The final sprint to iron out a structural re-designing of the relationship between the United Kingdom and the European Union may well have the blockchain at the heart of it.
In what may well turn out to be an historic letter from Boris Johnson, the current Prime Minister of Great Britain and Northern Ireland, to European Commission President Jean-Claude Juncker, Johnson said:
“We are proposing that all customs processes needed to ensure compliance with UK and EU customs regimes should take place on a decentralized basis, with paperwork conducted electronically as goods move between the two countries, and with the small number of physical checks needed conducted at traders’ premises or other points in the supply chain.”
By decentralized basis he obviously means blockchain technology. This was suggested in Theresa May’s Brexit whitepaper and was explicitly spelled out by the former Chancellor Philip Hammond who in October last year said:
“There is technology becoming available… I don’t claim to be an expert on it but the most obvious technology is blockchain.”
The new proposal by Johnson offers a special deal on Northern Ireland which under this arrangement is to remain under EU rules for goods.
It will not however be in the customs union. So in simple terms if, let’s say, EU bans cancer and headache causing nitrates in bacon, but Great Britain doesn’t, Northern Ireland would have to ban nitrates bacon too.
On the other hand, what’s the rate of VAT on this bacon, with or without nitrates, in Great Britain and in Northern Ireland, is to be decided by the UK government, not EU.
So the proposal says to check if there is nitrate and thus if they can enter NI, traders would have to register with UK customs before going from Great Britain to NI and in that registration say if there is nitrates or not.
This is where the blockchain comes in. The registration would obviously be electronic, but in a decentralized way, so in a blockchain system or more correctly in this case in a replicated shared database.
To simplify, if you are not connected to the internet then only you can see whats on your computer. If you connect your computer to other computers however, the internet, then everyone can see it if they are granted access.
Replace the word computer with database, turn this database into some sort of program you just download and install, connect all these databases together in a replicated manner through sharing history, and you basically have a blockchain as used in this context.
This blockchain obviously can’t say if the trader is lying, so in that regards there would need to be physical checks on occasion if lying is suspected.
The border here however would kind of be between Britain and Northern Ireland in regards to this nitrates example. So there would be checks at the port anyway as there are now. UK Customs then can enter the results of those checks on the blockchain, and the EU customs can insta-see the results because they would have a shared system.
Once the goods are in Northern Ireland then they would already be compliant with this nitrates ban, so there would be no need to carry checks at NI border with Ireland where nitrates are concerned.
Import and export taxes (tariffs) however are something else. Here the trader would have to say not just what are the goods, but how many there are. Again a blockchain was proposed by the last government, and if we’re not mistaken that was under the deal agreed with the EU.
Yet that deal kept UK in a customs union backstop. Some EU officials said this was untested technology, hence why the backstop was needed. So the Irish Prime Minister basically said he could not see how there can be different tariff rates between Ireland and Northern Ireland while not having a border to check how many goods are actually moving between them.
A free trade deal would easily address that aspect. Then we’d be back to just dealing with nitrates which can easily be addressed by checks at ports with it then stored and updated electronically.
Yet just what deal they’ll be able to agree, if any, and just what role blockchain tech will have exactly, remains to be seen.