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One small step…
At long last, the EU has laid out a set of proposals for dealing with multiple trade problems caused by the Northern Ireland Protocol (NIP). These have been trailed extensively by Brussels and EU-friendly media as a major concession which will greatly reduce the trade frictions created by the NIP (to note, the NIP is not supposed to cause trade frictions but to avoid them). The EU claims its proposals would get rid of 50% of customs checks and 80% of SPS (agri-food) checks, suggesting that their changes would create an ‘express channel’ for GB to NI trade – similar to the ‘green channel’ proposed by the UK.
It is welcome that the EU has finally shown a willingness to move away from its legalistic intransigence on the Irish border issue and is no longer dismissing suggestions for lighter touch implementation of the Protocol as ‘magical thinking’. And there are some positive elements among the EU proposals which align with suggestions from the UK side. Tabling the proposals in itself is the first real acknowledgement by Brussels that the Protocol as it stands is not working.
However, close examination shows that the reality of these proposals does not live up to the hype, and there is a nasty sting in the tail on governance which would actually extend the EU’s tentacles into matters of UK sovereignty. The proposals are hedged about with a variety of limitations and conditions that make them unacceptable to the UK. In some cases, new trade complications would even be introduced.
What’s on offer?
Here is our take on various elements of the proposals.
SPS (agri-food) trade – dynamic alignment by the back door
There are some welcome elements here, with suggestions for reducing supermarket customs formalities to one declaration per month and simplifying certification of SPS goods, including a single certificate for mixed consignments (which has been a thorny issue). The legal problem of GB supplying chilled meats to NI also seems to have been solved; ‘UK-only’ labelling for sensitive products is not unreasonable. But:
- The proposals for reduced levels of SPS checks are heavily caveated: levels of checks will still have to take place based on the EU’s notoriously trigger-happy risk assessment system, and some meat and plant products in mixed loads would still need individual certification.
- Smaller retailers will not be relieved of the burdens of paperwork. The suggested facilitations will only be available to a subset of authorised traders and establishments – this will mostly be larger firms.
- Food and drink products would need to be compliant with the rules of origin in the UK-EU trade agreement. A large proportion of goods sent to NI supermarkets from GB will have at least some foreign content (this applies both to raw food, over 40% of which consumed in the UK is imported, and prepared food products which will often use a variety of imported ingredients), so this is a new and burdensome demand which fails to recognise that Northern Ireland is part of the United Kingdom and the UK’s internal market.
- Crucially, the EU is demanding continued alignment of GB production standards with EU rules as a requirement for these proposed easements – the extent of this required continued regulatory alignment is unclear. It applies at least to production of chilled meats but the small print of the EU papers suggests it might apply to other areas too. This is an attempt to reintroduce dynamic alignment with EU regulations into UK law and crosses a major British red line. As such, it renders the proposal unacceptable.
A hard border
- The EU is also demanding the construction of border inspection posts in NI, which is politically a very sensitive issue. Insistence on border infrastructure, when the Protocol was devised to avoid such infrastructure on the NI/ROI border and is not supposed to impact everyday life in NI, shows an alarming disregard for the Good Friday Agreement, Northern Ireland’s unique history and Britain’s sovereignty.
Customs formalities
A potential reduction of 50% in customs paperwork is a small step in the right direction, and some of the EU’s asks in this area, such as better data sharing with the UK, are reasonable. But:
- A 50% reduction is wholly insufficient. Northern Ireland is in the customs territory of the United Kingdom. It therefore follows that only goods destined for the Irish Republic and transported through Northern Ireland should be subject to customs procedures.
- The customs proposals are not fleshed out. In particular, while the EU is suggesting a wider scope for the ‘not at risk’ category of goods entering NI from GB, there is very little detail on this.
- The EU is demanding that EU representatives in NI undertake monitoring and compliance roles, including audits and inspections. This is a power grab. The EU has no role implementing customs law in a non member state.
- The EU proposes that unilateral measures be allowed by the EU in case of failure of UK authorities or traders to react to or remedy an identified issue. This would simply open the door to ongoing interference and troublemaking by the EU in Northern Ireland.
Medicines
The medicines proposals would help ease the flow of generic drugs by allowing GB bodies to certify medicines for NI. But:
- The proposals would not necessarily do this for new – including life-saving – drugs where a ‘case by case’ approach would remain.
- Moreover, the UK would be required to ‘fully apply the relevant Union legislation on medicines – on quality, safety, efficacy, pharmacovigilance and batch testing and release’ when issuing authorisations for NI. Once again, this is dynamic regulatory alignment by the back door which would affect the entire UK. Think of the delays and deaths there would have been had such conditions applied to the development of covid vaccines.
State aid
The proposals do not seem to touch on this, but it is a serious issue as the existing rules allow the potential for reachback from NI to GB.
VAT
Again, the EU’s proposals fail to address the anomaly which keeps Northern Ireland in the EU’s VAT regime, even though no VAT is remitted to the EU and VAT rates are different between the UK/NI and the Irish Republic. The inclusion of EU VAT law in the Protocol was only conceded at the lastminute during negotiations after the Benn Act made leaving without a deal impossible. But EU VAT legislation is already having a negative impact on the second hand car market in Northern Ireland, and as time goes on and VAT systems diverge, problems will only increase. And if at some stage the UK decided to replace VAT, how could NI be left behind and subject to the tax rules of a foreign entity over which it has no say?
Governance – another power grab
The UK wants the ECJ’s role in dispute settlement on the NIP removed and replaced with a normal treaty framework featuring bilateral engagement and where necessary independent arbitration – on the correct grounds that the ECJ cannot be an impartial arbiter of such disputes. And as the EU has already threatened to retaliate on perceived infractions through suspension of the TCA, adding the Protocol to the TCA and using that governance framework is entirely appropriate. The EU proposals have nothing to say on this, but Brussels has made it clear in recent briefings that it will resist removing the ECJ role.
Instead, the EU has proposed ‘enhanced engagement with Northern Ireland stakeholders’ via ‘structured groups’ which would deal directly with the Commission, by-passing the British government. This is a brazen attempt to gain a voice and a legal governance status over the affairs of a part of the United Kingdom and would constitute a major breach of British sovereignty.
Conclusion – not nearly good enough
Overall, it’s clear that the EU’s proposals, while containing some positive ideas, fall a long way short of what is needed to fix the Protocol and do not meet UK asks, most recently in the Command Paper of July 2021. The SPS and customs proposals do not allow free movement of GB goods to NI which are intended for consumption in NI only.
They also fall far short of providing an ‘express channel’ for such trade as the EU claims. Substantial trade frictions would remain, damaging NI’s place in the UK single market and promoting inefficient trade diversion (which, we must remember, the Protocol gives as a valid reason for invoking Article 16 which allows suspension of parts of its provisions). This reduces welfare and living standards in NI and endangers political stability.
In the case of supermarket supplies, the EU’s proposals (critically, those extending rules of origin to agri-food trade between GB and NI) would mean that without the current grace periods suspending SPS and other checks, bureaucratic requirements and associated costs borne by NI supermarkets would rise considerably from current levels.
Moreover, these proposals come with unacceptable conditions, including continued regulatory alignment on medicines and also on many SPS goods. It’s important to understand the significance of this. Even when (as for medicines) this alignment is supposedly only needed for GB goods headed for NI, in practice it would be much wider than this, as firms will not set up separate production lines for the small quantity of products headed for NI. And the prospect of having to do so might stop them supplying NI entirely. Requirements for alignment also mean the EU would still be able to use NI as an economic pressure point against the UK by altering rules to increase GB to NI trade frictions (thus encouraging alignment by GB).
The best summing up is probably that by Sir Jeffrey Donaldson of the DUP: ‘short–term fixes that reduce checks and potentially give the appearance of easements compared to the current time will not of themselves solve the problem of divergence within the United Kingdom’. And as Jim Allister of the TUV has noted, the EU’s proposals would still leave NI in ‘a foreign single market for goods, under a foreign customs code and VAT regime, ruled by foreign laws and adjudicated upon by a foreign court’ – if the economic issues are only slightly improved by the EU’s new proposals, the constitutional problems are not ameliorated at all.
The UK should continue to press for a much lighter touch approach, with all GB to NI trade entirely exempted from both customs formalities and SPS checks. A system of data collection by the UK authorities on GB to NI trade flows, augmented by data sharing with the EU and intelligence-led spot checks to prevent cross-border leakage, should be quite sufficient to protect the EU single market. The fact that the EU single market has not been in any way damaged or subverted by GB to NI flows over the last nine months – when a large chunk of these flows has been freed from most formalities by grace periods – is proof of this proposition.
If the Protocol is to survive, the EU needs to agree solutions which respect the UK’s sovereignty, customs territory and internal market, and stop trying to turn Northern Ireland into an EU controlled backwater.
