Northern Ireland’s Divisive Protocol Might Just Help the Economy
No aspect of the U.K.’s departure from the European Union has caused more political fury and even violence than the so-called Northern Ireland Protocol. Less frequently heard is that many businesses see it as a competitive advantage that could boost jobs and growth.
That idea is buried in a U.K. House of Lords report published Thursday, which otherwise delivers a scathing judgment on the roles that both the British government and European Union have played in the protocol’s troubled implementation.
The agreement creates a customs border between Northern Ireland and the rest of the U.K. for goods considered “at risk” of moving onto the EU market. That has increased costs, consumer prices and anger among the region’s mainly Protestant Unionists.
Yet the protocol also makes Northern Ireland the only part of the U.K. able to trade with the EU just as it did before Brexit. Trade flows to and from the province have soared as companies reroute to avoid tariff and regulatory barriers.
So too have inquiries from companies attracted by the unique status the protocol creates for one of the U.K.’s poorest regions, according to Northern Ireland Invest, which promotes it as a destination for foreign direct investment.
“Being a member of the U.K. single market and a member of the EU single market is a really important benefit of the Northern Ireland Protocol,” said Lord Jay of Ewelme, chairman of the sub-committee on Ireland/Northern Ireland that produced Thursday’s report. “I am surprised myself that more has not been made of that as a potential advantage.”
The report cites a July 7 survey by the Northern Ireland Chamber of Commerce and Industry that found 67% of 200 members polled saw the protocol as an opportunity and 47% saw it as good for their business.
“There are plenty of Chinese organizations who wish to set up distribution centers here in Northern Ireland to ship to Europe,” said Alan McNeill, who works for two mobile phone export companies that recently registered in Northern Ireland.
Even the protocol’s boosters, however, acknowledge that its potential economic benefits are long term, while its costs and inconveniences are immediate. Failing agreement between London and Brussels, those could get a lot worse when so-called grace periods end in October, damaging supply chains in key areas such as medical supplies.
Those problems are inflaming passions among those in the population of 1.8 million who remain fiercely attached to the U.K. after decades of violence over whether the province should unite with the Irish Republic.
“It’s not the best of both worlds, it’s the worst of both worlds,” Steven Aiken, chairman of the Northern Ireland legislature’s finance committee and member of the Ulster Unionist Party, said of the protocol. Aiken argues that rather than protect the 1998 Good Friday peace agreement that ended the conflict, the deal has undermined it by cutting Northern Ireland off from its primary market, the U.K.
To Caoihme Archibald, Aiken’s counterpart as head of the legislature economy committee, that’s all special pleading. A member of the Republican Sinn Fein party, Archibald says the protocol was negotiated over four years and already boosted trade between the North and South.
“We should seek out the opportunities that are there,” she said.
The House of Lords report said the U.K. government had exacerbated the protocol’s problems by giving businesses as little as 12 hours to prepare for trade-rule changes and destroying trust with the EU by threatening unilateral action in breach of its Brexit treaty commitments.
The EU, meanwhile, was being overprotective of its single market by giving too wide a definition of “at risk” goods subject to costly controls, the report said. That’s especially true given that the £13 billion trade between Northern Ireland and the rest of the EU accounts for just 0.0008% of the bloc’s gross domestic product, the report said.
Lord Jay says his committee was deeply divided over the protocol, but agreed that reaching agreement on changes was essential.
Both London and Brussels will have to make compromises for that to happen he says -- “otherwise it’s the people of Northern Ireland who will suffer.”
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