Would the ‘Malthouse plan’ work?


Given that the process of the UK’s Withdrawal from the EU has so far been beleaguered with indecision, it is perhaps appropriate that the so-called Malthouse Compromise involves no fewer than two plans.

Plan A is quite ambitious. It would entail remodelling the Withdrawal Agreement along the lines of the appealingly-titled document: ‘A Better Deal’.

Coming in at a comparatively modest 59 pages, this paper (produced with no institutional affiliation or publisher mentioned, just the names of the three authors led by Shanker Singham) is intended to offer an alternative to the Protocol by making a future UK-EU free trade agreement compatible with ‘avoiding a hard border’.

Plan B is equally ambitious, albeit in a somewhat anarchistic way. It would not bother with a Withdrawal Agreement (if negotiations fail) but instead constructs a quasi-transition period (i.e. one lacking any formal legal framework) in preparation for WTO rules kicking in on 1 January 2021.

It references GATT Article XXIV to justify what it portrays as a smooth glide path towards free trade. However, it should be noted that this Article in fact describes what happens during a legally-agreed transition period to a legally-agreed new relationship.

Plan B, then, is a dead-end. Malthouse appeals to a spectrum of Conservative MPs because it claims to realise two of their core demands.

First, it sets a clear exit day. Transition would end by January 2021, come what may. And it promises a future Free Trade Agreement straight afterwards – no waiting for future rounds of negotiation or for the Irish to be happy with arrangements.

The deadline is intended to focus minds. In reality, however, it simply nudges the cliff edge just a short distance further rather than avoiding it altogether.

The purpose of the Protocol is, of course, to hedge against that very cliff edge when it comes to the island of Ireland. But what would Plan A look like in practice?

Malthouse wants the UK out of the customs union, Single Market and ‘all EU rule-making’. The unavoidable consequence of this is that customs procedures have to be applied to goods crossing the Irish border.

Plan A doesn’t sugar-coat that pill for those moving goods across the Irish border. The Union Customs Code will have to apply as well as whatever UK customs policy will be in play.

The ‘A Better Deal’ paper makes reassuring noises as to how this can be handled, talking o ‘advanced customs and trade facilitation measures’ which include ‘specific solutions’ for the Irish border’.

In practice, as the paper acknowledges, there is no getting around the fact that a whole new raft of procedures will come into play: customs declarations, technical checks, random checks, and inspections on premises.

In fact, the only concession to avoiding a hard border is to have these checks away from the borderline and to promise no physical infrastructure there.

When it comes down to it, talking of ‘simplified’ or ‘expedited’ procedures is of little solace to those who currently do not have to comply with any such procedures at all.

This would not be a border anywhere near to being as ‘frictionless’ as it is now.

And note that this customs facilitation scheme relies on ‘self-assessment for importers to declare imports periodically and account for duties payable’.

The incentives for simply not registering – especially items subject to high tariffs – are admittedly large, and the disincentives minimal, especially if the chances of getting caught are low.

A second consequence of the Malthouse Compromise’s unwillingness to compromise on the red lines of leaving the single market and customs union is that there will no longer be a level playing field between the UK and Ireland when it comes to applying the rules that enable goods from each jurisdiction to move freely.

Its promise that there need be no regulatory checks on borders around Northern Ireland centres on the principles of ‘regulatory recognition’ based on ‘deemed equivalence’.

Much of the force of argument here is that the UK and EU ‘we will be identical on day one’. The obvious question for the EU, of course, is what happens in the weeks and months to follow afterwards.

Malthouse relies on the EU trusting that UK’s rules on such things as food quality standards remain the same indefinitely. There is, however, no legal let alone political guarantee of this, and the EU is very aware that regulatory diversion was one of the stated objectives of many Brexit supporters.

One of the favoured sales pitches for Malthouse is that it doesn’t rely on future ‘technological solutions’ but on existing systems.

This is true, specifically the existing systems that the UK currently benefits from through EU membership, such as TRACES (Trade Control and Expert System) for ensuring safe food products, and VIES (VAT information exchange system) for VAT refunds.

These are currently useful electronic systems for easing the movement of goods around the EU. However, once the UK is outside the EU, however, access to these systems is in doubt, and impossible in a severe ‘no deal’ scenario.

Furthermore, Malthouse assumes the continued existence of inter-agency cooperation and information sharing between the UK and Ireland, together with recognition of the other party’s inspections and documents for certification of conformity.

Again, such things will be more difficult in legal and practical terms after Brexit and the framework to enable them requires careful negotiation. The scope for bilateral cooperation here is limited.

The Malthouse Compromise is not designed as a serious solution for the Irish border but as a means of downplaying the consequences of a hard Brexit. As such, it is a compromise between Conservative MPs on different wings of the parliamentary party.

But it is not designed as a compromise at the point where the problem lies, i.e. between the two negotiating sides of the UK and the EU.

And it entails no compromise of the intention to create a UK-EU Free Trade Agreement in the future with no single market or customs union strings attached.

As such, it is best understood as a sticking plaster over divisions within the Conservative Party, rather than as a serious proposal to revise the Withdrawal Agreement vis-à-vis the complex and sensitive issue of the post-Brexit Irish border.

By Dr Katy Hayward, reader in Sociology at Queen’s University Belfast. This piece originally appeared in ‘Brexit and the backstop: everything you need to know’, available here.

Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of the UK in a Changing Europe initiative.

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