Stephen Booth is Head of the Britain in the World Project at Policy Exchange.
Despite a succession of seemingly “make or break” moments, what is becoming clear is that the only Brexit deadline that matters is 31 December, when the transition period legally ends.
Nevertheless, there was an important Brexit breakthrough this week. The UK and the EU announced on Tuesday that they had reached an “agreement in principle” to resolve disputes over the implementation of the Northern Ireland Protocol. Yesterday, Michael Gove set out the contours of the agreement in the House of Commons. Fuller details, via legal text, are expected in the coming days.
The settlement is important for a number of reasons.
Under the terms of the UK-EU Withdrawal Agreement reached last year, the Protocol is due to come into force on 1 January 2021, irrespective of there being a UK-EU trade deal or not. The Protocol gives Northern Ireland a special economic status – within the UK’s customs territory, but in regulatory alignment with the EU Single Market for goods. However, it was clear from the outset that the UK and the EU had different interpretations of what this framework should entail in practice.
Brussels insisted on a maximalist interpretation of strict adherence to EU border processes, whereas the UK wanted a light-touch approach, minimising any impact on trade across the Irish Sea.
Agreeing how to resolve these differences – within a Joint Committee, co-chaired by Gove and Maroš Šefčovič, European Commission Vice-President – was theoretically distinct from a wider UK-EU trade deal. In practice, however, differences over the Protocol have, up to this week, been linked to the trade negotiations.
In September, the Prime Minister complained that the EU was using its maximalist interpretation of the Protocol to “exert leverage against the UK in our negotiations for a free trade agreement.” Hence the Government proposed unilateral powers in the Internal Market Bill, which would have had the effect of overriding aspects of the Protocol, as a “safety net” in the absence of a negotiated settlement.
The UK move was controversial but, at the very least, it did not prevent an agreement within the Joint Committee and – significantly – this deal holds irrespective of a wider UK-EU FTA. Ultimately, the Government is now satisfied that it has secured enough on the Protocol to remove the controversial clauses from the Internal Market Bill.
It remains to be seen what implications this agreement will have for the wider trade relationship. On the one hand, it builds goodwill and removes a significant hurdle to a UK-EU trade deal. Equally, it reduces the risk of an acrimonious no deal, reducing the political cost of such an outcome for both sides.
Most importantly, the deal has practical implications for businesses and consumers in Northern Ireland. The risk of getting this wrong was starkly underlined by Northern Ireland’s First and Deputy First Ministers jointly writing to the EU last month. They described the “unacceptable” and “real threat” to food supplies being shipped to Northern Irish supermarkets from Great Britain if flexibility wasn’t provided.
Under this agreement, supermarkets will be given a “grace period” of at least three months to ensure food supplies from Great Britain to Northern Ireland do not face disruption from 1 January. This will give supermarkets time to adapt their systems to comply with new procedures, so that checks can be risk-based.
Chilled meats, sausages, mince and unfrozen prepared meals – which are prohibited and restricted from entering the EU from third countries – will be permitted for a period of time, pending a review by both sides. The EU is briefing that, once this derogation period has elapsed, Northern Irish supermarkets will have to source these products locally or from the Republic. The UK would counter that this is actually a reciprocal issue, since the EU has a strong interest in exporting similar products to the UK.
Notably, Gove said in his statement that these derogations would provide time “for reciprocal agreements between the UK and EU on agri-food to be discussed in the months ahead.” Such agreements could fall within the scope of an FTA or stand alone. For example, the EU has such an agreement with New Zealand, which reduces the need for checks.
Meanwhile, the EU had previously insisted that all goods imported into Northern Ireland from Great Britain would be considered “at risk” of entering the EU, so should attract tariffs. However, the UK and the EU have reportedly agreed a trusted trade scheme that would see 98 per cent of businesses exempted from tariffs, which could be particularly significant if there is no UK-EU trade deal. The other two per cent could apply for rebates if they can prove goods will stay in Northern Ireland.
The trusted trade scheme would be subject to a review, or sunset clause, three-and-a-half years after the Protocol comes into effect, deliberately timed to precede the first vote of the Northern Ireland Assembly, under the “consent mechanism” on whether or not the trade provisions of the Protocol should be continued.
The EU and UK have also agreed that exit summary declarations for goods going from Northern Ireland to Great Britain will not be required and the information will instead be generated from data held by shipping companies. This removes a potential bureaucratic hurdle for NI exporters.
Under the terms of the Protocol, the Northern Irish goods sector is subject to EU state aid rules. There has been concern that this provision could lead to “reach back” into Great Britain, affecting firms with only a peripheral link to Northern Ireland. Under the terms of the deal, Gove said, GB firms will stay outside these state aid rules where there is no “genuine and direct” link to Northern Ireland, and no “real foreseeable” impact on NI-EU trade.
Finally, another point of contention had been the EU’s request for a dedicated mission in Northern Ireland to monitor the implementation of checks, which will be carried out by UK officials. The compromise is that EU officials will be based in temporary office space. “There will be no Belfast ‘mini-embassy’ or mission,” Gove said.
It is true to say that many Northern Irish Unionists “wouldn’t have started from here.” Nevertheless, the DUP’s statement on the agreement might be described as unenthusiastic but calm. The devil will be in the details and some issues remain subject to further discussion. Indeed, the DUP’s statement implicitly reminds the Government that Article 16 of the Protocol allows either party to take “appropriate safeguards” unilaterally if its application leads to “serious economic, societal or environmental difficulties”. This would be an option open to the UK in the event of future disputes.
However, pragmatism is a sounder basis for a lasting settlement on this issue. And, taken together, these measures are clearly a major improvement on the Protocol as envisioned by the EU a year ago.