Business Maverick

EU Refusal to Reopen Brexit Deal Spells Fresh U.K. Collision

By Bloomberg 22 July 2021

The European Union’s refusal to renegotiate the Brexit deal governing Northern Ireland has put the bloc on a fresh collision course with the U.K., as Boris Johnson’s government warns it will suspend parts of the agreement if the EU doesn’t budge.

David Frost, the U.K. minister for EU affairs, on Wednesday called on the bloc to rip and substantially rewrite the controversial Northern Ireland Protocol, the part of the U.K.’s separation agreement that governs trade and market rules for the region. The EU declined.

“Respecting international legal obligations is of paramount importance,” European Commission Vice President Maros Sefcovic said in a statement on Wednesday. “We will not agree to a renegotiation.”

The EU’s rejection of the U.K.’s offer marks a further setback in their post-Brexit ties, after months of increasingly souring relations over issues including fishing, access to financial markets and the status of Gibraltar.

Concerning the current situation in Northern Ireland, Frost told the House of Lords “we cannot go on as we are.” He blamed the Protocol for causing “significant disruption” to trade between the region and the rest of Britain and for causing “societal instability.” He warned the U.K. would be ready to trigger a clause suspending parts of the Protocol — a move that would dramatically increase tensions with the EU.

What’s the Deal?

The U.K. has come under pressure from companies including Marks & Spencer Group Plc to find a solution to rules that businesses say are leading to delays in getting goods into Belfast. But any move to rip up a deal that Prime Minister Boris Johnson committed to less than two years ago risks further damaging trust in Britain among officials in Brussels.

Under the terms of the Protocol, goods crossing from Britain to Northern Ireland face customs checks and procedures as if they are crossing into the EU. Politicians in Northern Ireland and Britain have complained that the effective trade border in the Irish Sea threatens the territorial integrity of the U.K. and has led to a reduction in trade flows to the region.

The EU has long insisted that the Protocol must be implemented as originally designed, in order to protect its single market and prevent Northern Ireland being used as a backdoor for smuggling into the bloc. In March, the EU began legal action against the U.K. after Britain unilaterally delayed enforcing part of the agreement.

Non-Starter?

In rejecting a renegotiation, Sefcovic said the EU will continue to engage with the U.K. to find “creative solutions” within the framework of the Protocol. A European official said that the dispute between the two sides has been exacerbated by the fact that officials in Brussels don’t trust Frost and Johnson.

Speaking to the House of Lords, Frost conceded that relations so far have been “punctuated by legal challenges and characterized by disagreement and mistrust.” He said that, as a first step, the EU must show it is serious about resolving the crisis.

Business groups in Northern Ireland expressed disappointment with the U.K.’s position. Frost’s statement “creates confusion and uncertainty for business, its supply chain and customers,” said Stephen Kelly, chief executive of Manufacturing NI, a lobby group. “Both parties owe it to the people in Northern Ireland to skip the drama and get on with dialogue and decision-making.”

To create room for potential negotiations, Frost called on the EU to enter a standstill period, extending the current grace periods on regulations that allow chilled meats and other goods to be imported into Northern Ireland from the rest of the U.K. He also said the EU should pause its legal action against the U.K. for not implementing the Protocol properly as a “genuine signal of good intent.”

Frost said the conditions exist to justify invoking Article 16 of the Protocol — the section which allows some of its rules to be suspended — but now is not the right time to do so. If the U.K. were to take such action, for instance by waiving customs checks on goods entering Northern Ireland from Britain, it would reignite the possibility of border checks happening on the island of Ireland given the EU’s stated desire to protect its single market.

The U.K. plan includes:

  • An honesty system for goods moving from Great Britain to Northern Ireland. Goods labeled “for NI” wouldn’t face customs checks, but those heading to the Republic of Ireland would
  • A light-touch system for traders where they would provide information about their supply chains and shipments to the authorities, or risk spot checks
  • Goods marked by U.K authorities as safe for sale domestically would be allowed to be sold in Northern Ireland without having to prove that they also comply with EU rules
  • The role of the European Court of Justice in enforcing parts of the protocol would be ended
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