Northern Ireland protocol clash risks ‘inevitable’ UK-EU trade war, officials fear

Trade spat could escalate to the imposition of retaliatory tariffs on all British exports to the EU

Anna Isaac
Thursday 22 July 2021 07:30
David Frost demands changes to Northern Ireland Protocol: 'We cannot go on as we are'

A trade war between Britain and the EU is “inevitable” if the UK refuses to back down on its new demands for post-Brexit rules on Northern Ireland, officials warn.

Brexit minister David Frost on Wednesday issued a new “command paper” that would radically rework the Northern Ireland protocol, a deal he himself negotiated and which only came into force in January, effectively removing most of a trade border created in the Irish Sea.

But the proposal was swiftly rejected by the EU. “We will not agree to a renegotiation of the protocol,” said Maros Sefcovic, the European Commission’s vice president, in an official statement.

Trade officials and business leaders told The Independent that time is running out to reach agreement ahead of the introduction of critical deadlines for extra processes which the UK agreed under the protocol.

They fear the step from the British government could push the UK and EU into a tit-for-tat trade fight.

One senior EU official said that Frost’s white paper from the UK undermined a more cordial tone which had been reached during the summer – that easing of relations had allowed for changes to EU rules to ease the flow of medicines from Britain to Northern Ireland. There was “less than zero chance” that the Brexit minister’s demands could be met, they said.

“We are running short of ways to engage in a productive way, while we remain willing to do so. This paper is unhelpful, unrealistic, and a poor use of time. We will not hesitate to pursue further legal actions if the UK fails to adhere to its international legal obligations,” the same official said.

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They added this could include retaliatory tariffs impacting all UK exporters to the EU. Such a step could result in tit-for-tat tariffs, key ingredients for a full-blown trade dispute.

Separately, an Irish diplomat confirmed that if the steps suggested by Mr Frost were followed – particularly the demand that the protocol “no longer be policed by EU institutions and courts of justice” – a trade spat would be inevitable. They added that any flexibility from the EU side had to respect the fundamental principles of the agreement.

“If the UK seriously tries to avoid the governance structures in the protocol, a trade row will be all but inevitable. But we obviously hope that won’t be the case,” the diplomat said.

While the Brexit minister held back from invoking Article 16, a mechanism that allows for parts of the protocol to be immediately suspended, Mr Frost said that the circumstances would “justify” its use.

“It is clearly a kind of threat from London,” said Anton Spisak, a former UK Brexit negotiator and now policy expert at the Tony Blair Institute.

He added: “This will add to disputes, to the idea that the UK is negotiating in bad faith in order to change the protocol. The destination of that is a trade war between the UK and the EU.”

He noted that the EU had already embarked on legal action against the UK in March over London’s decision to unilaterally delay customs checks on goods entering Northern Ireland from Britain.

The Brexit divorce deal left Northern Ireland in the EU’s single market for goods, but also in the UK’s customs territory in order to avoid a border on the island of Ireland. This resulted in the creation of a trade border in the Irish Sea.

There are a host of protocol deadlines which are due in the autumn adding time pressure to disagreements over the protocol and upping the risk of an escalation of trade tensions. A halt to imports of British chilled meats to Northern Ireland from September has attracted particular attention, with complaints from retailer Marks & Spencer, but there are greater hurdles in the offing, business leaders told The Independent.

From 1 October, all business parcels sent from Great Britain to Northern Ireland will require customs declarations. By November, British goods exporters to Northern Ireland will need to set up a base in the region or a “fixed place of business” in order to meet the requirements of a trusted trader scheme to prove that goods will not enter the EU.

Yet rather than advocating for ways to cut friction that were likely to be agreed to, Mr Frost had inflamed relations, according to a person familiar with Northern Irish business operations.

If the UK were to press ahead with a rejected plan it would fracture the protocol and the two key Brexit treaties, they said. “This is breaking the withdrawal agreement, and there are provisions within the TCA [Trade and Cooperation Agreement] to let the EU take tariff measures. So this isn’t just about Northern Irish businesses and consumers, this is about GB businesses and consumers as well. I don’t think many people see this danger.”

A leader of a business lobbying group echoed the comments, adding that the move was totally unrealistic: “The EU is not going to create a gaping backdoor to its single market.”

They added that the EU was wary of the UK trying to pursue a delaying strategy, constantly extending grace periods in order to make implementation politically toxic ahead of the Northern Irish consent vote in December 2024. The vote is a legally binding provision of the withdrawal agreement.

It’s time to stop “megaphone diplomacy” they said. “If trust can be reattained” some major trade frictions set could be mitigated or avoided through private negotiations.

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