‘Do we really want to launch a trade war with the EU NOW?’ asks ParcelHero

`Do we really want to launch a trade war with the EU NOW’ asks ParcelHero

Foreign Secretary Liz Truss has announced plans to introduce legislation overriding parts of the Northern Ireland Protocol. It’s a move likely to infuriate the EU. ‘With energy and food prices soaring, is a new economic war with our closest trading ally sensible?’ asks the international delivery expert ParcelHero.

The recent election in Northern Ireland led to a clear majority for the parties that broadly support the Northern Ireland Protocol agreement, with Sinn Fein winning the most seats. The international delivery expert ParcelHero says it’s an especially poor time for Prime Minister Boris Johnson’s government to reveal plans to introduce legislation scrapping parts of the Protocol. This could create a new trade war with Britain’s largest trading partner.

ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says: ‘With the EU distracted by the war in the Ukraine, PM Boris Johnson has chosen now to plan the opening salvo of a new trade war with the EU. With international attention turned elsewhere, Johnson has borrowed a move straight out of the Putin playbook. In this case, however, the Russian leader is probably delighted by this entirely avoidable fight among his opponents.

‘Sowing the seeds of an internal European conflict right now, with energy costs soaring and the price of food escalating rapidly, seems short-sighted in the extreme. Once again, SME manufacturers and retailers across Great Britain and Northern Ireland will be the casualties.

‘Foreign Secretary Liz Truss said her preferred solution was a negotiated outcome, but announcing unilateral plans to make changes to the protocol in the coming weeks frankly looks more like “war, war, war”, than “jaw, jaw, jaw”.

‘Mr Johnson’s reasons for scrapping parts of the Protocol seem driven by ideology and expediency. One reason is to keep Northern Ireland’s Democratic Unionist Party (DUP) onside, despite the fact they are no longer the largest party in the NI assembly. Another is because Conservatives have always mistrusted the European Court of Justice and are desperate to end its role in overseeing how the Protocol works. The final reason is that the UK is bent on ditching EU standards on many goods in favour of new British ones. It’s a move that will cost UK manufacturers a fortune in new certifications and create reams of red tape in Northern Ireland, where goods will also still have to conform to EU standards.

‘Indeed, Liz Truss said in her speech to the House of Commons that “businesses will be able to choose between meeting UK or EU standards”. Why should they be forced to make such a choice?

‘Clearly, the Northern Ireland Protocol is flawed. The raft of new checks on food, goods and parcels it would necessitate, if fully enforced to the letter of the law, is pointless. The Government’s ideas for a Trusted Trader scheme and a ‘Green Channel’ for goods not entering the Republic are worth discussing. The EU itself agrees the rules need changing and have put forward several proposals. In these divided times, however, surely a negotiated settlement with the EU, rather than heavy tactics such as new go-it-alone legislation, is a better solution.

Liz Truss argued the new bill would be “consistent with international law”. Reneging on the UK’s signed agreement with the EU doesn’t seem to meet that definition.

‘If the Government does press ahead with new legislation to abandon parts of the Protocol, it would ultimately mean invoking Article 16. Article 16 exists to fix difficulties with the Protocol that may cause serious problems or divert trade. It was envisaged as a “safeguard” to be used in a targeted way to fix specific issues.

‘However, the EU fears the UK is planning to use Article 16 like a nuclear button that would entirely suspend Articles 5, 7, 8 and 10. This would demolish Customs, product standards, VAT and state aid rules, while opening a potential back door into the single market.

‘Belgium’s Deputy PM and Minister of Finance, Vincent Van Peteghemhas, has previously warned that, if Britain reneges significantly on the current Northern Ireland border solution, the EU may give notice that it intends to collapse the entire trade deal. A clause in the UK/EU Trade and Cooperation Agreement (TCA) allows either side to terminate the whole deal with a year's notice. If that happened, it would effectively send the UK spiralling back towards a no-deal Brexit, with tariffs on most goods and many other restrictions on UK-EU trade. That’s a war that would result in heavy losses for both sides.

‘ParcelHero’s in-depth analysis of the ongoing UK-EU trade problems and, in particular, the Northern Ireland Protocol agreement, is available at: https://www.parcelhero.com/research/brexit-study