Businesses face difficult 2 months for Great Britain – N Ireland trade

Political developments

The N Ireland Protocol continues to be in the news. It was signed nearly 2 years ago, and described by UK premier Boris Johnson as being “oven-ready“.  But as the House of Lords reported last week:

Addressing the implications for Northern Ireland and Ireland of UK withdrawal from the EU has been the most fraught, technically complex and politically divisive element of the entire Brexit process”.

The Protocol is a key part of the UK’s EU Withdrawal Act. It was agreed by the UK Parliament and endorsed in a General Election.  It created a customs and regulatory border in the Irish Sea, which the UK is legally obliged to administer under supervision from EU institutions.

Effectively, this means that inspections take place at Northern Ireland ports, and customs documents have to be filled in.

Yet back in January, the UK’s N Ireland Secretary, Brandon Lewis, claimed that “There is no ‘Irish Sea Border’“.  He has since admitted his comment “has not aged well”. But the UK government recently issued a new report effectively calling for the Protocol to be renegotiated.

The issue is that the “grace period” for the detailed new rules to apply will end on 30 September. Time is therefore starting to run out for the problems to be resolved.  And there appear to be only 3 likely options:

  • The Protocol is renegotiated in line with the UK’s position. This is the least likely option as the EU has already confirmed that it “will not agree to a renegotiation of the Protocol”. It would also be very unusual for a major treaty to be renegotiated so quickly after signature, and would take a long time to finalise.
  • The UK unilaterally invokes Article 16 to cancel key clauses. This is also an unlikely outcome as the government’s own legal advice was very clear on the potential impact of the trading arrangements, before Parliament debated them. So it is hard to see how the government can argue the problems were unforeseeable.
  • The UK agrees to implement the Protocol that it has signed. By default, therefore, this is the most likely outcome, although it will not be easy to achieve.

There are 2 main reasons why the UK may end up accepting this outcome:

  • The need for new trade deals. The UK needs to negotiate a wide range of new trade deals to replace those it has lost by leaving the EU. And it is very unlikely that major countries will be keen to sign such deals, if they feel they can’t trust the UK to deliver on what it has agreed
  • The need for a US trade deal. The UK is desperate to agree a trade deal with the USA.  But that depends on President Biden. And he is very proud of the Good Friday Agreement, which was brokered by the US Special Envoy to N Ireland. Putting the Agreement at risk would end trade deal hopes.

That said, there is no doubt that this option will be difficult to finalise, given the volatile nature of internal Conservative Party politics.

It was these, after all, in the shape of Johnson’s bid to replace Theresa May as premier, that killed her ‘backstop’ agreement. It had been expressly designed to avoid all the issues created by the Protocol.

So one cannot rule out the risk that the introduction of the UK’s own border controls from 1 October – or even an unrelated issue such as vaccine passports – could lead to the UK invoking Article 16, and effectively ‘pulling the plug’ on the Protocol.

In turn, of course, this would also create the risk of a wider trade war developing with the EU, as well as a highly-charged confrontation in the courts.

It is always very difficult to plan for political uncertainty. There is probably only a 10%-20% chance today that the UK will pull the plug. But the impact of a decision to invoke Article 16 could be enormous, if it proved the spark for a UK-EU trade war.  

PREVIOUS POST

Auto industry provides a model for the transition to Net Zero

25/07/2021

Flooding in China and Europe, record temperatures in the USA, wild fires –...

Learn more
NEXT POST

Samsung stumbles in global smartphone market as Xiaomi overtakes Apple

08/08/2021

Smartphone sales confirm that global markets are continuing to pivot to the New ...

Learn more
More posts
Competence starts to replace charisma as a key factor in politics as the pandemic continues
02/05/2021

The appalling tragedy in India reminds us that the Covid pandemic is very far from being solved. And...

Read
“We may be opponents, but we are not enemies, we’re all Americans”
08/11/2020

Groundhog Day 2, last week’s made-for-TV movie set in Pennsylvania, was the perfect lockdown c...

Read
UK election offers voters no middle ground in December
03/11/2019

Pity the poor UK voters as they prepare to vote in probably the most critical election of their live...

Read
D-Day commemorations mark end of a political era
09/06/2019

Last week, 95 year-old Harry Read repeated the jump that he and his fellow parachutists had made as ...

Read
Wishful thinking dominates Brexit debate as the UK heads towards No Deal on 31 October
02/06/2019

One of the best things I learned at school was the simple mnemonic: “To ASSUME can make an ASS...

Read
Political and economic risks rise as US mid-term elections near
02/09/2018

This is the Labor Day weekend in the USA – the traditional start of the mid-term election camp...

Read
US PE exports on front line as Trump changes trade policies
15/01/2018

It is almost a year since Donald Trump became President.  And whilst he has not followed through on...

Read
Brexit disaster looms as UK government power struggle erupts
09/10/2017

UK voters were never very bothered about membership of the European Union (EU) before the Brexit vot...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more