Backstop

What is a Backstop in finance? 

This is an insurance policy formed during the UK-EU Brexit negotiation and agreement. It is among the draft of withdrawal written during the time of Theresa May's government and the EU. The draft states that after Brexit, the UK would enter a transition period. The period started around 31 October 2019 and would last until December 2022. During the period, the UK would still engage in trade, single market, and customs union with the EU. The plan also includes negotiation on the future relationship with the EU, this include talks on trade rule and others.

The backstop is an insurance policy in the negotiation between the UK and the UN. Early in the Brexit negotiation, the UK and EU came to an agreement that aims at how the UK would leave the EU. The negotiation also includes the reference to the borders that would be avoided between Northern Ireland and the Republic. The border is referred to as the Irish border. This is why backstop is often referred to as Irish Backstop.

After the transition period, if the UK could not reach a future negotiation with the EU in terms of trade and other plans, the Irish Backstop would kick start. The current deal is what keeps the Irish border open as it is today.

How The Backstop Works

Under the Irish Backstop, UK would be required to enter a single customs territory with the EU.  This agreement has many parts to it but significant among the part is that there won't be any tariffs on trades in goods between the UK and the EU.

Some of the current trade restrictions on the UK would also be removed.

Also, in other to ensure that the Irish border remains open, Northern Ireland would be placed under some extra rules of the EU. The extra rules would be specifically for Northern Ireland and it is to ensure that the goods from the UK to Northern Ireland is adequately checked

Current Situation Of The Irish Backstop

The rules guiding the Irish Backstop has raised some controversial talks between some MPs in the UK. This is basically one of the major reasons the withdrawal on the backstop agreement had failed to pass through the parliament. In fact, Boris Johnson, the new prime minister claims that the backstop is dead.

The criticism that arose from the backstop is for two major reasons, the first claim is that the backstop would lead to entirely different regulations guiding Northern Ireland in comparison to the UK. Some of the MPs feel this is a threat to the integrity of the UK

The second claim is that without the approval of the EU, the UK would not be able to leave the backstop.

The agreement on the withdrawal states that both the UK and the EU could terminate the requirements of the backstop. However, this can only be done if both parties agree that avoiding a hard border is no longer necessary for Ireland.

The point in this is that if no other alternative is provided by the EU, the UK would not be able to get out of the Irish backstop.