ECONOMY

Five ways UK and EU can break Northern Ireland deadlock

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It has not taken long for Northern Ireland to force its way back on to the Brexit agenda after a few quiet weeks over the summer when everyone took to their sun loungers. 

Officials on both sides continued to talk, but it is pretty clear from the early skirmishes that both sides are a long way apart on how to make this benighted protocol on Northern Ireland work.

The most positive news is that the differences between the two sides did not reach boiling point over the summer. 

The threat of violence during the July “marching season” did not materialise and when the UK government released its July Command Paper demanding a root and branch reform of the Protocol, the EU did not overreact.

Indeed, it moved to pull the teeth from the confrontation by pausing legal action against the British government for its failure to implement parts of the protocol in order to create space for talks. 

As one of Northern Ireland’s smartest politicians privately observes: “London has lost the moment to theatrically turn the table over, but then so has Brussels.”

It is in this atmosphere of uneasy truce, or perhaps grudging stalemate, that the events of this week should be observed. 

The UK unilaterally extended grace periods on the “easements” designed to help businesses adjust to the new regime, and it did so without any end dates. The EU, again, did not overreact, while reserving its rights to restart legal action. 

In effect, the protocol’s partial implementation now sits in a quasi-official, open-ended legal limbo. The question now is whether this creates space for productive talks, or a dangerous vacuum that leads to further division and instability.

It is into that void that Sir Jeffrey Donaldson, the leader of the Democratic Unionist party, was roaring this morning, demanding that the protocol (which requires all goods going from Great Britain to Northern Ireland to follow EU rules and regulations) be scrapped.

Threatening to pull the plug on the region’s power-sharing institutions, Donaldson warned that Northern Ireland’s political institutions “will not survive” a failure to fix the problems the protocol has created, and that solutions must emerge within “weeks and not months or years”.

The trouble with such grand threats is that — as demonstrated by both the UK and the European Commission stepping back from the brink over the summer — neither side has a clear exit strategy here.

Collapsing the protocol, or mostly ripping it up, as Lord David Frost’s Command Paper from this July proposes, does not deliver workable solutions. Nor, as the Command Paper admits, does triggering Article 16, since that only sets in train a specific and limited set of palliative talks.

But the fact remains that the protocol isn’t working as it stands. It erects barriers inside the UK internal market and leaves Northern Ireland in the regulatory and legal orbit of a foreign trading bloc in critical areas, such as food supplies, medicines and subsidy policy.

The fact that Frost and Prime Minister Boris Johnson negotiated this deal, and did so apparently in bad faith since the consequences were made crystal clear at the time by officials, does not change the fact that Frost is correct to say it is “not sustainable” in its current form.

Frost says additional “flexibilities” within the current system will not be sufficient — even though the EU is very clear that that’s what is on the table — but there are some things the commission could do to test that hypothesis.

Leaving aside that group of people for whom it will never be acceptable on grounds of principle, there are some things that could be done to make the protocol much more sustainable.

First, the EU needs to move further on medicines and veterinary medicines. The non-paper that the EU produced over the summer didn’t go far enough. The pharmaceutical industry has made clear that it needs UK-wide authorisations to work, or supplies to Northern Ireland will be constrained. 

Second, the commission has to move a lot further on the agrifood checks on the new Irish Sea border that (lest we forget) is there to prevent a return to the north-south trade border. 

If Unionists are to be asked to accept something east-west that nationalists would not, north-south, more must be done to reduce frictions given the unique circumstances of Northern Ireland — and not just for supermarkets and big retailers. 

Northern Irish trade groups are clear, for example, that imposing full-blown export health certificate regimes on agrifood movement would be — to quote Aodhán Connolly, director of the Northern Ireland Retail Consortium — “game over”. 

Third, the requirement to submit supplementary declarations on goods that are clearly destined for NI is also a layer of bureaucracy that trade groups say is unnecessary and, given audited supply chains, should be removed. 

Remember, all the complaints about border bureaucracy thus far have occurred even before the full bureaucratic regime has been enforced. Even the “grace periods” aren’t that graceful.

Fourth, derogations on chilled meats and plants, along with clear labelling and joining agreements on market surveillance to avoid “leakage” into the single market, has already been proven to work during the extended grace periods. These solutions could be made permanent. 

It is clear the UK will not do a veterinary agreement with the EU, but as Connolly adds, what Northern Ireland needs is not a “Swiss deal” or a “New Zealand” deal, but a “Northern Ireland” deal.

Last, there is also a clear argument, as George Peretz QC and James Webber set out here, to consider how to pare back Article 10 of the protocol which gives the commission massive potential “reach” into UK government subsidy policy, causing an affront to UK sovereignty.

Since the clause was written, the UK has committed in the Trade and Cooperation Agreement to a set of principles. It has published legislation on its subsidy control regime. As that regime formalises, there is a strong case to find ways to limit the scope of Article 10 much more narrowly to Northern Ireland.

The more the EU embraces genuine flexibilities within the framework of the protocol, the harder it will be for Frost to reject them.

The EU’s top official overseeing the Brexit deal, Maros Sefcovic, starts a two-day visit to Northern Ireland today and will be both selling new commission solutions, but also hearing from those directly involved in implementing a protocol that isn’t working.

He should listen carefully. Because the truth is, with none of the sides being able to walk away and everyone having a responsibility to the peace and prosperity of Northern Ireland, the only way out of this mess is a deeper compromise. It’s time for both sides to engage.

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 [email protected].

Brexit in numbers

Barely a day goes by without more stories of shortages hitting the headlines — from hotel laundries to water treatment centres — which is causing growing stress levels in government.

It is never clear-cut how much Brexit is responsible for these shortages. The short answer is, it is often a contributory factory, but how big a contribution often seems to depend on whether or not you voted for Brexit.

But underlying all this — and the government’s decision to stand its ground by not giving derogations to low-skilled immigrant workers such as HGV drivers despite the pleading of industry — is a promise that business will adjust and wages will rise in affected sectors.

That was always the macro promise when it came to Brexit and the ending of Free Movement from the EU, but as my colleague Delphine Strauss explores in this wonderfully forensic piece, it is not at all clear that wages will rise that broadly. 

So while HGV drivers’ wages are up 10 per cent, the “white van man” last-mile delivery guys’ wages are flat. Pret A Manger is offering entry jobs at the statutory minimum of £8.91 an hour. 

Political narratives can often diverge from the data (as Brexit itself shows), but the danger for the government is that the “upsides” of the shortages — higher wages for a narrow cohort of HGV drivers, for example — are much less widely felt (and reported upon) than the downsides.

And, finally, two unmissable Brexit stories

The Financial Times has spoken to dozens of eastern European HGV drivers who used to work in Britain but have now gone elsewhere. Many cite similar tales of poor working conditions for quitting but also mentioned Brexit, which meant endless paperwork for which they were never trained and queues at the border. Many said they had now found work elsewhere on higher wages and in a better working environment.

Angela Merkel’s departure is long overdue, argues Philip Stephens. In recent years the message Germany’s chancellor has conveyed to the electorate has been the one it wanted to hear: things have not much changed since the west’s triumph over communism. But Europeans have a choice, as French president Emmanuel Macron has argued, they can translate the continent’s economic heft into a significant geopolitical voice, or they can look on helplessly as competition between the US and China sets the terms of a new world disorder. If it is the latter, Germany will be among the biggest losers.

All 27 EU member states have now submitted their national “recovery and resilience plans” to the commission and in return they hope to be able to borrow from the massive recovery fund. But one plan is by far the most important, and that is Italy’s, Martin Sandbu says. “Whether Italy can use the post-pandemic recovery to exit its 20-year stagnation for good is the pivotal question for the future of Europe,” he writes.

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