Northern Ireland

Perspectives: Northern Ireland has an exceptional place in the UK, EU, and WTO – for good and bad

A temporary crisis last week exposed the reality that Northern Ireland has a unique place in the United Kingdom, the European Union and the World Trade Organization, one which requires care and attention.

In one sense it was like many short-lived political crises. On the afternoon of Friday 29 January an EU emergency regulation introducing export controls on vaccines was published.

Although intrinsically controversial given global implications of restricting trade particularly in life-saving products, it was the Northern Ireland element which provoked immediate widespread condemnation.

The EU proposed to invoke safeguard clauses to give them the power to override trade arrangements reached in the UK-EU Withdrawal Agreement, as set out in the Northern Ireland protocol.

British opponents of the protocol who had suggested using these clauses because of difficulties in implementation felt vindicated. The UK and Irish governments were appalled. Within hours, that part of the proposal was withdrawn.

The crisis reinforced the problems which Brexit has caused for Northern Ireland – problems which require some historical knowledge to understand properly. It also demonstrated that trade decisions made by the UK and EU must consider the now unique trading status of the province. There were suggestions that the current situation is not sustainable, though the absence of better alternatives means this is far from certain.

The uneasy Northern Ireland Protocol compromise

Northern Ireland’s status as a province of the UK dates back to the partition of Ireland in 1921, and the independence of the Republic of Ireland in 1922. A majority in Northern Ireland favoured remaining in the UK, whilst a minority favoured unification with Ireland.

This divide between majority unionists and minority nationalists ultimately led to a long period of civil unrest, referred to as the Troubles, which ended with the Good Friday Agreement of 1998. This agreement rested on a simple concept, that both communities could feel part of their chosen greater entity, with no borders either on the island of Ireland, or between Northern Ireland and the rest of the UK.

The UK’s vote to leave the EU was always likely to present a problem to this dual identity. The Irish government and nationalist community strongly believed any border infrastructure on land would breach the 1998 agreement. The EU thus suggested keeping only Northern Ireland in the EU Customs Union and Single Market.

With Theresa May as prime minister, the UK government rejected this in favour of an approach keeping the whole UK within the EU Customs Union, largely to avoid barriers between Northern Ireland and the rest of the UK. But after this failed to pass Parliament, new prime minister Boris Johnson accepted the original EU approach, subject to a future vote – in 2024 – in the Northern Ireland Assembly.

To the anger of unionists, the Northern Ireland Protocol of the UK-EU Withdrawal Agreement divided the UK into two separate regulatory and customs zones as from the end of the Brexit transition period on January 1 2021.

Northern Ireland would follow EU single market rules for goods, while the rest of the UK could diverge. Similarly there would be no customs restrictions on trade between the province and the EU, but potential checks inside the UK. A safeguard clause allowed either side to suspend parts of the agreement in special circumstances, which is what the EU proposed on the Covid vaccines issue – and rapidly withdrew.

A unique trading status

As far as services trade is concerned, Northern Ireland remains part of the UK single market, and UK VAT is payable. New barriers are thus established to trade across Ireland.

For goods trade, on the other hand, Northern Ireland is part of the EU single market and customs union, and EU VAT is paid. Trusted trader schemes and grace periods for trade between the UK mainland and Northern Ireland should ease changes internally within the UK.

But it is hard to think of a reasonable precedent in world trade rules. Other countries have enquired as to the WTO legality of the new set-up, but have not pursued the point, recognising the issues of peace involved, and also their inability to prove any economic loss.

For the UK and EU alike, making policy must now address the unique status of Northern Ireland, in a way which the Commission’s vaccine regulation so obviously failed to do. The challenge is likely to be tougher for a UK government that wants both to diverge in regulatory terms from the EU and to minimise checks between Northern Ireland and the rest of the country. With EU goods rules continuing to apply in Northern Ireland, new UK rules could create new barriers to trade.

The EU needs however to think about Northern Ireland whenever it makes regulatory changes, such as for example any carbon border adjustments. This is likely to be made harder by the obvious democratic deficit whereby which Northern Ireland is subject to EU rules without any representation in Brussels.

Both must also pay far greater attention to views in Northern Ireland. The dislike of the unionist community for any checks on goods sent to the rest of the UK could be matched by any disruptions to all-Ireland services trade in the nationalist community. No Northern Ireland MP voted for either the Withdrawal Agreement, or the new trade deal with the EU.

Above all, in a fragile political situation change is always difficult, and any threat to invoke safeguard measures is something that should only be considered in the most extreme circumstances. The vaccine measure did not clear this threshold.

Better solutions are not obvious – so seek opportunities

Despite its fragility, improvements to the protocol are far from obvious. There is not a clear majority in Northern Ireland for a change to the protocol, or for unification of Ireland. It is unlikely that the UK as a whole will move to a closer relationship with the EU in the short term – and Ireland is not going to be leaving the EU single market and customs union.

Ultimately this puts the onus on both the UK and EU to find ways to make the protocol work. There are probably three main elements to how this should be done.

The first is for both sides to work with communities to explain in clear terms what has been agreed. The second is to be open to pragmatic improvements as suggested by businesses, building up support through responsiveness. Finally, both sides have to avoid making things worse through bad policy making.

Being an exception is never going to be easy. The history of Northern Ireland is ample enough demonstration of this.

There are going to be further costs. But there are also opportunities, of possible preferential access to both the UK and EU markets. The EU and UK need to find those.

 

 David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.

 

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