Brexit: how will the new Northern Ireland protocol work?

Along presumably with all other UK trade specialists, I have been receiving plenty of calls and messages in recent days to try to explain how the Northern Ireland protocol of the Brexit Withdrawal Agreement, as agreed by Boris Johnson and the EU recently, will work. The first part of the answer is the easy part: there is precious little detail in the agreement, and this will have to be worked up in the coming months. But typically I am then pressed to specify what checks would be done at what border on what goods, and have to respond that Northern Ireland would be treated as part of the EU in terms of customs and regulatory checks, with the possibility of subsequent rebates. 

That is because in order to avoid land border checks, NI will keep one foot in the EU tariff regime and both feet in the single market for goods and agriculture. Not only will GB goods entering Northern Ireland have to pay the EU tariff, with the possibility of rebate if they remain in the province, but goods coming from Northern Ireland will have to similarly pay a GB tariff, unless it is proved that they originate solely in the province. Such tariff payments will mostly be done through a process yet to be designed, but there will have to be checks to reduce smuggling.

Forget the now-infamous bluster and confusion of answers on the subject of Northern Ireland by the prime minister and the Brexit secretary. We can actually be quite sure of the principles of the scheme, and the reason for this is the most fundamental of rules of the World Trade Organisation, the “Most Favoured Nation” principle.

Always a favourite among trade policy cognoscenti, the Most Favoured Nation principle means the exact opposite of what you would think. It holds that all members of the WTO must treat all other members equally, with regard to tariffs and other conditions of trade, unless a special preferential arrangement covering substantially all trade is agreed.

So, without preferential arrangements the UK cannot privilege imports from the EU over imports from, for example, the US. If EU products are able to come into Great Britain free of tariffs, but US products cannot, then the EU has an advantage. Without a formal free trade agreement in place this is a clear breach of WTO rules. Therefore there must be checks on goods leaving Northern Ireland, and tariffs will be paid unless the goods clearly originate in the province.

This of course raises some questions, the first of which is how Northern Ireland being effectively part of both the EU and UK customs territories can work under WTO rules. I have asked the question of a number of eminent WTO law experts, who have either via message or in person more or less shrugged their shoulders and said they have no idea, but they don’t think it would be a problem. Some think you could cite Article 21 of the General Agreement on Tariffs and Trade, a security exemption. There’s also an exemption for what’s called frontier traffic. But all are clear that these exemptions can only apply to Northern Ireland, not to the whole UK.

A follow up from some is to ask whether it really matters that the UK will be breaking WTO rules, given that the organisation is currently under great strain. Perhaps we could just brazen it out like the US is currently doing. Part of the problem here is that the UK government has said that it wants to strengthen the multilateral system through Brexit, so immediately undermining a fundamental rule wouldn’t be a good look. Another consideration is that we don’t want to get into an endless round of disputes.

Given this position, some have argued that the UK and EU should conclude a quick zero-tariff Free Trade Agreement, so that we’ll need no checks on trade between Northern Ireland and Great Britain. However, that’s to simplify how trade agreements work, for there are rules on qualifying for zero tariffs: the increasingly famous “rules of origin,” under which you have to prove that products qualify for zero tariffs. Proof equals checks, and thus our simple FTA also fails the test (though it could certainly help ease checks).

Perhaps we could return to the “Alternative Arrangements” plan worked up for the land border, relying on technology, widespread surveillance and remote checks, for help in minimising checks at Northern Ireland ports of entry and exit. The junking of this was important in reaching a UK-EU deal. Actually, you may be surprised to learn, while these suggestions were never a solution to all-Ireland trade, they could help in reducing the intensity of checks between the province and GB. But they will take some time to be put into place.

Then again, the Northern Ireland arrangements as already detailed will take time to put into place. The idea of all relevant technology, and all relevant ports, being equipped to handle new checks in 14 months’ time is optimistic. It can be done, of course, but potentially with considerable disruption. As with the whole future relationship with the EU, some realistic ideas of future deadlines could really help smooth the whole process.

The unionists of Northern Ireland are therefore right to be angry that significant new checks will be introduced on trade with Great Britain, given these customs checks will come on top of NI following EU law in goods and agriculture, with no say over either. They are doubly angry because they went along with Brexiteer Conservative MPs who insisted that the same arrangement, only with a UK-wide customs union instead of just this Northern Ireland-specific protocol, was a bad outcome, largely on the basis of the province having to follow EU law with no say and because it put up some barriers to intra-UK trade. Those same Conservative MPs are now supporting an outcome that puts more barriers up to intra-UK trade and has barely addressed the democracy issue.

Whether or not the Northern Ireland protocol makes a united Ireland more likely in the future I’m not equipped to say. But we can say with considerable certainty that in the future, trade will be easier on the island of Ireland than between Great Britain and Northern Ireland, and that this is a difficult outcome for many to accept.