Graham Gudgin is Chief Economic Adviser at Policy Exchange.
There has rightly been much general congratulation on the Christmas Eve Trade and Co-operation Agreement (TCA), but the Northern Irish provisions of the deal have raised the greatest concerns with the wider Conservative and Unionist family.
The Unionist critics (and, indeed, their Nationalist antagonists) aver that the UK emerges with customs declarations between GB and Northern Ireland for the first time in centuries – and in contradiction to the 1801 Act of Union. Even if some animal health checks were already present, the level of customs checks is being substantially increased.
In short, many in Northern Ireland believe this hastens the arrival of a united Ireland. But are these analyses correct?
It is worth recounting what has happened in the last few years. The primary cause of Unionist disquiet is the Irish Protocol, which creates a customs border in the Irish Sea to prevent a land border between Northern Ireland and the Republic. The Protocol remains in place, irrespective of the Christmas Eve Agreement – although its impact is greatly ameliorated by the new agreement to avoid tariffs and quotas between the UK and the EU.
The new Johnson Government found itself trapped in a situation not of its own making and has clawed back something of real value. The previous Government’s deeply unsatisfactory Backstop, tying the UK into the EU Single Market, and Parliament’s self-harming Benn Act of 2019, forced it to accept EU terms to get an election to achieve Brexit. The cost was acceptance of the EU and Ireland’s demand for an Irish Sea Border to avoid any change in the land border.
Recognising the difficulties caused by the Protocol, the Government has used the last year to make determined efforts to limit the economic and political damage of an internal customs border. Much of the negotiation has gone on quietly, and apparently calmly, in the Withdrawal Agreement’s Joint Committee which was given the power to determine key aspects of the border arrangements.
The promise in the Protocol that businesses in Northern Ireland would continue to enjoy ‘unfettered access’ to markets in Great Britain has allowed the UK to see off the contradictory EU demand that businesses should fill out export declarations for any goods sent from Northern Ireland to Great Britain. Export declarations are a normal part of the EU’s Union Customs Code (UCC) which Brussels initially insisted should apply to its new outer border in the Irish Sea.
Such declarations had little practical value, and it has now been agreed that firms do not need to complete them. To keep the EU happy and to keep to the letter of the Protocol, Brussels will instead be supplied with data from ferry manifests on the flow of goods to Great Britain. A further EU demand for a trade oversight office in Belfast was rejected by London as unnecessary and provocative, but the EU does not go empty-handed. It gets access to trade databases, and the right for its officials to be present at customs checks.
Unfettered access is a one-way ticket applying only to West-East trade. In the other direction, things are rather different. The key principle here is that the EU’s Single Market should be protected from penetration by goods which do not comply with its technical, SPS or ‘rule of origin’ regulations. One level of protection for the Single Market is that producers inside Northern Ireland must adhere to EU regulations for any products likely to cross the EU border. Associated with this are rules that some goods must be checked at centres across the border in Ireland and in the case of food products by southern vets at Northern premises.
This still leaves the problem of goods entering Northern Ireland from Great Britain or elsewhere. The principle is that no goods contravening EU regulations should be allowed into Northern Ireland if they are ‘at risk’ of entering the EU across the unmanned Irish land border.
The Joint Committee of the UK and EU has the power to determine which goods are at risk. Despite the new agreement avoiding all tariffs, all goods entering the EU from the UK must provide customs declarations showing that they conform with EU regulations, and checks will be undertaken to prevent avoidance.
For Northern Ireland this means that all goods entering Northern Ireland from Great Britain require a customs declaration. To avoid cost and disruption to businesses, the Government has set up a £200 million Trader Support Scheme (TSS) under which agents working for HMRC will undertake the paperwork based on information received from the businesses themselves.
It seems that few of these consignments will be checked unless they involve sensitive products – chiefly animals, food or chemicals. There will be intensive checks for these products but, under an agreement reached in early December, authorised traders will have a three-month ‘grace period’ to organise the necessary health certifications.
Beyond March 2021, the Government promises a new ‘end to end digital system’ to enable goods to be moved in the most streamlined way possible. Again, the Government promises to bear the costs of setting up this system. Despite an earlier promise of no new customs infrastructure, £50 million has been set aside to construct customs posts at Northern Ireland ports.
A potentially tricky problem affects food products restricted or banned by the EU. Products such as sausages and chilled meat can be prevented from entering Northern Ireland from Great Britain. For the time being, the problem has been kicked into the long grass, with a six-month stay of execution to find a long-term solution.
The idea seems to be that regular importers, including supermarkets and their suppliers, will be authorised as ‘trusted traders’, and will undergo few if any checks. This is intended to promote a light and unintrusive regime, but it is unknown how other importers will fare – especially intermittent or new sellers into Northern Ireland markets. The issue of parcels, which are becoming a major source of consumer goods through internet shopping, has still not been settled, but the promise is for no ‘undue’ disruption.
The DUP vote against the Bill earlier this afternoon but, in truth, this is more a complaint about a perception of being let down than a heartfelt wish to avoid the legislation. Arlene Foster, ever the pragmatist, has been muted in her opposition. The DUP have had to bear daily taunts from nationalists, other Unionists and the media (including of course BBC Northern Ireland) that their support for Brexit has weakened the Union, perhaps fatally.
The DUP should let this roll off their backs: the Union is safe enough and, moreover, is outside the EU just as they wanted, despite the opposition of other major Northern Ireland parties. In this sense, the DUP have won. Nor are the costs of victory likely to be heavy, even if nationalists will of course strive to make them seem so. Life in Northern Ireland is likely to be much less changed than they or their opponents anticipate.
The border in the Irish sea will impact lightly on firms, and is likely to be largely invisible to the public. Meanwhile, the real border will remain the land border. On the southern side is the EU and the Eurozone, with Ireland an increasingly large, and potentially less happy, fiscal contributor. For the Province, a more independent UK will be freer to go its own way in the world with a raft of new trade agreements in which Northern Ireland will fully share. The direction of travel will be towards more trade with a Trans-Pacific Partnership, probably soon to include the USA, and other faster growing economies.
With reforms like freeports, and regulations more suited to UK-specific advantages, Northern Ireland can benefit from this new independence. Already Northern Ireland has gained from being a world leader in Covid vaccination, while EU countries chafe at the delays in approving a vaccine developed in Germany.
Whether continued EU commercial regulation will hold back Northern Ireland remains to be seen. An apparent lack of freedom in Northern Ireland to ban the export of live animals (as in Great Britain) already annoys animal welfare supporters, and constraints following possible subsequent UK reforms will no doubt annoy others.
If the fetters of EU regulation prove too unpopular, the ability to escape the Protocol remains a democratic option after four years – thanks to an important addition injected into the Protocol by the Johnson Government that upholds the consent principle through the mechanism of consulting the Northern Ireland Assembly to review these arrangements. The consent principle is, of course, the cornerstone of the Belfast Agreement of 1998.
Above all, the new arrangements do not enhance the concept of a single island economy, as pushed by Dublin. Anyhow, that concept is not be found in the Good Belfast Agreement. Instead, this new trade agreement continues the existing framework of two socio-economic entities on the island of Ireland, functioning according to different rhythms.
The mainstream media’s take on Johnson’s attempts over many months to undo the worst aspects of the Protocol was that these attempts would disintegrate – and humiliatingly so. There was no such humiliation, and Johnson’s word on unfettered trade for Northern Ireland producers is upheld. Huge efforts have been made to ensure that few if any traders are more than minimally inconvenienced. But will Unionists appreciate that in the current mood of communal pessimism?
This is the third in a series of pieces from Policy Exchange looking at specific issues that arise from the Brexit trade deal.