Why Northern Ireland Has Become the Flashpoint for Post-Brexit Trade Tensions

(Bloomberg) -- The U.K. and the European Union are wrangling over Brexit arrangements covering trade between Great Britain and Northern Ireland that are designed to avoid the return of a hard border with the Republic of Ireland. The current regime is stifling the flow of goods and British Prime Minister Boris Johnson has rejected the EU’s proposals to improve the situation. Instead, his government wants to rewrite the arrangements painstakingly agreed to in years of negotiations. The tensions are a reminder that, even though the U.K. officially parted ways with the EU at the start of 2020, fundamental aspects of the relationship remain problematic. 

1. What is the Northern Ireland Protocol?

It’s an arrangement to keep goods moving between Northern Ireland, a region of the U.K., and EU-member Ireland to the south, while making sure the border doesn’t turn into a soft target for smuggling goods into the EU. It did that by establishing physical checks on products when they arrive in Northern Ireland from mainland Britain. The U.K. government says the burden of new paperwork and customs procedures have disrupted trade and effectively created an internal border within a sovereign country. It’s also unhappy that the European Court of Justice oversees large parts of the protocol. Britain has threatened since February to suspend part of the protocol by triggering an emergency clause known as Article 16. 

2. What is Article 16?

Either the U.K. or the EU can invoke it if they believe the protocol has caused “serious economic, societal or environmental difficulties” or a “diversion of trade.” In short, either side can take unilateral action if they believe the arrangements are not working. But the measures are supposed to be limited and it doesn’t allow one side to scrap the protocol entirely. Britain has said the threshold for triggering Article 16 has been met due to disruption of trade, but it’s held off from taking that final step and insisted it wants a negotiated solution. More recently it indicated a willingness to soften its stance and accept an interim deal to amend the protocol. U.K. Brexit minister David Frost quit his job on Dec. 18, and Foreign Secretary Liz Truss took over the negotiations. 

3. What does the EU say?

It’s proposed concessions to reduce the customs burden on traders, but refused to scrap the role of the ECJ. EU officials say the U.K. already accepted, following long and detailed negotiations, that the protocol was the best solution to avoid a hard border on the island of Ireland and protect the integrity of the EU’s “single market” for goods, which ensures the same standards and rules governing areas such as food safety. 

4. What options does the U.K. have?

It could suspend customs checks and paperwork requirements on a limited number of products arriving from Britain, or take more drastic action and decide not to apply large swathes of the protocol.

5. What happens once Article 16 is triggered?

Unless there are exceptional circumstances, the protocol requires each side to give the other a month’s notice of activating Article 16, and they must then hold talks before any action can be taken. If Britain invoked Article 16, the EU would have the right to take immediate and proportionate retaliatory measures. 

6. How confrontational could it become?

If the U.K. were to suspend all customs checks on goods entering Northern Ireland, it would create a major dilemma for the EU: would the bloc be prepared to construct a border of its own between Northern Ireland and the Republic of Ireland to protect its single market? That prospect has been downplayed by EU officials. 

7. Could there be a trade war?

Quite possibly. Given the difficulty that a suspension of the protocol would create for the EU, it may look to retaliate against the U.K. in other areas of their trading arrangements. For example, it could seek to impose tariffs on sensitive industries, or increase the intensity of customs checks on goods crossing the English Channel. It might even go as far as terminating the entire post-Brexit trade deal. A tit-for-tat tariff dispute could also strain the unity of EU member states. Some nations, including France, are talking tough to defend what was agreed in the Brexit deal, while Germany worries about the impact of a trade war on its companies. The EU is the U.K.’s largest trading partner and businesses from both sides would lose market access. If the conflict were to spiral out of control, the hard-fought peace and stability of Northern Ireland could, ultimately, be in jeopardy.

The Reference Shelf

• Bloomberg articles on Frost’s replacement, U.K.-EU tensions over Northern Ireland and on the dispute over the sale of chilled meats and sausages.
• Some U.K. retailers halted sales to Northern Ireland amid trade disruption after Brexit.
• A summary of the Northern Ireland Protocol.
• Bloomberg QuickTakes on the Irish border, on Irish unity and on hurdles to a U.K.-U.S. trade deal following Brexit.

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