Welcome back. Do you work in an industry that has been affected by the UK’s departure from the EU single market and customs union? If so, how is the change hurting — or even benefiting — you and your business? Please keep your feedback coming to brexitbrief@ft.com.
Good afternoon from Belfast where Brexit Briefing has been spending a few days delving into the question of Northern Ireland’s constitutional future and whether Brexit ultimately makes a united Ireland more or less likely.
Of course that question is far from unallied to how Brexit itself plays out in Northern Ireland in the longer term and whether the Northern Ireland protocol can be made to operate in a way that doesn’t obviously and excessively disadvantage NI consumers.
How you define “excessive” is important, because even if the UK succeeds via its brinkmanship with the EU in whittling down the impact of the protocol and “de-dramatises” the Irish Sea border it created, there will still be some losses to Northern Irish consumers.
But that is equally true of GB consumers who will find that Brexit brings shifts in pricing and availability, much of which they won’t notice, and some of which — like VAT demands on parcels from the EU — they will. It is a question of degree.
The difficulty particular to Northern Ireland is that the protocol and the trade border it creates have become wrapped up in the region’s identity politics, while much of English politics seems oblivious to the travails of business (see below).
But for the Democratic Unionist party which is now demanding full abolition — rather than the light-touch implementation being sought by the British government — the protocol has become wrapped up with its political survival.
Long-term watchers of Brexit will be familiar with this scene, where the DUP demands the impossible of the British government, picking a fight that it is far from obvious it can win.
They might believe that, with the help of some Conservative MPs in the European Research Group, they can convince Boris Johnson and David Frost to go for full abolition, but that surely overlooks the cost to Downing Street’s relations with the White House and the simple absence of good alternatives.
Brexit Briefing last week discussed how aligning, Swiss-style, on the EU’s food and plant import rules might open the door to a super-soft protocol but that deal isn’t going to happen — that much is clear.
So the best option is incremental easements on sanitary and phytosanitary measures (SPS) negotiated via the EU-UK trade agreement’s subcommittees. Over time this could reduce the burdens of the protocol and the EU-UK border — which are significant — but it will not make it go away.
Whether both sides can reach simple, operable solutions based around trusted trader schemes and levels of traceability that give the EU confidence that products are not leaking into the single market will depend on establishing trust.
That, as we know, is in short supply but it is also true that there is something of a gap between the political hyperbole — from all sides — and the reality of a considerable amount of nuts and bolts implementation that rather belies DUP calls to “abolish the protocol”.
This morning, for example, Sam McBride of the Belfast News Letter reports how, just weeks after the DUP said it was blocking the recruitment of Irish Sea border inspectors, the region’s agriculture department (Daera) has advertised for port inspectors.
Trade groups — who previously lambasted the government for failing to engage and provide information — now say their diaries are chock-full of meetings with UK government departments on the modalities of implementation.
“We were critical at the time, but now I have to stand up and say the government is throwing the kitchen sink at this,” said Aodhán Connolly, director of the Northern Ireland Retail Consortium, listing four meetings with various departments this week alone.
That is not to say that everything is fine, but with easements and extended grace periods the protocol is not landing too hard on the ground — and that does create a window for a longer-term fix.
In the port town of Larne this week, where many of the new checks are carried out, there were clear signs of political discontent: posters accusing Boris Johnson of selling out the Union and saying the protocol invalidates the Good Friday Agreement.
But on the high street, residents were collecting their parcels from the newsagents and the supermarket shelves were not bare. Keep it that way, and it will be much less likely that things boil over politically as Northern Ireland approaches the centenary of Partition in May and the annual marching season in July.
This, the UK government argues, would not be the case if it had not unilaterally extended grace periods in February around supermarket shipments, parcels and medicines. Trade groups welcomed the outcome, if not the manner of its achievement, but unilateral moves are not durable solutions — these can only come from engagement.
The EU, after firing off legal letters, has now signalled it wants to start talking and is demanding a “road map” on implementation from the British side which — per the Irish foreign minister Simon Coveney to RTE — could unlock greater flexibilities.
The ongoing challenge is that, since Brexit landed fully on January 1, the two sides have failed to make the shift to implementation — they are still in fact negotiating. Even positive steps are seen in that context.
This month, for example, the UK is understood to have handed over some of the border flow data that the EU had been demanding, but EU officials say member states were told this still falls short of the full, real-time package.
The UK then feels that the EU has, in the best traditions of EU-UK negotiations, “pocketed the concession” and moved on. The EU, of course, doesn’t see it as a “concession”, simply the UK only partially fulfilling the obligations it signed up to. Round and round we go.
Similarly, there is a looming legal limbo for UK companies sending goods to Northern Ireland after April 1, since the EU has not officially agreed to extending the grace periods that enabled companies to avoid paperwork such as export health certificates.
From an EU perspective this is easily resolved, says a senior EU official, by the UK providing that long sought-after road map. Then the EU can consider and jointly agree to extend the grace periods, assuming it is satisfied with UK plans for its implementation. And yet there are some areas, such as pets and medicines, where the UK clearly doesn’t want to fully implement the deal. Yet again, another negotiation.
Still, my perhaps optimistic bet — in the absence of viable alternatives for both sides — is that we’ll get there in the end. And the DUP, having once again marched itself up to the top of the rhetorical hill, will have to claim any EU concessions as a hard-won victory, and try to march back down again. That said, with Northern Ireland’s May 2022 assembly election looming, and the DUP suffering a series of setbacks in the 2019 general election, that will not be easy.
Brexit in numbers
This has been a week in which the government has had to deal with a litany of depressing reports and data on just how severely the red tape at the border is affecting businesses, particularly in food and drink sector.
The Food and Drink Federation produced these compelling statistics from the January ONS trade data that give numerical shape to the wealth of anecdotes from companies trying — and failing — to ship everything from cheese to chocolate to the EU.
The meat processing industry then produced a report that found that £120m of new costs would result in the permanent loss of at least 20 per cent of its total export business, with some placing that figure as high as 50 per cent.
These were followed by two Lords EU committee reports into the impact of Brexit on first services and then goods, both of which provide a comprehensive account of many of the issues that Brexit Briefing has covered in some depth since January.
What do all of these have in common? That affected industries see permanent scarring and that, while not naive about what is achievable, they want the government to get the partnership council of the EU-UK trade agreement up and running pronto.
Whether, in aggregate, these issues cut through to voters and to constituency MPs with clusters of affected businesses is something that I’ll be waiting and watching for — and look forward to hearing from Brexit Briefing readers on this also. You can reach me at the email above.
Source: Economy - ft.com
