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EU patience starts to run out as UK threatens to break the N Ireland Protocol

Economic growth
By Paul Hodges on 17-Oct-2021

Unsurprisingly, it turns out that Brexit still isn’t “oven-ready”, despite the UK government’s promises back in 2019. Instead, as many of us pointed out all along (and The Times cartoon confirms), it is set to lead to years of dislocation and disruption for the UK economy.

Of course, the pandemic made things worse. But it also allowed the government to claim that many Brexit-related problems were somehow related to Covid. And now that fiction is being exposed, as the UK economy suffers from the labour and food shortages that were long predicted by those involved with day-to-day business.

Amazingly, some Conservative MPs even think this might be a “good thing”, with one telling the party Conference this month:

“It is in our mid and long-term interest that these logistics chains do break.

“It will mean the farmer down the street will be able to sell their milk in the village shop like they did decades ago. It is because these commercial predators – the supermarkets – have wiped that out and I’d like to see that come back.”

The problem for the UK is that today’s supply chain problems are actually focused on Great Britain.

N Ireland is still in the EU Single Market and has avoided the UK’s problems with queues of cars in search of petrol.  Its economy is adapting well to the change, with exports to Ireland rising 77% since Brexit (€800m).

Last week saw major developments on the N Ireland Protocol issue.  Local DUP MP, Ian Paisley, told the BBC that:

 “Boris Johnson promised to tear up the Protocol before he signed the Brexit deal”.

In other words, Johnson planned all along to break the international treaty that he negotiated, signed, recommended to Parliament and used as the basis for his election win in December 2019.

Last week also saw chief UK negotiator Lord Frost confirm his threat to suspend parts of the N Ireland Protocol if the EU didn’t immediately agree to renegotiate the whole deal.

Wisely, the EU chose to ignore this threat. Instead, it proposed a package of new ideas for resolving the unexpected side-effects of the Protocol, including the concept of a Green Channel for exports to N Ireland and a Red Channel for exports to the EU Single Market.

It seems the UK government hadn’t expected this move. And it now faces a difficult decision:

  • Either it accepts the EU’s suggestions, after having improved them where necessary
  • Or it decides to suspend parts of the Protocol, and risk a trade war with its powerful neighbour

Suspension would take the UK further into uncharted water. It would not only be breaking an international treaty, signed less than 2 years ago.  Escalation would also cause a major break with the USA. The “Irish vote” is a powerful voice in US politics, and Republicans and Democrats have already made their support for Ireland very clear.

The EU’s patience is also wearing thin. It has other more important issues on which to focus. France, Germany, the Netherlands, Italy and Spain are all pressing Brussels to prepare for a trade war with the UK, if it doesn’t now implement the treaty it signed. One option could even be termination of the EU-UK Trade Co-operation Agreement, which guarantees tariff-free trade.

Logic therefore suggests the UK will accept the EU’s offer. But logic has not played a major role in Brexit so far. UK business now needs to speak up very strongly if it wants to avoid an EU trade war, and a major row with the USA.