Brexit Institute News

Brexit, Market Adjustment and the Irish Sea

Gerard McCann (St Mary’s University College)

John Maynard Keynes observantly noted of European realignment coming out of the Great War, that: “When the final result is expected to be a compromise, it is often prudent to start from an extreme position”. Brandon Lewis, Secretary of State for Northern Ireland, opened the UK Government’s new round of Brussels bashing with another alleged breach of international law and the launch of a “new operation plan” to free up the internal market for goods coming from Great Britain to Northern Ireland. A two-year extension of the grace period on checks on goods “to avoid disruptive cliff edges” was proposed unilaterally and without consulting the relevant EU authorities. Brussels was not happy to say the least, facing new UK “certification requirements” alongside the “Digital Assistance Scheme”. Narrowed down, the issues that have vexed the process so much are – essentially – market adjustment, technical and regulatory compliance. Reading through the five-year backstory, there was any amount of warning that there would be a long list of problems, specifically with regards to certain agri-food products crossing the Irish Sea.

In their July 2016 report on the possible impact of Brexit, PWC commented that: “Ireland’s economy and export market will be significantly impacted by border controls, tariffs and excise duties… We could see an overall reduction in organisations procuring goods and services… Services may also be affected, with UK-based service centres and supply chain hubs becoming unviable”. (PWC, 2016: 5) Indeed, issues with service centres and supply chain hubs were flagged up by government advisers and businesses alike very early on in the Brexit process.

The UK Prime Minister’s Office noted in December 2017, that even with no agreement, “the United Kingdom will ensure that no new regulatory barriers develop between Northern Ireland and the rest of the United Kingdom… In all circumstances, the United Kingdom will continue to ensure the same unfettered access for Northern Ireland’s businesses to the whole of the United Kingdom internal market”. (Prime Minister’s Office and Department for Exiting the European Union, 8 December 2017: 8) Even the Ratings Agency Standard and Poor’s (S&P), as with Fitch and Moody’s, in June 2016 and again in June 2018, highlighted issues and a “less predictable, stable and effective policy framework”, the problem of “transit routes and supply chains” between the Republic, Northern Ireland and Britain. (S&P 27 June 2016; 01 June 2018)

HM Government (9 January 2019): “One of the questions raised in relation to the UK internal market has been the potential for different rules between Great Britain and Northern Ireland… the rules to which NI would align would be only a small fraction of EU rules overall, with the majority of laws being a matter for the UK regardless”. (HMG, 2019: 11) In Brexit and the Backstop, Professor David Phinnemore (QUB) commented that: “…controls would be required on the movement of goods from the rest of the UK into Northern Ireland. Efforts would be made to keep these to a minimum, but there would be an increase… the Withdrawal Agreement commits the United Kingdom to ensuring ‘unfettered market access for goods moving from Northern Ireland to the rest of the United Kingdom’s internal market’. Reinforcing this commitment is the UK government’s statement that it will introduce ‘strong protections in law that guarantee [such] unfettered access’”. (in Menon, 2019: 7-8)

The Northern Ireland Protocol itself notes that the signatories: “may take such proportionate rebalancing measures as are strictly necessary to remedy the imbalance. Priority shall be given to such measures as will least disturb the functioning of this Protocol”. (Northern Ireland Protocol, 17 October 2019, Article 16) Michael Gove’s Command Paper on the Protocol laid out the anticipated problems: “Our system will be based on electronic checking as far as possible of documentation; “identity checks” focused on a simple check of the seal of a truck; and physical checks managed at a local level based on risk assessments and reflecting the full range of flexibilities provided in legislation. In practice, this means that physical checks on retail packs and supermarket goods can be reduced to zero, or close to zero, on a risk assessed basis”. (Northern Ireland Protocol – Command Paper, December 2020: Article 37)

It is very clear that market disruption would be a part of the deal and one cost of Brexit no matter where the checks were located. Indeed, with the Irish Sea, the Nordic and Swiss models for easing market adjustment have been touted from day one by all shades of opinion.

So why shock and “cliff edge” politics in March 2021? In the north, the jostling has settled into the conventional shoring up of the base, a competition for radical credentials, a prudent “extreme position”, yet anticipating change. In Westminster, disruptively standing up to Brussels still prevails. Supply problems are evident across the UK, but with the north – representing just two percent of the overall economy and no votes to win – there remains room for experimentation by angling a relatively safe, albeit seemingly extreme, position. We await the compromise.

Gerard McCann is Senior Lecturer in International Studies and Head of International Programmes at St Mary’s University College, a college of Queens University Belfast.

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