Tensions between the UK and the EU are rising again over the implementation of post-Brexit trading arrangements for Northern Ireland, with talks on possible reforms seemingly deadlocked.
Ireland’s foreign minister Simon Coveney warned at the weekend that the entire EU-UK Trade and Cooperation Agreement could be terminated if the UK made good on its threats to trigger Article 16 and fundamentally rewrite the protocol on Northern Ireland. The protocol, part of the EU-UK withdrawal agreement, was agreed in order to avoid the return of a north-south trade border on the island of Ireland.
At the same time tensions are growing in Northern Ireland, where the mainly Protestant Unionist parties have rejected the agreement. Two buses have been set on fire in the past week, in apparent protests over the protocol.
Why has Article 16 become so controversial? And how could it affect EU-UK relations more broadly?
What is Article 16?
This is a safeguard clause in the Northern Ireland protocol which either side can trigger if they believe the arrangement has caused “serious economic, societal or environmental difficulties” or the “diversion of trade”.
The UK says this threshold has already been reached as a result of the trade frictions caused by the protocol, which requires all goods travelling from Great Britain into Northern Ireland to conform to EU rules.
Although the arrangement was agreed by Boris Johnson in October 2019 the British government now says it has caused far greater disruption than anticipated at the time and needs to be fundamentally rewritten.
UK ministers also argue that the unionist community has lost confidence in the protocol and its continued application could destabilise the already fragile politics of the region.
Which parts of the protocol does the UK want to change and why?
There are five main areas that the UK wishes to change, which were set out in a formal command paper published last July.
In order to reduce friction on the Irish Sea border that the protocol has created, the UK asked for an “honesty box” approach to checking goods entering from Great Britain. This would mean only goods travelling south to the Republic of Ireland would face checks. London also asked for the scrapping of any paperwork on goods travelling from Northern Ireland to Great Britain.
In addition, London demanded that the European Court of Justice should no longer have the right to enforce main elements of the protocol and wanted it to be replaced with a “treaty-based” arbitration mechanism. The EU has rejected this request, arguing that since Northern Ireland is following EU rules and regulations for goods, only the ECJ can rule on their application.
The bloc has offered to reduce customs and health checks on the Irish Sea border, but the UK says this offer not go far enough.
Why would Article 16 be a problem for the EU?
If the UK fails to maintain an effective border in the Irish Sea, and there is no north-south trade border in Ireland — as both sides agree is necessary to preserve the 1998 Good Friday Agreement that brought peace to the Island — then this creates a backdoor into the EU single market.
Brussels argues that without full legal controls on animal and plant products, Ireland’s place in the EU single market is undermined because its goods can no longer be trusted, so may require checks as they enter the EU. The UK would therefore be threatening Ireland’s economic rights as an EU member. This may be seen as intolerable by the 26 other EU member states.
For its part, the UK says this concern is overstated. It argues that in-market surveillance by both sides can address concerns about any non-compliant goods flowing into Ireland via Northern Ireland, and that the actual risks to the EU single market from UK goods are negligible.
How would Article 16 affect trade?
Once the UK notifies the European Commission of its intention to trigger Article 16, including what measures it intends to take to address the “serious economic, societal or environmental difficulties”, the two sides immediately enter into consultations to discuss the British proposals.
These cannot come into force for a month, except under “exceptional circumstances”, where the UK argues that immediate action is required. Crucially, Article 16 says any action taken must be limited to what is “strictly necessary in order to remedy the situation”.
The response from Brussels would therefore depend on how expansively the UK used Article 16. If London identified specific problems with the protocol — for example the ability to trade in chilled meats or plant products with Northern Ireland — the EU would likely take limited steps to address the fallout in those areas.
But if the UK used Article 16 to suspend key parts of the protocol — for example Articles 5 and 7, which form the basis for leaving Northern Ireland in the EU single market for goods — then Brussels has suggested it could take far more draconian action.
For instance, it could argue that because the EU-UK trade deal was always predicated on London first addressing the Northern Ireland border issue, any UK decision to unravel the protocol would therefore be undermining the entire basis for the Trade and Cooperation Agreement with the EU.
Under the TCA, either side must give 12 months’ notice of termination, before they would revert to trading on World Trade Organization terms. This would effectively create another “no deal” cliff-edge during which Brussels hopes the UK would return to the negotiating table.
Alternatively, Brussels could take the lesser step of applying targeted tariff measures against the UK on sensitive products such as cars, whisky or fish.
Could there be longer-term consequences?
If the two sides cannot agree on reforms to make the protocol function, there could be a serious rupture of economic and political ties.
The souring of relations could also extend to foreign affairs and co-operation on a range of fronts, from data flows to pan-EU scientific research projects.
A trade war would also cause job losses in the EU, especially in France, Belgium and the Netherlands, which still have big economic links with the UK. The EU has already set aside €5bn to compensate governments and companies which took an economic hit from Brexit.
As was seen in the four years after the 2016 Brexit vote, trading on WTO terms could also deter investment and damage business confidence in the UK.
Source: Economy - ft.com
