Stephen Booth is Head of the Britain in the World Project at Policy Exchange.
The post-Brexit policy landscape will inevitably require a degree of triangulation between the government’s domestic agenda, the non-EU trade partnerships it is seeking to develop, and implementing the new relationship with Europe. Appearing before parliamentary committees in both Houses of Parliament this week, Lord Frost touched on all three aspects.
Frost said that post-Brexit regulatory reform is likely to reflect a change in culture, consistent with the “lighter-touch” common law approach, rather than the more prescriptive methods often found in EU legislation. “We have internalised principles of EU law and EU ways of thinking about things for the last 50 years,” he said.
Following reports that hopes are fading of a deal with the EU on so-called ‘equivalence’ for financial services, the Government is examining how to use its new regulatory flexibility outside of the EU to secure the competitiveness of the City. A new unit, which will solicit thinking from outside government and report to Frost, will identify and implement opportunities in additional areas. It could usefully draw on a recent Policy Exchange report, which set out a range of potential options in fields ranging from health to energy and the environment.
Meanwhile, Frost warned that the relationship with the EU could be “bumpy for a time”, chiefly due to the problems arising from implementation of the Northern Ireland Protocol, where things seem to be heading for another political crunch in the summer.
There have been some recent signs that the UK-EU relationship could bed down towards something like a “new normal”. Last month, the European Parliament finally rubber-stamped the UK-EU Trade and Cooperation Agreement (TCA). MEPs delayed their ratification following the UK’s decision to unilaterally extend grace periods for new checks on certain products crossing the Irish Sea. The chance of a veto was always very slim, but ratification has removed the threat of a cliff edge.
Days later, a months-long row over the status of the EU’s ambassador in London concluded with a UK-EU agreement, granting the EU delegation a status equivalent to that of a state. A joint statement said the agreement had been reached through “goodwill and pragmatism”.
Meanwhile, the latest trade data suggests UK goods exports to the EU are recovering after a big fall in January when the new trade regime came into force. The long-term picture has yet to develop, since it is still too early to disentangle the effects of the pandemic versus the Brexit change, and there isn’t yet comprehensive data for services.
Nevertheless, the Office for National Statistics figures show that in March goods exports to the EU were close to their levels in December, before the UK’s departure from the Single Market and Customs Union. Notably, imports from the EU have not recovered as quickly, despite the fact the Government has postponed the introduction of some checks at UK ports.
However, the problems with the Northern Ireland Protocol continue to loom large. Frost told MPs that the “chilling effect” the Protocol is having on Great Britain-Northern Ireland trade is contributing to “the unrest and political developments we are seeing”.
There has always been a fundamental difference in the UK and EU approaches to how the Protocol should work. Last year’s row over the Internal Market Bill was defused with temporary fixes, including grace periods for various checks. The UK has attempted to implement the Protocol on this basis but the situation on the ground has illustrated that the current approach cannot be made to work. And it is worth noting that the problems that businesses are currently experiencing are likely to get worse if solutions aren’t found before the various grace periods expire. This is particularly the case for food products and supermarket supply chains.
The resignation of Arlene Foster as First Minister and leader of the Democratic Unionist party has underlined the degree of political turbulence ignited by the EU’s move in January, when it proposed using Article 16 of the Protocol to impose an export ban on vaccines. Foster’s successor as DUP leader, Edwin Poots, this week demanded “meaningful action that dismantles the Northern Ireland Protocol”.
The UK has not ruled out triggering Article 16 itself if it is not possible to reach a deal in the coming weeks. “We continue to consider all the options,” Frost said. “I’d like to think that if we were to take measures of any kind that support the stability of the Good Friday Agreement in Northern Ireland, that the EU would not make that more difficult by reacting to it.”
Against this backdrop of rising political tension, technical talks in the UK-EU Joint Committee, headed by Frost and European Commissioner Maroš Šefčovič, are ongoing.
The UK says it is pushing for an agreement that recognises that UK and EU standards are equivalent, if not exactly the same, which would reduce the need for checks. It also wants legally flexible solutions based on the genuine and precise risks of products entering the single market, rather than remaining in Northern Ireland. Firms – such as supermarkets – that have consistent data to prove their goods are only sold in Northern Ireland could see checks waived. Such arrangements might be subject to safeguards and review if the EU could demonstrate persistent leakage into the single market.
On Monday, a leaked UK “roadmap”, reported by the BBC, appeared somewhat at odds with the wider UK rhetoric about fundamental reform to the operation of the Protocol, since it included plans to in four stages from October.
Frost stressed the leaked document was “evolving”. And it should be noted that the partial extracts in the public domain include the UK’s broad ambition to put in place “risk-based long-term solutions”, recognising the “low risk of retail movements by trusted traders that do not leave the UK’s internal market”. The question is: what the UK will do if the EU does not agree to this?
The EU has emphasised that solutions must be found within the bounds of EU law, or else the integrity of the Single Market will be compromised. Brussels, therefore, wants the UK to align wholesale with EU food safety rules, possibly on a temporary basis. Frost ruled this out again this week. “That doesn’t work for us and isn’t going to be the solution,” he said, noting that full-scale alignment would reduce the UK’s flexibility in current trade talks with the likes of Australia.
Brussels has downplayed the extent of the disagreement, saying this week that the talks are “making progress”. In contrast, Frost said, “it is not hugely productive, and we will have to see how far we can take it.”
Unless something changes, something must give. It is in the EU’s interests to portray this as a technocratic dispute. The EU can opt to hold out for UK alignment with its rules, but the stakes are rising. The future politics of the Protocol are hugely unpredictable several years out from a Stormont consent vote on the trade arrangements in 2024.
And the longer this goes on, the stronger the UK’s argument that theoretical and hypothetical risks to the Single Market are overriding political stability in Northern Ireland. Undoubtedly, triggering Article 16 would be messy and be likely to spark EU retaliation, which could plunge UK-EU relations to a new low. But the UK is right to point out that the EU took on commitments and responsibilities to both communities in Northern Ireland when it agreed to the Protocol.
It should be in all sides interests to avoid reaching a full-blown crisis. This is a problem that could be solved with legal creativity and pragmatism on both sides. The UK-EU relationship retains the potential for volatility until the arrangements in Northern Ireland are made politically sustainable.