being passed to a child, whose main assets after the inheritance are agricultural land, is also to be curtailed.

The inheriting child would have to be active in the business to qualify for the relief.

 Again, this additional CAT would have to be paid by the inheriting child by borrowing, by selling property, or out of income saved and not spent in past years.

The combined effect of these proposals, affecting farms, would reduce the value of agricultural land in Ireland quite substantially. The suggested restrictions on livestock production in the interest of reducing methane emissions will push land values down further.

It is unlikely that recommendations of this Commission will be acted upon in the near future. The government has enough on its mind.

 But they will be used in negotiations for the formation of future government. They may also be turned to if a Minister for Finance finds herself short in a particular year.

 Given that the farming community had no input at all to the Commission, their representatives should go through the report with a fine comb to be ready for the arguments of the future.

AUTUMN CHALLENGES FOR THE EU

The European Union is facing some pretty severe challenges this autumn. 

GAS PRICES AND THE GERMAN ECONOMY

 The biggest one is the high price, and insufficient supply, of natural gas.

This will have a disproportionately damaging effect on Germany and Northern Italy, which are the manufacturing hubs of western Europe. Both countries have already been hit by the recession in China and the loss of export markets that that has entailed.

I have always been of opinion that, without Germany, there would  be no such thing as a real European Union. ,

Germany provides the financial backstop on which all the EU’s ambitious plans, including the Green Deal, and the recently acquired capacity of the EU to borrow, rest. Without a healthy German economy, and a Germany that is prepared to think of its neighbours as well as of itself, the EU would wither. Other EU states need to show energy solidarity with Germany during this winter, when its economic model is under particular stress.

Meanwhile, the EU is facing other threats that could also become existential.

One is from Poland, and the other is from the United Kingdom.

POLAND AND AN INDEPENDENT JUDICIARY

In the Polish case, the courts system there has been politicised, to suit the agenda of the ruling Law and Justice Party.

 In effect, Polish Courts are rejecting the primacy of EU over Polish law, in disputes around issues that are within the competence of the EU under the Treaties.

This principle of the primacy of EU law, to be authoritatively interpreted by the European Court of Justice, is not new.

It dates back to European Court of Justice (ECJ) decisions of 1964 and 1970.

 By having a single ultimate interpreter of EU law, namely the ECJ, we have been able to create a Single market with consistent rules, consistently interpreted, and  more or less consistently applied, across all 27 countries of the Union.

The Polish government has interfered with the independence of its Courts by putting in place a Disciplinary Tribunal for Judges, one effect of which has been to encourage a nationalistic and Eurosceptic interpretation of the position of Polish law within the EU.  Some Judges, disliked by the government, were sacked.

Cases on the interpretation of EU laws, as applied in Poland, are not being referred to the ECJ for authoritative interpretation, as is the normal procedure in most EU countries. Thus the primacy of EU law in Poland is being slowly eroded. If a big country, like Poland, gets away with this, there will be many imitators (like Hungary which is an even worse case), and the European Union will begin to decay.

Notwithstanding all this, Poland was, in June 2022, allocated 36 billion euros in EU funds, even though it has not yet dissolved the Disciplinary Tribunal, as required to by previous EU decisions , and had not addressed the primacy of EU law issue at all.

 In a split vote the Von der Leyen Commission voted to release the funds, on the understanding that Poland would meet certain “milestones”, including the abolition of the Disciplinary Tribunal , but not the affirmation of the primacy of EU law.

 Obviously the burden being borne by Poland in aiding Ukraine influenced this decision. But the trade off is fundamentally damaging. The rule of law is one of the EU values for which Ukrainian people are giving their lives, and one the reasons Ukraine and other countries want to join the EU as a full members.

The advantage of the EU, for a small country like Ireland, is that it makes its decisions based on clear rules, and not on the basis of raw power. Ireland should not be indifferent to what is happening in Poland. That said, the EU should also be conservative in asserting what comes within the legal competence of the EU.

Meanwhile the integrity of the Single Market, and the primacy of EU law, is also being challenged, albeit in a less fundamental way, by British tactics over Brexit. 

BRITISH BREXIT TACTICS

 Under the Protocol, and to avoid the need for customs controls on the Irish land border, Northern Ireland is to be allowed unfettered access to both the EU and the UK Single markets.

But the UK says it does not want the ECJ to be the final interpreter of EU rules, as applied in Northern Ireland, and it also wants NI exempted from EU State aid and VAT rules. Such a precedent for a territory within the EU Single Market, if set,  would , like the one the Poles are attempting, undermine the level playing field that is  essential to the EU Single Market.

The incoming UK Prime Minister, Liz Truss, appears willing to provoke a major crisis with the EU on these matters.

 She seems to believe that, if she is strong, the EU will cave in. In a way, the problem is that UK has never taken the EU very seriously and takes a patronising attitude towards it.

So the EU should not wait until the UK has started to disapply the Protocol, to outline to the trade sanctions it would impose on the UK. Once the Protocol disapplication Bill reaches Committee Stage in the House of Lords, the EU Commission should publish the full list of its proposed trade sanctions, to come the day the legislation is implemented. That  advance notice would give time for cooler heads to assert themselves in London.

Meanwhile, I have no doubt that practical compromises can be reached on the implementation of the Protocol.

 In July,  the Europe Committee of the House of Lords published a very interesting report, with the evidence it received, on the Protocol.

It was balanced. It showed that the Protocol had adversely affected the retail sector in NI, but had advantaged manufacturing investment there

I drew two conclusions from reading the report and the evidence.

UK UNLIKELY TO WIN IN COURT

The UK will lose the Court cases it is facing, for attempting to walk away from the Protocol. Under the Vienna Law on Treaties, the UK would have to show it had been suffering from “coercion”, or “improper process”, when it signed and ratified the Protocol. Given that the negotiations had been going on for more than a year, the UK will not be able to do that.,

EU AND UK OFFICIALS SHOULD HOLD JOINT CONSULTATIONS IN NI

The other conclusion I drew was that the best way to find solutions to practical problems thrown up by the Protocol would be for UK and EU officials jointly to meet the various sectors of the NI economy. Each have had separate meetings with the sectors, but that cumbersome format is not conducive to constructive thinking or to problem solving.

One of the advocates of Brexit, Michael Gove, suggested in February 2021 that there be a joint EU/ UK Business Consultative Group of officials,  who would to talk, together in the one room, with all the relevant economic actors in NI. If Liz Truss wants to keep open the option of a negotiated agreement, as she says she does, she should activate this proposal of Michael Gove this week.

Otherwise we are all heading for unnecessary trouble, when we have so many other problems to deal with.

 

 

IS DITCHING THE PROTOCOL GOOD FOR “THE UNION”

uk flag on creased paper

While visiting relatives in London , I was invited to give an interview to Times Radio yesterday .

It was a great chance to speak to to an English audience.

The subject was the stated policy of Liz  Truss  not only to enact , but to implement , the legislation that would unilaterally disapply a Protocol , that the  UK freely agreed to in an international treaty , signed and then ratified by the UK Parliament.

This extraordinary and damaging course , for the UK , is being justified on the grounds that it is good for the Union, by which is meant in this case the union of Britain and Northern Ireland.

Indeed it is being pressed forward by a  self described “Conservative” and supposedly “Unionist” party.

My argument to Times Radio listeners was that this  radical , and deeply unconservative,  attempt to break a solemn treaty , is actually DAMAGING to the Union, for the following reasons

1. It is opposed by a majority in Northern Ireland. A majority there would like changes to the Protocol alright , but do not favour such a radical course as Truss is insisting upon. Adopting a course , in defiance of a majority view in Northern Ireland,  politically weakens “unionist” sentiment there. That should be fairly obvious.

2. Northern Ireland has prospered disproportionately under the Protocol.  

From being one of the worst performing regions of the UK before the Protocol, Northern Ireland has become second best after London , under the Protocol.

Prosperity in Northern Ireland, as part of the UK and under the Protocol , is objectively good for the Union. Business in Northern Ireland knows this. The “ Conservative and Unionist” party in Britain does not seem to care.

Incidentally, the more Northern Ireland prospers under the Protocol, the less subsidisation will it require from London, which also would strengthen the Union.  

3 . Unilaterally ditching the Protocol will initiate a a major trade war between the UK, including Northern Ireland, and the EU. Liz Truss, a former Trade Secretary, knows this.

This trade war will inevitably be disproportionately severe on Northern Ireland , because it is a region  directly on the UK/EU frontier. Again this is obvious.

The consequences of this UK initiated trade war will  thus be bad for the Union because it will hurt the people of Northern Ireland more than anyone else in the UK. Again, that is bad for the Union.

Incidentally, this UK initiated trade war will also weaken the western alliance economic and political capacity to support Ukraine, a concern for democrats everywhere.

4 . Ditching the Protocol will not restore the  economic status quo ante  for Northern Ireland that preceded the Protocol, when it was lagging behind the rest of the UK.

The new situation will be much worse than that for Northern Ireland. This is because the economy there will be engulfed in  new duplicative bureaucracy of a kind never seen before.

Long existing links will be broken.
Supply chains will be destroyed.
Expensive investments will be rendered valueless.

This is because the ditching of the Protocol will allow the UK to impose increasingly different product regulations in Northern Ireland , to the ones it uses at the moment and which allow it free access to the EU market, the only market in the world to which Northern Ireland has  unimpeded road access.

The damage will be be felt especially severely by Northern Ireland’s dairy sector.

 One third of Northern Ireland milk is processed in the EU  ( in Ireland).  There are 5400 dairy businesses in Northern Ireland and the business generates 1.5 billion sterling every year.. This cross border processing  of Northern Ireland milk have to stop if  the milk is longer produced to EU standards. This will be massively disruptive .

 To get around that ,  a special supply chain would have to developed, separate from the one for supply  for milk destined for the NI/ UK .  Northern Ireland Farmers will be forced to choose to be EU or UK suppliers, whereas they can be both at the moment.

 Massive duplication and additional expense would the thus be imposed on dairy producers in Northern Ireland , most of whom  probably vote for “unionist” parties,  and who are enterprising people , and vital contributors to their neighbourhoods. They do not deserve this.

 So ditching  the Protocol will not only be bad for the Union, it will be bad for unionists.

For all these reasons Liz Truss’ policy is not only unConsrvative, it is anti Unionist !

Maybe some her friends listened to Times Radio!

Frank Crowley RIP

I am deeply saddened to learn of the death of Frank Crowley . His formidable vote getting ability was vital to enabling Fine Gael to get into government.
Frank loved North Cork and spoke up for it with deep conviction.
He was very popular with colleagues.

A DANGEROUS WORLD…

illustrations by @liuzishan

There is more to worry about in the world today than in any time in my memory.

I remember the Cuban missile crisis, a very dangerous moment. It was defused by secret diplomacy between the Soviet Union and the US , and the willingness of the US to accept a Communist state in the Western Hemisphere , and of the Soviets to turn their ships back.

If a similar issue arose now , does a basis exist in which Russia and the US could even talk to one another to defuse it?

The US/China confrontation will be more long lasting.

China has dramatically increased its military spending. Confronting China is almost the only thing on which Democrats and Republicans in the US can agree.

The US is pledged to support Taiwan remaining politically separate from China, even though it is part of China, and the US is theoretically prepared to to go to war to defend that position.

 But the US position is ambiguous.  So is the Chinese position.

Ambiguity is often the enemy of peace. World War One arose from ambiguity in the pledges the powers had given to one another in the event of attack. If the pledges had been clearer, the risks might not have been taken.

Inflation , and an artificially induced recession  to cure it , are increasingly expected. Higher interest rates would be the tool used.

 The political effects of this could be very serious , because public opinion is unprepared for it, and the hardships will not be evenly spread.

Inflation hits everybody, though not equally.

High interest rates  are more selective.  

They hit over borrowed states , like Italy,  hardest. They also cause unemployment which hits people with marginal jobs, but leaves those in secure employment with  savings  or low borrowings  unaffected. That is what happened in the 1980s. This leads to political tensions.

The idea that we should tackle inflation by extra state spending ( which can only be paid for either  by taxation now, or by borrowing , which is taxation of our children) does not seem sensible to me. Yet everyone is advocating it.

 The current inflationary surge has come from outside. It has made energy and food importing countries poorer. Attempting to redistribute this poverty through state action raises expectations that cannot be fulfilled , and that will damage democracy. Increasing demand adds to inflation. Increased supply is the cure , but that is not in the gift of any western government.

It is important that voters understand the gravity of the problems we are facing. Populism confuses facts with emotion. Anger is not a policy. Blame is not a policy either.

We need to think things through carefully.

THE UK’s ATTEMPT TO BACK OUT OF THE PROTOCOL IT AGREED

uk flag on creased paper

The UK government is unilaterally signalling its intent to ditch  the provisions of the Northern Ireland Protocol that are designed to protect the integrity of the EU Single Market. The integrity of the Single Market rests on their being a single set of rules, uniformly enforced and consistently applied, across the 27 EU States.  

Under the Protocol, goods produced in NI would enjoy full access to the Single Market without any checks at the EU border in Ireland or anywhere else. The Protocol also affirms that NI retains full access to the UK market. This is a win/win situation for .NI business.

The new UK legislation announced this week would instead create a control free zone in Ireland, which would radically weaken Irelands   position as a member of the EU. By doing away with the controls at the ports in NI , envisaged in in the Protocol , it would create a situation whereby good and foods, not meeting EU standards , could be brought into the EU market via Ireland.

We should not forget that the Withdrawal Agreement, of which the Protocol was a central part, was a key element in the winning Conservative Party General Election Manifesto of 2019.

Now the joint author of the Protocol, Boris Johnson , wants eviscerate it by means of unilateral UK legislation.

A unilateral breach of a Treaty by domestic legislation  on an internationally sensitive matter Is clearly a breach of international law.  

International commerce, in which the UK was once a major champion, rests on scrupulous respect for treaties and contracts.

“My word  is my bond” was once a watchword in British international dealings. No more, it seems.

The UK are now  claiming that an international Treaty can be breached on the basis of


“ necessity”.

This is a hard claim to justify in this case . 52 of the 90 members of Northern Ireland Assembly have indicated support for the Protocol, so there is no democratic “necessity“ to scrap the Protocol.

It is true that the DUP has said it will not sit in the NI Executive unless it’s seven demands for changes are met. These demands are vaguely phrased and symbolic  and do not provide a solid basis for legal resolution. It is not clear when or if the DUP would take up their seats in the NI Executive. So one  minority political party , in  small part of the UK , cannot be allowed to determine what is a “necessity” for a large and diverse state like the UK .

The fact that the UK government, Parliament, and electorate , all endorsed the Protocol as recently as 2019, with their eyes wide open, makes it very hard to plead “necessity” as a ground for undoing their own work.

An objective court would decide that they could and should have anticipated what would happen in their own jurisdiction.

The situation we are in today is a sign that debate within the ruling Tory party is taking place within a bubble , within which the needs of others outside the bubble are not heard.

Following the debate on the Protocol in Tory supporting press in Britain is like watching the reaction of the Republican base to the hearings about the invasion of the Capitol.  They hear what they want to hear , and nothing else.

One Brexiteer recently described the NI Protocol as “ a punishment the EU inflicted on the UK for Brexit”. This is despite the fact that in 2019, Boris Johnson, who negotiated the Protocol himself, claimed that ,in the Protocol , he had swiftly negotiated  what he called a “great new deal”!

He, unlike his predecessor, had got Brexit done, he boasted.

The  same Brexiteer writer said the Protocol was “an attempted power grab “ by the EU over the NI economy “on behalf of its allies in Dublin”.  The writer ignores the fact , under rules written while the UK was still an EU member, the Single Market of the EU has to have border controls, and these controls have to be more or less the same at all EU Borders.

Any precedent the EU might cede to the UK will be demanded by other non EU states with land borders with the EU.

The UK demands to be trusted when they say that nothing that fails to meet EU standards will cross the border into the EU .

They seem to have forgotten the long tradition of smuggling on and around the NI border , some of which which helped finance paramilitary activity in the past,  activity which costs thousand of IRish (and British) lives , and  could do so again.

Trust has to be earned, it cannot be commanded. If the EU cannot trust the UK government to keep its word, it will be even harder for it trust the private sector    “trusted traders” , the same government appoints to protect the EU from the smuggling of sub standard goods and foods across the border into the Republic.

What will happen now?

The EU has made clear the terms of the Agreed Protocol will not be changed. It has also made clear that without the Protocol there could have been no Withdrawal Agreement, and without that ,  there could have been no Trade and Cooperation Agreement(TCA)

Without the TCA, the Common External Tariff of the EU would have to be applied to British goods coming into Ireland and every other EU state. This would be deeply destructive , but it is the logical outcome , when one tries to unravel complex inter related  international agreements unilaterally. The whole thing comes apart.

As an EU member, Ireland would then have to apply the Common External Tariff on its own land and sea borders, a task of daunting proportions politically and practically. The effect on stability in NI  , and the sense of isolation of Northern nationalists , would be intense. The disruption of the food industry in The whole of Ireland would be disastrous.

One hopes that it will not come to that. But pretending that this could never happen is not wise.

The best approach for the EU will be to gradually turn up the heat on the UK so as to give them time to learn that actions have consequences , and the price could be very high. The European Commission has much experience in trade disputes and know how and where to target it’s actions. Meanwhile the political climate in the UK could change. The UK opposition parties need to assert themselves for the sake of the reputation of their country.

famous seated statue of president in memorial

PRESIDENT  BUCHANAN

I recently enjoyed reading a biography of Abraham Lincoln’s immediate predecessor as US President, James Buchanan.

Of Northern Irish stock, he had a long political career in Washington, and abroad representing his country, before he became President at the then advanced age of 70.

The book by Garry Boulard is entitled   “ The Worst President”, a title that is not really warranted by its content.

Buchanan did not believe in the forceful abolition of slavery in the South, but he did not want to see it spread any further.

 He was  also uncertain whether the Federal government had the right to use force to prevent  state from seceding  from the Union, although he eventually came to the view that it had.

 There was genuine room for doubt on the legal position at the time.

 The issue was eventually settled only when, after Lincoln had taken over, South Carolina forces fired on a Federal Fort in Charleston.

The Civil War that followed polarised opinion, and Buchanan’s temporising earned him a bad reputation.

 But hindsight is at work here. Buchanan suffered the same sort of retrospective reputational fate as Neville Chamberlain.

Both bought time, and preserved peace as long as they could, thereby ensuring that when battle was finally joined, public opinion was better prepared for the sacrifices involved.

UK’s threat to break international treaty is ‘gravely serious’

link to interview

WHY THE UK DEMANDS, IF CONCEDED , WOULD UNDERMINE THE EU

 UK critics of the Protocol, including unionists, fail to explore why the Protocol must contain provisions that EU rules on goods must apply to NI, and be interpreted there in the same way as in the 27 EU states.

 It has been this unwillingness to try to understand the EU reasoning that has made the negotiation so difficult. The first principle of a good negotiation to understand your interlocutors genuine needs. I do not feel the Protocol critics are doing this sufficiently.

This unwillingness to try to understand the reasoning behind the Protocol testifies to the deep lack of seriousness at the top of British politics.

 Expertise is disdained. Verbal dexterity and witty put downs are preferred to truth telling and serious analysis. The former are the skills that win votes in student debates in Oxford University, but they are useless when it comes to the hard slog of governing a country and negotiating with other countries

.

This lack of seriousness explains why Boris Johnson agreed to the Protocol, won an election on the basis that it was “getting Brexit done, and now wants to pull out of it.

There is  also a complete mismatch between the negotiating styles of the UK government and  of the European Commission.

 The UK approach is one that emphasises drama, and performance for an external audience. The Commission’s approach is low key and legalistic and is rooted in the texts of EU treaties and laws, documents which the UK political negotiators hardly take the trouble to read (as we have seen with the Protocol)

The essence of the Single Market is that it sets up a single set of standards for goods and foods, standards which are uniformly applied and interpreted consistently across the EU. That makes trade simpler and protects consumers equally, where ever the make their purchases in the EU

NI is important, but so too are the 27 EU states and their Treaty commitments to one another. 

For example, a UK proposal that exempted NI from any of the EU rules, listed in the Protocol ,would create doubt as to the wisdom of investing in an EU oriented business in NI. NI sourced goods could then no longer be relied upon as fully meeting EU standards . That would dilute the unity of the Single Market.  The Commission is not going to allow this to happen.

 When a Competence review, to see if the balance of responsibilities between the UK and the EU was right, was undertaken by the UK Coalition from 2012 to 2014 before the 2016 Referendum, the then NI Executive said access to the Single Market was “vital” to NI.

The UK took part in the drafting of all the EU rules listed in the Protocol which will apply in NI under it, and understood at the time that they were necessary to protect the integrity of the Single Market. Chapter 3 of the UK’s own Competence Review explained why this was needed. Why does the UK not understand in 2022 what it understood in 2012?

The answer is that the present UK government thinks the 2016 Referendum result changes everything.

 That may be so for the UK, but it changes nothing  or the EU and its 27 members states. The requirements for maintaining the Single Market among the 27 EU members have not changed. These rules are there to protect the EU Single Market and they  will not be changed Boris Johnson or for Jeffrey Donaldson, who freely chose to leave the EU.

The suggestion, by the UK, that ECJ jurisdiction would not apply to interpreting the EU rules as applied in NI  is  dangerous.  It could be seen as subversive of the entire Single Market. It would institutionalise double standards inside the EU Single Market, and  potentially reverse 50 years of European integration.

ECJ judgements created the Single market, almost as much as did EU Treaties and legislation.

The idea that there might be two versions of EU law, a version applied in the EU on the basis of ECJ jurisprudence, and another NI version, based on UK Court interpretations, could not endure.

 It would be a formula for perpetual and wasteful conflict. 

The same consideration applies to the idea that EU state aid rules would not apply in NI while NI was supposed to have unfettered access for goods to the Single Market. It would create a platform for unfair competition which is the antithesis of the EU Single Market.

We should remember also that proposing changes to the Customs Code of the EU is an exclusive Commission competence, rather than one for the Member states. If it has been otherwise, there would never have been a Single Market. The UK proposals on flexibility directly attack on this exclusive competence of the Commission. I worked in the Commission for five years and I know the Commission will not give this up  to some joint EU/UK Committee..

 Because the EU is a voluntary Union of 27 states, it is an inherently fragile construction, bound together by rules that are freely accepted by 27 very different countries.  

  The big weakness of the European  Commission in the present impasse is that it is not good at explaining why its rules are as they are. The Commission  is good at details,  but not good at communicating basic concepts and the logic of the EU position in plain language.

 It  is allowing the UK to make all the running publicity wise. It is time to change this.

REES MOGG APPOINTMENT COULD  MAKE PROTOCOL DIFFICULTIES MORE ACUTE

 Jacob Rees Mogg has been appointed as UK  Minister for Brexit Opportunities, with a mandate from Boris Johnson  to  change 1000 regulations, now in force , which the UK adopted as an EU member.  

This mandate, if acted upon, makes a settlement of the EU/UK dispute over the Protocol  next to impossible.

The more  EU inherited  UK regulations in respect of goods, which Minister Rees Mogg changes, the more will be the frequency and intrusiveness of checks on goods entering Northern Ireland from Britain.

 This because, under the Protocol Minister Rees Mogg and his colleagues signed , Northern Ireland will continue to apply  EU regulations for goods, including food products.  

 Any new and different UK rules , sponsored by Minister Rees Mogg, will not apply in Northern Ireland .  This will mean even more checks on British goods entering Northern Ireland to ensure that the goods comply with the EU rules. 

 New and different UK rules for goods, will also mean more things to check at British ports facing continental Europe, and more traffic jams on the roads approaching these ports.

Of course, this applies only to goods. In the case of services, the UK can make whatever rules it likes without any impact on customs checks at ports.

But as far as goods are concerned, it is almost as if the Rees Mogg appointment is designed to sabotage any possibility of his colleague Liz Truss finding an agreement with Vice President Sefcovic on a lightening the Protocol. 

 If he does the job he has been given , Mr Rees Mogg’s real title should  perhaps be “Minister for Extra Trade Barriers”.  Of course this applies only to goods. 

A recent UK paper  on the “Benefits of Brexit” suggested that scrapping EU rules could bring £1 billion worth of benefits to the UK economy. This seems like a figure plucked out of the sky.  There is no detail of what rules might be changed, even though the UK has been preparing for the suppose benefits of Brexit for the past six years.

 Indeed separate and different  UK rules might actually increase costs, because of the duplication involved.

But there are strong suspicions that the “benefits of Brexit”  paper is  just for show, and that Rees Mogg will not actually be able to diverge much from EU standards at all, because UK businesses will not want  to lose markets in the EU.. 

In a way, his appointment is an expression of the confused expectations about Brexit within the Conservative Party……members want a bonfire of EU rules.   But they also want to be able to have their exports accepted in the countries of the EU as being compliant with the very  EU rules they have just scrapped!

 Businesses which trade internationally know the importance of regulations for both goods and services, and may not be so keen on unilateral UK regulatory changes that put the UK out of line with its neighbours to whom they want to export.

Whether it is product safety, or the transfer of cross-border data, domestic regulations and international agreements are a crucial element in making access to markets easier, or  making  them more difficult. Having different rules is a way of keeping imports out and making consumers pay more. 

Under Prime Minister Theresa May there was some openness in the UK government to aligning with EU rules, particularly in the area of goods, in order to facilitate trade and resolve issues around  Northern Ireland .

The arrival of Boris Johnson as Prime Minister in July 2019 ended this openness.   His view was  that UK regulatory sovereignty is crucial, or at least must be made to appear to be so. 

Boris Johnson’s present political difficulties weaken his ability to reach compromises with the EU on the Protocol.

 His party is, in fact, a coalition between those who want more spending and those who want less spending, between those who want more protectionism and those who want less, and between those who want more regulation and those who want less. 

 Some problems have already arisen. The new UKCA conformity assessment mark to replace the EU’s CE mark, means greater internal regulatory inconsistency between Northern Ireland and the rest of the UK, and hence more bureaucracy at Northern Ireland ports.

 The more Rees Mogg does  his job, the more will be the differences between Northern Ireland standards and those in the rest of the UK.

Trade Agreements may be an added complication.

 For example there are suggestions that Canada will challenge the UK’s ban on hormone treated beef, as part of the accession process for the UK to the  new Pacific Trade Agreement. 

If this were to happen, it would mean extra controls on beef products from Britain coming into either part of Ireland. It would also place beef exports from either part of Ireland to Britain  at a competitive disadvantage vis a vis hormone treated beef imported from Canada. 

 But would British consumers want to eat hormone treated beef?

Whether the UK actually diverges all that much from its existing EU standards or not, the fact that the UK is SAYING now  it  intends to diverge a lot , means that the EU has to maintain tight customs controls of British goods .

  That means insisting that the Protocol is respected to the full in Northern Ireland ports,  and continuing delays on British good going to continental Europe

 So the Protocol row may go on and on, until the UK finally settles on what EU rules it wants to change, and what EU  rules it intends to keep. 

Given how slow progress on making these decisions has been in the six years since Brexit , the Protocol  dispute could drag on for years.

 This does not  augur well for stability in Northern Ireland,  or for Anglo Irish relations.

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