EU may hold the cards but the UK has the joker

Behind-the-scenes talks have been going on for several weeks now between EU and UK officials on how the Northern Ireland (NI) protocol might be adapted to minimise disruption on trade between Britain and NI.

The ideal solution that would satisfy the needs of traders in goods of animal and plant origin, not just for trade between Britain and NI but for all trade both ways between Britain and the EU, is a veterinary alignment.

There are reports that the UK government is reluctant to commit to this, because it might constrain a trade negotiation with the USA.

Irrespective of political sound bites, the talks are ongoing, with officials pouring over the minutiae.

If this had been done at a political level, it is possible that neither the trade and co-operation agreement (TCA) nor the withdrawal agreement (WA) would have been agreed by the UK government.

UK politics polarised after the referendum around either “getting Brexit done” or trying to find a way of remaining in the EU – leavers and remainers.

Leave or remain position trumped pragmatism

Unfortunately, insufficient attention was given to finding a way that would give effect to the political decision of no longer being part of the EU but retaining the maximum level of agreement on trade alignment which would minimise business disruption.

Such agreement, of course, would be for the duration that suited both parties and the UK could, as an independent sovereign nation, make the decision to leave any agreement after a suitable period of notice.

However, to use the well-worn cliché, we are where we are, irrespective of who thought what when the agreement was signed off.

The reality is that an arrangement, whatever it may be branded as, is required that enables NI to, as seamlessly as possible, be simultaneously part of the EU and UK single market.

As things stand, there are zero problems with trade from NI to the EU or from the EU to NI.

Where the difficulty arises is with the final part of this trade dynamic – Britain to NI.

Just one part of the protocol is a problem

Aside from the practical difficulties in dealing with a multitude of products in retail supply chains and online consumer shopping, there is huge political sensitivity with any disruption to the UK single market.

This has meant a failure to appreciate the value of NI fish being able to access EU markets seamlessly, unlike their counterparts in the rest of the UK, or NI milk and lambs that go south for processing in a way that agri produce cannot access EU markets.

There is further huge potential for NI to replace Britain as a distribution hub for the entire UK for EU-sourced goods and NI is a logical bridge between the EU and UK where inward investors are likely to be attracted to.

That just leaves the problem with supply chains for NI supermarkets that are based in the rest of the UK and consumer shopping.

Applying the letter of EU sanitary and phytosanitary (SPS) rules on goods of animal and plant origin makes this business impossible.

The EU is also loathe to do anything that might compromise the integrity of the single market and has a subtext of making it clear that leaving the EU isn’t a good idea if you want to continue trade with the EU without a heavy load of bureaucracy.

Bespoke solution required

Yet the complexities of NI history and the fact that it is the only land interface between the UK and EU means that a tailored solution is required, as the off-the-peg version simply doesn’t fit.

That will mean the EU accepting some dilution of its SPS rules when it comes to goods that can be demonstrated to be part of UK internal trade only.

This would cover supermarkets selling at retail price to consumers or consumers purchasing limited quantities of goods in Britain for personal use in NI.

Obviously, the EU can dig in on the basis that what is happening with checks on goods entering NI from Britain is just implementation of the agreement the UK signed up to.

The fact that this problem doesn’t matter one iota to 26 of the 27 EU members is also significant at a time when the focus is on vaccinations and getting the EU economy up and running after the pandemic.

There are also many who believe that the EU member states can survive better than the UK can if the TCA were to collapse, so there is an element of 'let us teach them a lesson' at play as well.

Problem for just one EU member - Ireland

However, Ireland is the one member state that requires a fully functioning TCA and, ideally, an enhanced version with full veterinary alignment to ensure the continued seamless movement of agri food products into Britain.

If the EU or UK decide that the protocol can’t be made work for goods entering NI in the way that they want, it undermines the foundation of the entire TCA between the EU and UK.

In the worst-case scenario, the agreement just ratified by the European Parliament falls or is even suspended either partially or in its entirety.

Even if the fall-out is limited to the NI interface between the UK and EU, it would still have huge implications for the Irish Government.

In the worst-case scenario here, if the UK government won’t facilitate controls at NI ports, the issue of protecting the EU single market will fall to the Irish Government.

That will mean border controls either at the border itself or perhaps at Irish border control points with the rest of the EU, giving the Republic of Ireland de facto participation in the UK single market.

The TCA and the WA, including the NI protocol that preceded it, were both shaped by the EU, as it held most of the cards in the negotiations.

However, when it comes to having an EU border control implemented within the UK, the UK government holds the joker.