EU rejects calls to overhaul NI protocol, but legal action on hold

Brexit | | MIC Customs Solutions |

An economist has warned of a 'mini trade war' between the EU and UK unless disagreements over the Northern Ireland protocol are resolved.


Tensions are rising between the UK and the EU after Brussels rejected efforts from the British government to force a renegotiation of one of the most contentious parts of the Brexit agreement, the Northern Ireland protocol that affects trade across the Irish Sea.

An open border between the North and the Republic of Ireland is seen as vital to maintaining the peace process on the island of Ireland, and this means that Northern Ireland remains part of the EU's single market. As a result, customs checks are instead required for goods travelling from Great Britain to Northern Ireland, and this has created many difficulties for trade within the UK.

Efforts to renegotiate protocol rebuffed

The UK has been urging the EU to renegotiate, and in July released a 'command paper' setting out its proposals for the future of the agreement. In it, the UK suggested rewriting major parts of the protocol, including article 5, which sets out details of checks such as customs documents, and article 12, which covers how the arrangement is monitored and enforced.

It proposed abolishing blanket customs paperwork for goods traveling between Great Britain and Northern Ireland in favor of a "trust and verify" system. Brexit minister Lord Frost warned the situation cannot continue in its current form, as the burdens imposed by the rules "have been a source of considerable and ongoing disruption to lives and livelihoods".

However, the EU has responded coolly to the suggestions, with European Commission (EC) president Ursula von der Leyen writing in response on Twitter: "The EU will continue to be creative and flexible within the protocol framework. But we will not renegotiate."

This was also emphasized by EC vice-president Maroš Šefčovič, who said the protocol must be implemented as agreed in order to avoid a hard border on the island of Ireland, while also protecting the EU single market.

He said: "The EU has sought flexible, practical solutions to overcome the difficulties citizens in Northern Ireland are experiencing regarding the implementation of the protocol." For instance, Mr Šefčovič highlighted measures such as changing EU rules to ensure the long-term supply of medicines from Great Britain to Northern Ireland as among its efforts to ease problems. 

EU offers own proposals, pauses legal action

While the EU has firmly rejected renegotiating the NI protocol, it has offered its own suggestions for ways in which the arrangement could be simplified, as well as pausing legal action it is undertaking against the UK for alleged breaches of the agreement.

Brussels said halting the action, which was started in March after the UK unilaterally delayed the implementation of new customs checks, will help both sides consider the new proposals that are on the table.

A spokeswoman for the EC stated: "In order to provide the necessary space to reflect on these issues and find durable solutions to the implementation of the protocol, we have decided, at this stage, not to move to the next stage of the infringement procedure."

The EU's own suggestions for streamlining the process include steps for ensuring the continued supply of medicines from Great Britain to Northern Ireland and new safety checks that would permit freer movement of livestock.

However, these measures have been rejected by the UK as not going far enough. A Downing Street spokesman said the EU's proposals only address "a small subset of the many difficulties caused by the way the protocol is operating".

He added: "We need comprehensive and durable solutions if we are to avoid further disruption to everyday lives in Northern Ireland."

With the dispute showing few signs of easing in the near future, some experts have therefore warned it could lead to further trade disruptions between the UK and the EU. 

James Smith, developed markets economist at ING, told CNBC: "With trust between both sides clearly low, the bigger near-term question is whether further legal steps are taken by Brussels that eventually culminate in tariffs - and in a negative scenario, some form of mini trade war."