TRANSATLANTIC POLICY MEMORANDUM ON TRADE
BREXIT IN NORTHERN IRELAND AND ITS IMPACT ON TRANSATLANTIC TRADE
Ivana Petricevic, Lillian Sullivan, Tommaso Filippini & Dennis Gelders
Contemporary European and Transatlantic Governance American University – KU Leuven
Section 1: Introduction to the Issue
Written by Lillian Sullivan
On 23 June 2016, the United Kingdom decided in a close vote of 52% to 48% to leave the European Union. A majority of voters in England and Wales supported the “Leave” campaign, while a majority in Scotland and Northern Ireland voted to remain an EU member state. During Brexit deal negotiations between the UK and EU that followed, the main point of contention was Northern Ireland's internal border with Ireland. Pro-British Unionists supported Brexit and a hard border. Pro-reunification Nationalists strongly opposed Brexit and refused to accept any border alterations. Protests and clashes between the two groups following the Brexit decision threatened to undo the fragile peace in Northern Ireland that began with the Good Friday Agreement (GFA) in 1998.
The UK and EU came to an agreement on 17 October 2019 with a renegotiated Northern Ireland protocol. The main elements of the protocol keep Northern Ireland aligned with EU single market rules, creating an island-wide regulatory zone and eliminating the need for regulatory checks on trade between Northern Ireland and Ireland. Any physical checks necessary to ensure customs compliance are to be conducted at ports or points of entry away from the Northern Ireland-Ireland border.
The United Kingdom & European Union established the Northern Ireland protocol to protect the fragile peace between Unionists and Nationalists after Brexit, but now that same provision threatens to destabilize the province. The protocol maintains an open land border, but the EU-UK trade border now lies in the Irish Sea, between Northern Ireland and the UK, complicating trade for UK businesses and making importing basic goods to Northern Ireland more difficult. Then in late January 2021, the protocol was embroiled in conflict once again when, in an effort to control the export of COVID-19 vaccines outside the bloc, EU officials approved the invocation of Article 16 of the Northern Ireland protocol—an emergency override mechanism available to either the UK or the EU—to prevent vaccines being exported from Northern Ireland to the rest of the UK. The Democratic Unionist Party (DUP) and other unionists have since urged the UK government to use Article 16 to abandon the protocol entirely and draft a new plan.
Pro-British Unionists voted for Brexit in 2016 but now vehemently oppose the Northern Ireland protocol. They feel it undermines their identity as British citizens and violates the conditions of the GFA by changing NI's constitutional status as a province of the UK without majority approval from the people. Former DUP leader David Trimble, who won the Nobel Peace Prize for his role in the GFA negotiations, joined his colleagues to protest the protocol. The UK, US, EU, and Ireland leaders received a letter from Trimble and seven other prominent Unionists declaring their opposition to the protocol. However, Rory Montgomery, a former Irish Ambassador to the EU, argues that because the protocol deals with a matter of international law and not a devolved matter, the GFA has not been breached.
More radicalized Unionists within the faction's militant arm have taken things a step further, creating legitimate concern for violence in the province. The two Loyalist paramilitary groups, The Ulster Volunteer Force (UVF) and the Ulster Defence Association (UDA), officially withdrew support for the GFA and still assert the NI protocol undermines the terms of their collective ceasefire from 1994. The UDA and UVF still have access to weapons and ammunition and a joint force of 12,500 between them. Reports say that Brexit has "breathed new life into their activities," and while the exact target for violence is ambiguous, the "highly destructive tendency within Ulster loyalism" is long-established. In early February 2021, customs and regulatory checks in Northern Ireland had to be temporarily suspended following reports of loyalists threatening port workers and EU customs officials. While the threat was ultimately quashed, the temporary suspension at the ports caused further shipping delays and exacerbated the dispute between nationalists and unionists within Northern Ireland.
The 2016 Brexit decision was an impetus for dramatic change within EU-UK trade relations. The EU and the United States remain the UK’s two largest trading partners. UK-EU trade, once linked by a shared customs union and single market, remains highly integrated through shared supply chains and services and through the activity of multinational companies operating on both sides of the English Channel.
In 2018, ROI's Taoiseach Leo Varadkar warned that Brexit could reignite violence from certain Irish Republican Army (IRA) factions. The NI protocol appeased the IRA by maintaining an open border but has left Unionists feeling betrayed and seeking redress. Unionists believe the Irish Sea border threatens their British identity and NI's status as a member of the UK. The threat of violence and descent into Troubles-era instability has become more likely in the last few years than at any other time since the GFA was signed over 20 years ago.
Section 2: Relevance for Transatlantic Order
Written by Ivana Petricevic
The Northern Ireland protocol is a relevant and important topic in the transatlantic space for multiple reasons. The first is the long-term prospects for stability in Northern Ireland. The Good Friday Agreement allowed tensions on the entire Emerald Isle to diminish, and lead to total freedom of movement between Northern Ireland and the Republic of Ireland. This is relevant because it determines the regulations for trade and customs between regions. Northern Ireland's position after Brexit shapes trade and customs. The protocol established that there would be no new checks on goods crossing the border between Northern Ireland and the Republic of Ireland, and so renewed conflict was avoided. If hard borders were drawn, disruption to the movement of goods, services, and persons would strain relations between the involved nations. The protocol works towards avoiding this hard border, ensuring the integrity of the EU’s single market for goods and facilitating unfettered access for Northern Ireland’s goods to Great Britain's markets. Additionally, it led to the inclusion of Northern Ireland’s goods in free trade agreements between the UK and third countries. The protocol thus allows trade to carry on as usual from Northern Ireland to the Republic of Ireland and the EU as it did prior to Brexit. Northern Ireland functions as an EU member by remaining in the single market and customs union. The protocol puts the EU peace process to the test. Northern Ireland’s protocol implementation is thus also a test of EU/UK relations. Strains in the relationship between the two affect wider conditions for the economic, social, and political environment of Northern Ireland. Furthering Northern Ireland’s economic trade and development using the protocol can be regarded as crucial to ensuring long-lasting peace in the region. Opening borders between Northern Ireland and the Republic of Ireland ensures frictionless trade.
The Northern Ireland protocol has caused a shift in trade, the value of Irish exports to Northern Ireland jumped 54 percent in 2021 while Northern Ireland exports to the Republic rose 65 percent, thus also influencing the value of goods exported from Britain to the Republic of Ireland, which dropped 13 percent. Since the protocol Northern Ireland-based exporters have equal access to both the British and EU markets. Business executives anticipate benefits from the protocol over time, as foreign investors come to the realization that Northern Ireland has a unique position with high levels of access to both the EU and U.K markets.
As mentioned previously by my colleague, The EU, and the United States are the UK's two main trading partners. Thus, the protocol shaped what the future of trade will look like for the UK. While current issues remain in regards to the implementation of the protocol, such as trade issues for the UK and EU, the Biden administration remains interested in maintaining strong ties with both the UK and the EU. Brexit and the Northern Ireland protocol have also come with conflicting views between the US and the UK. Tensions rose as prime minister Boris Johnson threatened to break the Northern Ireland agreement. To which the U.S responded claiming a breach in the peace of the Northern Ireland agreement would hinder any future trade agreements between Britain and the U.S. The U.S had been involved in creating the Good Friday Agreement making the risk of violence in Northern Ireland due to Brexit a serious concern. When the Good Friday Agreement was created the involvement of the U.S was in economics through peace, stability, and prosperity, thus conflicts in Northern Ireland are of importance to the U.S.
After almost 50 years of the UK's membership in the EU, it is complicated to unwind all of these issues into a single protocol or treaty. Re-establishing trade between the nations is of utmost importance and has an undeniable effect on transatlantic order. Thanks to the Northern Ireland protocol, the region is back on the transatlantic agenda, while keeping the Good Friday agreement intact, for the most part. The ongoing effects of Brexit on peace and security in Northern Ireland are not something to be overlooked. Great strategic importance never comes easy, this is especially true in the transatlantic partnership. This series of developments and decisions which materialized after the EU referendum demonstrates the challenges and political sensitivities which Brexit awoke in Northern Ireland. It also presents the sheer complexity of fashioning a Brexit withdrawal process that attends to the wider agenda of Britain’s traditional sovereignty, but simultaneously respects and accommodates the special circumstances which pertain in Northern Ireland.
Section 3: Challenges to the Transatlantic Order
Written by Tommaso Filippini
The United Kingdom’s (UK) membership to the European Union (EU) officially terminated on 31 January 2020; after that date, a transition period of eleven months was implemented, during which the UK remained part of the EU customs union, as well as the EU single market. The general position of Prime Minister Boris Johnson’s government at the time favored a ‘hard’ Brexit, with the ultimate objective of reaching an agreement as soon as possible, thus allowing the UK to set its own trade policy objectives without further interference from the EU. After several rounds of negotiations, the UK and the EU agreed on the text of the Trade and Cooperation Agreement (TCA), approved by the British Parliament in late December 2020. The 1200-page document presented a number of challenges and criticalities: it did not mention mutual recognition of product standards or professional qualifications and failed to prevent the future imposition of new trade barriers, such as regulatory and customs checks. The TCA was only the beginning of the novel economic relation between the Union and its former member state: after its signing, negotiations have continued with the aim of regulating issues that weren’t included in the document.
Bilateral talks prior to the conclusion of the Brexit Withdrawal Agreement focused on the issue of the land border between the Republic of Ireland and Northern Ireland, and on the political, economic, and social implications of its management. During the first negotiations with then-British Prime Minister Theresa May’s government in 2018, the EU’s position foresaw the implementation of a Northern Ireland-only backstop, to avoid the creation of a ‘hard border’ between Northern Ireland and the Republic of Ireland. Under this proposal, Northern Ireland would have remained part of the European single market, while the rest of the UK would have been able to conclude its own trade deals as an independent country.
After the Democratic Unionist Party’s objection to such an agreement, Prime Minister May agreed on the extension of the backstop to all the territory of the UK, that would have remained part of the EU customs union for an indefinite period. The DUP’s position stemmed from the concern that a Northern Ireland only backstop would result in a constitutional threat, because of the establishment of a regulatory barrier between Northern Ireland and the rest of the UK. Prime Minister Boris Johnson opposed the backstop provisions, and after new rounds of negotiation, a new agreement was concluded: the Protocol on Ireland/Northern Ireland, which entered into force on 1 January 2021; before and after its implementation, the Northern Ireland Protocol, as it is often referred to, was subject to criticism from both sides, with Northern Ireland Secretary Brandon Lewis declaring the new document would represent a breach of international law, although in a “minimal and specific way.” Aside from political declarations, the Northern Ireland Protocol and the application of its processes and customs requirements for goods originating from Great Britain caused a number of problems and rising costs for businesses and customers alike, with frequent reports of shortages and delays in shipping. While trade disruptions diminished as traders became more accustomed to the Protocol’s requirements, one of the greatest challenges for Northern Irish economy today is labor shortage: 18,000 EU immigrants left Northern Ireland since 2016, almost a third of the total, and the situation was aggravated by the COVID-19 pandemic.
In the second half of 2021, following discussions on the difficulties arising from the implementation of the Protocol, mounting speculation arose over the possibility for the UK to invoke Article 16, an emergency mechanism that allows either party to introduce safeguard measures to protect its economy. In July 2021, the UK government stated that in their opinion the threshold to apply a safeguard was reached, but had decided not to act in that direction. The Irish Prime Minister, Micheál Martin, declared that such an imposition would undermine the relationship between the UK and the Republic of Ireland. The application of Article 16 could have resulted in unexpected consequences, as the EU could have decided to take appropriate rebalancing measures if the UK’s safeguards had created an imbalance.
The United States of America (US) followed Brexit developments closely, with former President Trump expressing support for the UK’s decision to leave the EU, while the Biden Administration maintained a more skeptical view: one of the main points of concern was the possible repercussions of Brexit on the peace process in Northern Ireland, as well as on its economy and political stability. US observers questioned the possible impact of Brexit on American strategic interests in Europe and feared the economic strains imposed by Brexit could signify a reduction of the UK’s military and defense capability. The UK and the US initiated bilateral negotiations for the creation of a Free Trade Agreement (FTA) in May 2020, following the labor of working groups active since July 2017, however after five rounds of negotiation no agreement was found over some of the most challenging issues to be included in the TCA, namely food safety standards and pharmaceuticals.
Section 4: Proposals/recommendations for the Transatlantic Divergence
Written by Dennis Gelders
This topic is potentially the most divisive part of the entire aftermath of Brexit and creates deep tensions between Europe and the United Kingdom. It creates a difficult situation for the United States as it wishes to remain on good terms with partners. It also carries great risk as it could force the United Kingdom to choose between its international ambitions and its traditional European trading bloc, and in so doing, it could create a rift in the transatlantic trade, which could have repercussions in all policy areas. The United States needs to walk a delicate path between their two trading partners, a not unimportant challenge as European trade accounts for a quarter of the United States’ international trade with Britain constituting one-fifth of the European share.
The United Kingdom wanted to use Brexit as a stepping stone to new international trade agreements but has so far not been able to capitalize on Brexit. Two great hurdles stand in the way of any significant free trade agreement between the two nations. On the one hand, the US is reluctant to enter into negotiations and urges Britain to “prioritize political and economic stability” (in Northern Ireland) over a trade deal. This may not be the whole story as the current president does not seem as focused on relations with the UK but rather more interested in renewing US-EU ties. On the other hand, the issue of food safety haunts any potential negotiation. This is intensely tied with the problematic position of Northern Ireland as it is a condition of the European Union for the UK to conform to the Union’s sanitary and phytosanitary rules for the soft borders around Northern Ireland to work. But, for free trade to work between the United Kingdom and the United States, these rules would have to be able to be changed subject to negotiations.
The United Kingdom must balance both as trade with both is crucial. To achieve this the British could strike different types of deals with the European Union. One such deal is what is called a veterinary agreement. Such an agreement would end border checks and veterinary declarations for food items entering Northern Ireland from the rest of the United Kingdom and the European Union more generally. This would be particularly helpful for supermarkets to export meat and other food into Northern Ireland while avoiding EU red tape and import taxes. The United Kingdom has consistently opposed this solution as it would align them with EU regulation which they reject on principle and it would potentially drive them further away from the United States.
The British government would prefer an equivalence arrangement such as the one concluded by the European Union with New Zealand; this would get rid of some but not all friction on trade. A case-by-case approach would allow for some low-risk foods to be exempted from checks. Fundamentally in this scenario, the United Kingdom would not be bound to follow the European Union’s sanitary and phytosanitary rules or its food safety regulations, which could give them more leeway when negotiating with the American government on a potential free trade agreement.
The United States could help bring progress to this situation by clarifying its position: do they still want a trade deal with the United Kingdom or the European Union? The current American administration seems to be more interested in restoring its relationship with the European Union than restoring its ‘special relationship’ with the United Kingdom. By honestly admitting the United Kingdom is not a priority, they would free the British from their illusions and allow them to pursue a trading relationship with their traditional European partners, but would also potentially risk upsetting the transatlantic order. The veterinary agreement reached between the United Kingdom and the European Union could, however, be temporary to allow Britain to go its own way if and when a new and different American administration would be more Anglo-American minded.
If the American government committed to initiating talks on TTIP 2.0, this would reinvigorate the transatlantic trade, but also force them to incur backlash from the American agricultural and food lobby for accepting the European Union’s sanitary and phytosanitary rules. In the case of an EU-US trade deal that includes the European SPS rules, this would open a path for a trade deal between the United States and Britain as the tough concessions on regulation would already have been overcome. An initial trade deal with Britain based on American SPS rules would create a rift between the United Kingdom and the European Union and risk upsetting the delicate situation in Northern Ireland and make any new trade deal between the United States and Europe very unlikely.
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