How far can the NI Protocol be changed?

The Northern Ireland Protocol has caused much more trouble than many anticipated and this may be because it was widely misunderstood. The Protocol was written and revised prior to the Trade and Cooperation Agreement of December 2020 and hence included the possibility of tariffs on all goods trade between the UK (including NI) and the EU27. Tariffs were to be imposed on goods at risk of entering the EU via NI. In the event, the TCA introduced trade largely free of tariffs and quotas. However, the Protocol also stipulated that NI producers should observe EU regulations including the Union Customs Code, i.e.EU customs rules, for all goods entering NI. This meant that NI remains within the EU’s single market, and that the outer customs border of the EU lies in the Irish Sea between NI and GB.

What was not much commented upon at the time of the TCA was that these regulations and customs rules referred to all goods entering NI or produced in NI, and not only to such goods also at risk of entering the EU. Promises were made that NI would have unfettered access to the wider UK market and these promises have been honoured but UK ministers made little effort to point up the fact that the promises referred to NI businesses having unfettered access to GB markets, but not to GB businesses having access to NI or to NI businesses having unfettered imports from GB.

As a result, businesses in NI are in a good position in relation to selling goods into both EU and GB markets but face potential constraints, including customs checks, on imported goods coming into NI from GB. Businesses importing from GB, including supermarkets and garden centres, have faced customs checks, delays and some bans on imports.  Consumers have also faced similar difficulties in direct importing of goods, for instance via Amazon, and on such things as the movement of pets to and from GB. So called ‘grace periods’ allowed time for businesses involved in trade in food and medicines to adapt to these new regulations. When arrangements to minimise the disruption of these new arrangements were not in place, the UK Government unilaterally extended the grace periods until October 2021. The EU has threatened legal action against these unilateral extensions but has weak grounds for succeeding except on procedural grounds around the one-month notice period rule (an even this is elastic under protocol annex 7(3)).

The overall impact on NI is thus a mixed bag. Exporting businesses have something of an advantage over firms in GB in that they do not face customs administration or EU regulations for selling goods into the EU. It is not yet fully obvious how large this advantage will be since direct exports into the EU from GB appear to be recovering fast after an apparent dip in January 2021. However, reports from InvestNI suggest that interest in investing in NI has been running at relatively high levels in 2021. (InvestNI appear reluctant to publicise these successes for fear of been seen as taking sides in fraught political debate). On the other hand NI businesses face disadvantages over those in GB in having to fill in customs declarations and obtain veterinary certificates on their purchases from other parts of the UK. Since some GB businesses view the new administrative burdens as unsustainable, some goods from GB are already unavailable to NI businesses and their customers in NI and elsewhere, and unavailability is likely to get worse as the grace periods are lifted and the UK diverges from EU regulations and standards.

Negotiations on the Protocol

Lord Frost and his colleagues are in negotiation with the EU led by Maros Sefcovic in an attempt to mitigate the difficulties which have arisen over trade and which have caused social and political problems in Northern Ireland. Lord Frost reported in the Lords last week that there were around 20 outstanding difficulties and that he was aiming at ‘practical and proportionate solutions’. The EU side are demanding full implementation of the protocol including direct access for EU officials to the online real-time databases on cross-Irish Sea trade into NI.

My contacts with what is now the EU embassy in London suggested that the EU was always willing to consider ‘facilitations’ on trade into NI as long as the UK fully recognised the rules in the Protocol. Such facilitations would include easements for supermarket imports into NI. It is not clear why these facilitations have still not been agreed five months into the operation of the Protocol but there is something of a tense stand-off between the EU and UK and I assume such facilitations will eventually be agreed. These are likely to include a sensible approach to soil being brought into NI on plants and on tractor wheels (trade expert Shanker Singham said to a Lords Select Committee that existing difficulties on soil may have partially caused by over-zealous UK officials).

Customs declarations, veterinary certificates and checks will become significantly more problematic once the grace periods end for food and medicines. A UK ‘roadmap’, leaked to the BBC, outlined UK intentions to end the grace periods starting with meat in October.  There was little in this roadmap to suggest that the UK was seeking substantial changes in the Protocol to ease the trade difficulties. There as nothing about customs-free movement of goods by supermarkets, or for medicines within the NHS or pharmacies or materials or vehicles movements by the military. The only sign of substantial change came in a single paragraph which announced a joint UK:EU Agri-Food Forum ‘to develop proposals to protect NI’s food supplies and the core purposes of the Protocol including minimal impact on the lives of people in NI. This should include pragmatic and sustainable arrangements for certification’.  No timescale was specified but the implication is that these important arrangements will be taken out of the current talks and potentially kicked into the long grass.

In the meantime, HMG has attempted to ease trade difficulties though its £250 million Trade Support Scheme (TSS) which provides advice and training to those facing customs difficulties importing into NI but more importantly aims to fill customs for companies based on information supplied by these firms. It is not obvious how well the scheme is operating. (The scheme is being operated by Fujitsu -involving Shanker Singham and several others who contributed to ProsperityUK’s Alternative Arrangements Report aimed at practical customs measures for a land border in Ireland).

How far can the Protocol be changed?

It seems unlikely that the Protocol can be abandoned altogether without triggering an EU response that could include suspension of the TCA and the tariff and quota-free trade it permits with the EU. However, the UK has several strong arguments in its favour in seeking to ameliorate the difficulties in operating the Protocol.

The Protocol itself states in its preamble that it contains ‘a shared aim of avoiding controls at the ports and airports of Northern Ireland’ and ‘of impacting as little as possible on the everyday life of communities in Northern Ireland’. It also ‘has regard to the importance of maintaining the integral place of Northern Ireland in the United Kingdom’s internal market’.

These stated aspirations have clearly not been met in the operation of the customs rules to date, to the extent of provoking protests from NI businesses and rioting in the streets and arguably the resignation of the moderate DUP leader, Arlene Foster. It is essential that these aspirations should be met.

The UK’s strongest card in the current negotiations is Article 16 of the Protocol. Article 16 in full states

1. If the application of this Protocol leads to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade, the Union or the United Kingdom may unilaterally take appropriate safeguard measures. Such safeguard measures shall be restricted with regard to their scope and duration to what is strictly necessary in order to remedy the situation. Priority shall be given to such measures as will least disturb the functioning of this

2. If a safeguard measure taken by the Union or the United Kingdom, as the case may be, in accordance with paragraph 1 creates an imbalance between the rights and obligations under this Protocol, the Union or the United Kingdom, as the case may be, may take such proportionate rebalancing measures as are strictly necessary to remedy the imbalance. Priority shall be given to such measures as will least disturb the functioning of this

3. Safeguard and rebalancing measures taken in accordance with paragraphs 1 and 2 shall be governed by the procedures set out in Annex 7 to this (Annex 7 describes the procedures for taking safeguard measures including a one month notice period).

Since the Protocol has clearly already caused societal difficulties and diversion of trade, the UK fully within its rights to adopt appropriate safeguard measures. Indeed, it has already done so in extending the grace periods for the introduction of checks on food and medicines.

Much of the public arguments around the Protocol have revolved around maintaining the Good Friday Agreement. Such arguments initially from the EU, Irish Government and more recently the Biden Administration, are a sham. The GFA says nothing about borders but was weaponised by the EU in 2017 after the Irish Government claimed that cross-border co-operation, including that agreed within the GFA, depended on the absence of a land border in Ireland. Theresa May’s administration meekly acceded to this obvious over-reach and secretly signed up to a ‘mapping exercise’ listing over 100 types of co-operation. The EU couched its determination to avoid a land-border in terms of maintain both the GFA and peace, without identifying who exactly was threatening the peace. The result completely favoured the nationalist cause in Ireland in shifting the customs border to the Irish Sea within the UK. The peace is now threatened by young loyalists, currently and probably temporarily kept in check by more experienced paramilitaries. The GFA, which is a balanced document, has clearly been abrogated to unionist disadvantage and the role of the Protocol is being contested by Unionists in the courts.

The GFA is firmly based on democratic consent and this has been neither sought nor obtained in introducing the Protocol. It is true that article 18 (Democratic Assent in NI) in the Protocol allows a vote in the NI Assembly after four years on whether the Protocol should continue. However, recently retired senior DFA official, Rory Montgomery, writing in Northern Ireland’s Fortnight Magazine asserts, probably correctly, that this concession is meaningless.  Even if the Assembly voted down the Protocol it would continue for a further two years and the EU would insist that it be replaced by something essentially the same.

What will the UK Government do?

Both Boris Johnson and Lord Frost have repeatedly made it clear that the UK Government will insist on radical reforms to the Protocol to ease the difficulties cause to imports into NI. They have also stated a willingness to use all methods, including the Protocol’s article 16, if necessary. The PM has stated these intentions in the Lords and again in his interview with BBCNI’s Spotlight programme. Lord Frost has outlined a hard line both to the Lord’s Northern Ireland Committee and the Commons European Scrutiny Committee.  There should be no doubt that the current trade arrangements will need to change, even if Unionist trust in the PM is at a low level since it is believed that he had already promised no customs checks in the Irish Sea.

The EU has insisted on a full implementation of the Protocol and has complained that customs posts in NI are not being built and that access to real-time computer records of trade across the Irish Sea has not occurred. The ‘roadmap’ referred to above appears to be a response to such complaints, with its promises on orderly progress starting with an ending to the grace period of customs checks on meat products by October. There is an obvious contradiction between orderly progress and radical reform  and we wait to see how this plays out. Unionists remain sceptical and the DUP has elected a new leader perceived as more hard-line on the Protocol. However, the PM and Lord Frost both appear to be firm supporters of the Union and are fully aware of the dangers presented by the Protocol.

What Changes are needed?

The operation of the Protocol should cease be a legalistic and complete application of the EU’s Union Customs Code (UCC) and instead should be based on reasonable precautionary principles about illegal goods entering the EU via NI. Since UK regulations remain close to fully compliant with those in the EU there are few current dangers, and no customs checks are currently actually needed to protect the Single \market. There is an issue of tariffs connected with rules of origin (tariffs are due on goods which have a high content of imports into the UK) and as a result customs declarations via the TSS need to continue, but otherwise checks and veterinary certificates could be minimised until significant regulatory divergence begins to occur.

Reasonable reforms should include:

• The end of customs controls at the ports and airports of NI in recognition of the aspiration in the preamble to the Protocol.
• Customs checks be restricted to goods at serious risk of entering the EU across the Irish land border. No checks or restrictions on goods bound for registered NI retailers including supermarkets, or other reliable firms which can guarantee that imported goods will stay within NI
• Customs checks be undertaken where-ever possible on trucks while queuing for ferries at Stranraer, Liverpool or Holyhead etc., or actually on the ferries, in order to minimise delays
• SPS checks on such things as soil revert to the degree of checking in place prior to the TCA and which were regarded as adequate protection while the UK was a member of the EU.
• Ensure that the TSS operates as originally indicated, i.e. customs declarations be completed largely by the TSS using information supplied by the companies including VAT information.
• The Protocol should allow what is called ‘diagonal cumulation’ on trade between GB and NI. Diagonal cumulation means that goods which are allowed into the EU free of tariffs (for instance from South Korea) are also tariff-free when built-into UK exports to the EU. Hence, ‘rules of origin’ restrictions will not result in tariffs being payable on any NI imports from GB on components imported into GB from countries with which the EU has a free-trade agreement.
• The EU has been pressing for the UK to enter into full dynamic alignment with EU food regulations so that checks become unnecessary between GB and NI. The UK is unwilling to accede because this would hamper trade agreements with the USA, Australia and other major food exporters and lead to higher food prices in the UK. The UK instead prefers an equivalence agreement similar to that the EU has with New Zealand on lamb, recognising that standards of production are equivalent to those of the EU. Equivalence on a broad range of foods should be offered by the EU.
• The FT reports that the EU has most recently suggested that the UK temporarily recognise EU standards until future trade agreements result in some divergence. This may suggest a way forward for at least some regulations. Other regulations may diverge from EU standards immanently when a trade deal is signed with Australia, and later with a US deal. Although the EU is sceptical about this proposal, the principle of only demanding checks on products where UK standards have actually diverged sounds a good one.
• Any imports within public sector organisations including the NHS, education authorities and the military should be free of all customs documentation or EU regulatory restrictions.

Conclusion

The bottom-line here is that the principle of at-risk goods should be applied to regulations and SPS checks. All goods imported into NI from GB which are bound for consumption in NI either by households, firms or government, without risk of being re-exported to the EU, should be free of all checks or trade bans. Customs declarations which do continue should be  processed largely through the TSS, with minimal inconvenience to firms in either GB or NI. These customs declarations will provide the EU with confidence-building data on what is coming into NI without the needs for actual checks except in a small number of cases where goods are likely to enter the EU via NI. Such checks should be on an intelligence basis rather than routine. If the EU refuse to agree to such conditions, then article 16 of the Protocol should be used to enforce these principles unilaterally.