Comment

The continued political uncertainty in Northern Ireland

Sam Lowe / Jun 2022

Belfast Dockyard, Northern Ireland: Photo: Shutterstock

 

The economic case for the Northern Ireland protocol goes as follows: the Protocol puts Northern Irish businesses in the unique position of being able to sell goods freely to buyers in the rest of the UK and across the EU.

This, in theory, should make Northern Ireland a relatively more attractive prospect for future investment in, say, pork production or warehousing, than Glasgow, Liverpool or Cork.

But for now, only the very boldest would make a long-term investment in Northern Ireland on the basis of the existing trade arrangements.

Uncertainty remains the only constant as the UK and EU tussle once again over how best to square the circle of a Brexit settlement that leaves the UK free to regulate however it pleases yet avoid the need for a customs and regulatory border between Northern Ireland and Ireland.

From a practical perspective, some of the UK’s suggestions to reduce the internal trade friction created by the Protocol for goods moving from Great Britain to Northern Ireland are workable.

A so-called green lane that obviates the need for Great British produce destined for Northern Irish consumers to face customs declarations and regulatory controls is a natural extension of existing provisions which do the same for tariffs. So long as the green lane is available only to those traders with an exceptional compliance history and willingness to subject themselves to stringent audit and data sharing requirements, the risk of products leaking onto the single market would be slim.

(In practice, the mix of grace periods and limited resources means there is already an effective green lane procedure in place for food products entering Northern Ireland, with the checks concentrated on products known to be moving into the EU.)

 

The UK could go a step further to alleviate EU concerns and accept that certain particularly risky food products, such as citrus fruits (a bête noir of the Commission and member-states), will never be eligible for green lane treatment.

The EU has already accepted the premise of a fast-track procedure – its own express lane proposal would reduce the customs and regulatory burden for trusted traders. The difference in opinion is solely over the associated benefits. But both sides are closer on the practicalities than most people realise.

However, in other areas, there is no convergence in sight.

The UK’s proposal for a dual regulatory regime, which would allow producers in Northern Ireland to choose whether to follow UK or EU rules, is a solution looking for a problem: it is near-impossible to find a business in Northern Ireland advocating for it. And the EU views the UK’s desire to strip away the ECJ, EU subsidy rules and VAT/excise provisions as a sop to hardliners within the Conservative party, rather than an honest attempt to address real issues on the ground.

But the immediate obstacles to lasting compromise are time and trust.

The EU knows it can wait. The UK’s attempt to rewrite the rules on the ground in the form of its Northern Ireland Bill will not pass through Parliament quickly. In all probability, assuming the House of Lords will oppose the Bill on the basis it breaches international law (the Attorney General might be the only lawyer in the UK who thinks otherwise) and need to be bypassed via procedural tinkering, the Bill’s passage could take up-to a year.

The EU also does not trust UK Prime Minister, Boris Johnson. It would rather wait him out, and negotiate with his successor, whomever that may be, than grant him concessions that (they presume) he will renege on moments later.

In the meantime, talk of trade wars, the reimposition of tariffs and suspension of the wider Trade and Co-operation Agreement will get louder as we approach Christmas 2022. And the EU will gamble that the UK will eventually blink, and step away from the cliff edge (as it did prior to agreeing the Withdrawal Agreement, agreeing the Trade and Co-operation Agreement, and the last time it threatened to act unilaterally on Northern Ireland in winter 2021.)

But while the theatre may be predictable, those on the ground in Northern Ireland will be forced to endure many more months of political uncertainty. And whatever economic upside there might have been will continue to prove elusive. 

 

Sam Lowe

Sam Lowe

June 2022

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