Brendan Howlin (Wexford, Labour) | Oireachtas source

When the European Council meets tomorrow and Friday, it will be dominated by the discussions on a digital tax and Brexit. On Monday the draft text of the withdrawal agreement was published and it showed in a clear, colour-coded way in a very dramatic presentation on the big screen behind the Minister, Mr. David Davis, and Mr. Michel Barnier, how far we had to go. Three broad issues remain outstanding in advance of Brexit next March and the end of the transition period in December 2020. First, of central concern to us is the Border issue which remains intractable, as we have heard from many speakers. Alongside and separate from it, a framework must be developed for a future trading relationship. We are no closer to knowing exactly what form that relationship will take and whether it will include British membership of the customs union or a parallel customs union. This is of huge material importance to Ireland as ESRI research published today shows the expensive impact of tariffs on imports from the United Kingdom, with food products potentially costing Irish people up to €1,400 a year more. The most difficult and least remarked on issue is the need for a dispute resolution mechanism. This is also a concern for Ireland because, as it will influence whatever dispute mechanism is finally decided on, how any backstop agreement needed will be enforced or interpreted is an issue. The United Kingdom has ruled out the European Court of Justice as the arbitrator. If we are to have regulatory alignment, somebody will have to judge whether the rules are being applied properly.

The clock is ticking and solutions will have to be found to these difficult problems. However, I acknowledge that progress has been made on many issues. Once approved by the EU 27 on Friday, the draft agreement will allow talks to be opened on the future trading relationship. This pivot on the future trading relationship has the potential, as I indicated during Taoiseach's Questions, to sideline Irish concerns about the arrangements on the Border. If it remains a sticking point in agreeing to a final deal, ultimately, when everything else has been agreed to, it is easy to see how Ireland will come under enormous pressure to relent to enable the national trade interests of member states to move to centre stage, something we have all been trying to avoid all along. The draft legal text does not address the continuing British objections to the current proposals from the Barnier task force and we are no wiser on what exact legal interpretation of the December backstop agreement is acceptable to Britain.

It appears that the United Kingdom wanted a longer transition period, longer than the 21-month period to 31 January agreed to. As I read it, there is no provision in the withdrawal treaty to extend the transition period if there is general consensus that such an extension is needed or desired in the event that there is no deal. The Taoiseach or the Minister of State might indicate whether it is possible to extend the transition period if it becomes an imperative in the next few months. Ireland wanted a longer transition period. Yesterday the Tánaiste spoke about a period of up to four years being required to conclude a proper trade deal. In effect, on Monday the European Union allowed the British to park discussions on the legal text of the backstop agreement for now. That issue will obviously have to be addressed in due course and probably by the June Council. The fudge cannot continue indefinitely.

While the so-called backstop technically remains in place, we have no practical written interpretation of it that is agreeable to both sides. As I said on Monday, Mrs. Theresa May agreed to it, ruled it out and then ruled it back in again. In any set of negotiations that does not and cannot inspire confidence. The lack of a reaction from the DUP and Tory Brexiteers highlights the win for the United Kingdom on that position or at least the perception of the hard Brexiteers is that it is a win. I read today that 13 Tory backbenchers are signing a motion to demand a rejection of the transition deal. Apparently, the 13 have been joined by Mr. Sammy Wilson on the basis of an objection to the fisheries element of the deal. Apparently, they are to stage a protest tomorrow and dump fish in the River Thames outside the House of Commons in protest about the fisheries element, in other words, Britain remaining in the Common Fisheries Policy during the transition period. Apparently, the reaction of the Environment Secretary, Mr. Michael Gove, who is responsible for fisheries was to say that one should keep one's eyes on the big prize. The big prize is that it will be all right at the end of the day. These are just indications, from the Brexiteers' perspective, that Monday was a good day.

The Irish Government will need to remain vigilant on this issue, as I am sure it will. The danger for Ireland is that there might be progress on all other issues, except our own, and that there will then be a shift of focus by some of our comrades and colleagues in the European Council. I accept that there is no sign of that happening, but it is certainly something we should not take for granted.

On everything else, Britain has accepted the EU position lock, stock and barrel. The only concession appears to be in regard to the permission afforded to the United Kingdom to negotiate trade deals during the transition period, albeit without concluding them. However, it appears to be beyond the power of the British state to that. Trade deals are lengthy and complicated and some of the big trading partners with which it would like to do deals, such as the Trump Administration, are not currently in the mood for agreeing benevolent foreign trade deals. It is for that reason that a Commons committee on exiting the European Union urged an extension to the transition period but, as far as I can tell, there is no provision for that in the deal so far.

The majority of the Europe Council will be focused on economic affairs, including discussions on trade, jobs growth, competitiveness and taxation. As the Taoiseach indicated to the House, there will also be a euro summit. In light of the move by the US President to impose tariffs on steel and aluminium, we are potentially on the verge of a trade war which would involve the imposition of a series of tit-for-tat tariffs. It is unclear if the EU will be exempted from the American proposals, which have already been modified from what was first announced by President Trump. If the EU response is to place punitive tariffs on US imports, there is a possibility that Irish products such as whiskey or liqueurs will be impacted by a counter-tariff imposed by the US, which would be very bad news for Irish producers and the thousands of employees in the export-focused agrifood sector here.

The proposals for a digital tax will also colour a possible trade deal. The US has made it clear it does not accept the EU position in that regard and is likely to see it as an attack on American companies. This is a very difficult issue for Ireland and on which Members have commented. Ireland has been very clear about its support for the OECD base erosion and profit shifting, BEPS, process. As the Taoiseach is aware, there was a strong focus on that while the Labour Party was in government. Ireland has been a leader in terms of that agenda and we must continue to ensure that our laws are best in class and fully transparent so that we dispel with a clear response the common perception that we are soft on this issue, which is raised every time I have discussions with European colleagues. My party has long argued for a standing commission on taxation along with a minimum effective rate of corporation tax, which would address many of the concerns of our European colleagues. However, a move towards an arbitrary turnover tax would cause great concern because it is, in essence, an additional spending tax which would certainly be of benefit to the large economies but would have a seriously negative impact on small economies such as Ireland. It would also undermine national competency on tax.

I am conscious of time. The agenda will include discussion of the implementation of the European Pillar of Social Rights and the European Commission proposals for a European Labour Authority and I had hoped to have time to discuss those issues. I hope the Government will strongly push for an implementation plan in regard to the European Pillar of Social Rights. We must win back the support of working people for the concept of the European Union, which means impacting on their working conditions and living standards and that is possible to do.

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