The Northern Ireland Protocol was a critical part of the negotiation of the Withdrawal Agreement and the Political Declaration.
In turn, trade arrangements were central to the Northern Ireland Protocol. Trade is essential for the economy of Northern Ireland, both with Great Britain and with the Republic of Ireland (ROI) in the EU.
Trade profile
The trade profile is mainly in goods, with a high proportion of trade with ROI relating to agri-food.
In 2018, Northern Ireland:
- exported £11.3 billion to GB and £10.1 billion to RoW, including £3.8 billion to ROI
- 80% of exports were goods, 20% were services
- 81% of NI exports were from smaller companies with 250 employees or fewer
- agri-food goods accounted for 32% of goods exports to ROI
- imported £13.3 billion from GB, and £7.1 billion from RoW, with £2.6 billion from ROI
- 82% of imports were goods, 18% were services
- agri-food accounted for 40% of goods imports from ROI
Proposed changes to WA and PD
On 2 October 2019, the Prime Minister, Johnson, proposed changes for the Withdrawal Agreement and Political Declaration (WA and PD) to the EU, but the proposals were not seen as workable for Northern Ireland.
The proposals did not explain how they would operate in practice or provide legal certainty to the EU, businesses or government departments. They involved two borders and customs checks on goods traffic between Ireland and Northern Ireland. This was cumbersome and would have endangered peace in Northern Ireland (see my assessment at the time here).
The publicly available documents consisted of a short letter to Jean-Claude Juncker, the outgoing President of the European Commission, and a seven-page explanatory note. The government also made a confidential legal text available to the European Commission, but not to the public nor to member states.
Brussels’ initial response, given by the Brexit Steering Group of the European Parliament, was underwhelming:
“The proposals do not address the real issues that need to be resolved, namely the all – island economy, the full respect of the Good Friday Agreement and the integrity of the Single Market.
The UK proposals would operationally only be worked out in detail by the EU and the UK, or in the UK unilaterally, during the fourteen-month transition period. This does not provide the necessary certainty or fulfil the agreed principles in the Withdrawal Agreement.
In summary, [we have] grave concerns about the UK proposal, as tabled. Safeguarding peace and stability on the island of Ireland, protection of citizens and EU’s legal order has to be the main focus of any deal. The UK proposals do not match even remotely what was agreed as a sufficient compromise in the backstop.”
Negotiations continued and on 17 October the UK and the EU agreed the final draft Withdrawal Agreement and Political Declaration. The final version included several revisions, which reflected UK concessions to the EU. For more details, please go to Appendix D: Withdrawal Agreement and Appendix E: Political Declaration
Final agreement – main points
- Customs territory. After the transition period, at the end of 2020:
- UK would leave the EU customs territory i.e. before a long-term trade treaty is negotiated.
- Northern Ireland will officially be part of the UK’s customs territory, meaning that it applies UK tariffs to imports from outside the UK and can participate in future British trade deals.
- At the same time it would be within the EU customs territory, meaning that the EU-UK customs border for Ireland and Northern Ireland will be placed in the Irish Sea.
- NI follows most of the EU’s customs and regulatory rules. (See Table 13.3 for an overview of NI-ROI trade).
- The spirit of the GFA would be preserved as there would be no checks at the land border between NI and ROI.
- Northern Irish products can cross the border without having to pass any controls – friction-free.
- The level-playing provisions are still absent from the WA for Great Britain, but:
- The PD (clause 77) now includes the original WA commitments to:
- “open and fair competition, encompassing robust commitments to ensure a level playing field. Given the Union and the UK’s geographic proximity and economic interdependence, the future relationship must ensure open and fair competition, encompassing robust commitments to ensure a level playing field.”
- These commitments include those that relate to state aid, competition, social and employment standards, environment and climate change, and tax.
- The legally-binding WA Article 184 commits both sides to “use their best endeavours, in good faith” to deliver the intentions of the PD.
- The PD (clause 77) now includes the original WA commitments to:
- The VAT arrangements were principally unchanged from the original Protocol.
- NI remains in UK VAT area.
- NI follows EU law on VAT and continues to use EU IT systems.
- UK continues to be responsible for implementing EU rules on VAT.
- Reduced Irish VAT rates may apply in NI.
- The mechanism for democratic consent underpinned the deal:
- New trading arrangements take effect at the end of the transition period without any NI vote of consent.
- After four years, the NI Assembly would hold a vote to continue the arrangements and the associated divergence between NI and GB rules.
- If it agrees by a simple majority, the trading rules will apply for a further four years. If there is “cross-community” support in the assembly, they will apply for a further eight years. Cross-community support requires a majority among parties on each side of the republican-unionist divide, or the support of 60% of members, including 40%
on each side. - If the vote fails to win a simple majority, the new trading rules would only extend for two years. During that period the Joint Committee would have to work out a new system to keep the border open while protecting the Single Market.
- If it agrees by a simple majority, the trading rules will apply for a further four years. If there is “cross-community” support in the assembly, they will apply for a further eight years. Cross-community support requires a majority among parties on each side of the republican-unionist divide, or the support of 60% of members, including 40%
- Interpretation and dispute resolution:
- Specialised Committee on the Protocol considers issues relating to the interpretation and implementation of the Protocol.
- Joint Committee of the WA is available to reconsider any issues which the Specialised Committee is unable to resolve.
- WA also provides for reasonable means to settle these disputes, including with an arbitration procedure.
- Protocol allows each Party to take appropriate unilateral safeguarding measures to remedy if application of the Protocol leads to serious economic, societal or environmental difficulties. If these unilateral measures look excessive, the other Party may take re-balancing measures.