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Is the Protocol bad or good for firms in Northern Ireland? It's both, they say

The EU’s suggested changes will fix some – but not all – problems with post-Brexit trade in Northern Ireland.

Image: Alamy Stock Photo

BUSINESSES IN NORTHERN Ireland have indicated that the Protocol does work for some sectors, but not all – and that recent changes proposed by the EU to improve the Protocol won’t fix all problems with post-Brexit trade in Northern Ireland. 

Since the EU published proposals to alter the current Protocol last week, UK junior minister David Frost and European Commission Vice President Maroš Šefčovič have been discussing the proposals in the hope of coming to an agreement.

If they don’t there is a threat that the UK will trigger Article 16, a nuclear option that will cut all post-Brexit trade ties agreed between the UK and EU, and restart a whole new process of trade negotiations from the start, as well as inflaming political tensions.

The EU and the Irish government have accepted that there are elements of the Protocol that aren’t working, but insist that there are businesses and citizens who benefit from it, and that changes, such as the ones published last week, can be made to improve it.

The UK government has taken the position that the Protocol needs to be scrapped in favour of other arrangements, and have reportedly submitted unpublished proposals to the European Commission. 

Businesses in Northern Ireland have indicated that the EU’s proposed changes won’t solve all the trade problems experienced in the past 10 months, with most of the suggestions focused on the retail and food sectors, with manufacturing offered “little crumbs” to fix their issues.

Polls have indicated that there are split opinions among the public and among businesses on the Northern Ireland Protocol, which contains the North’s post-Brexit trading rules.

A Lucid Talk-Queen’s University Belfast poll in June indicated that 43% of think that the Protocol is, on balance, good for Northern Ireland, whereas 48% think it isn’t.

A study compiled by a Brexit working group in July found that additional staff time, consultancy fees and and other costs were “not inconsiderable”.

According to the study: “One medium-sized NI-owned company put increased staff time resulting from Brexit at around £3,000 per month, plus one-off advisors’ fees at £130,000.”

Difficulties Source: Northern Ireland Business Brexit Working Group

One representative of manufacturers in Northern Ireland told The Journal that the post-Brexit trading arrangements are not working the way either side wanted them to. 

“One in five manufacturers say their GB supplier is no longer willing to send goods to Northern Ireland at all,” Stephen Kelly, CEO of Manufacturing Northern Ireland said.

The Protocol, he said, “is not working fully in the way that both sides intended: as long as EU goods are not circulating freely in Northern Ireland, and British goods do not have unfettered access, it will be sub-optimal”.

Kelly said that the pain is being “most acutely felt” by the businesses that import components from GB and sell the finished product on to the UK market.

“Those who export their product are in a good place, because they have all of the benefits, which is a price worth paying for the complexity of trade from GB to NI.”

Another business representative said that their sector wasn’t that badly affected or at an added advantage, and that they were “getting on” with the Protocol. 

‘Very close’ to what NI businesses asked for

The Northern Ireland Business Brexit Working Group, made up of 12 organisations representing Northern Ireland businesses, has been engaging with the European Union and the UK on what changes to the Protocol are needed.

Aodhán Connolly, Director of the Northern Ireland Retail Consortium which represents 90% of Northern Ireland businesses and is one of those 12 organisations, said that the EU’s proposals seemed to reflect “very close” to what the Working Group had asked for. 

A spokesperson for the Northern Ireland Business Brexit Working Group said that “some of the solutions being mooted go some way towards meeting those tests”, that the proposals must provide “stability, certainty, simplicity and affordability”.

The umbrella group has meetings with both the UK government and the European Commission to discuss these proposals in full, and won’t be making statements to the press until those discussions have taken place.

Brian Reid, the CEO of Deli Lites, a fresh food supplier in Warrenpoint, said that his business sells 70% of its products over the border to Ireland.

“We told [David Frost] business is really thriving, but he wasn’t listening to us. We told him the real problem was political uncertainty,” he said of a visit Frost made to nearby Newry.

Some issues still not dealt with

But Kelly, whose group Manufacturing NI is also one of the 12 Working Group organisations, said that the vast majority of what is proposed is “largely irrelevant” to many in manufacturing, with most of the focus on retail and food issues.

Many transportation manufacturing businesses in Northern Ireland buy axles from a German manufacturer, he says.

That company sends its axle to Northern Ireland and there’s no customs and no tariffs, in theory. But it leaves the factory, and arrives at factory in England, because modifications are needed in the UK, that’s a necessity – the German companies recognise that.
So the axle leaves factory in Germany, arrives tariff-free in the UK, but the modifications made are not sufficient to give it a UK identity, so it moves to Northern Ireland and attracts customs and tariffs, because it’s deemed an ‘at risk’ good.

“It’s an EU product in an EU factory, modified by EU factories, and the only time customs apply is when it’s going to Northern Ireland.”

He says that there are no proposals in the current Protocol changes to fix this anomaly.

“Some people ask: ‘Why don’t people shift supply chains to the EU?’ But history and culture and decades of trading history is linked to Britain, and for good reason: we’ve the same currency, language, legal structure. It’s not possible to just turn that tap off.

“It’s a small-business economy, we don’t have the scale to be competitive.”

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‘Devil is in the detail’

Michael Bell, Executive Director of the Northern Ireland Food and Drink Association says that though the Protocol “was necessary” as it avoided a catastrophic no-deal Brexit, he adds that “it is not perfect”.

“We have consistently called for practical solutions on the Protocol that meet four key tests – we want affordability, certainty, simplicity and stability. Signs of movement from both parties this month are very welcome, and indeed some of the solutions being proposed may go some way to meeting these tests.

“The devil is in the detail however, and the business community continues to work with London and Brussels to encourage lasting, practical solutions.

“The most important thing food and drink businesses in Northern Ireland need right now is certainty.”

One of the common complaints about the current EU proposals is that they are light on detail. Kelly says that this may have been a negotiation tactic, due to the fraught political atmosphere that led up to the proposals being announced:

Our sense is that, given the rhetoric in advance of the EU publishing proposals, the EU probably left some stuff in the tank. They either removed details or ideas because they knew negotiations were ahead.

Kelly summed up the differences between the two sides on the Protocol as the EU assuming that products arriving in Northern Ireland should be treated as ‘guilty until proven innocent’, while the UK is arguing that it should be on authorities to prove that certain traders are non-compliant with post-Brexit trading rules.

“I’m slightly alarmed, despite all this time, that there appears to be gaps in understanding on the EU side about some of the challenges as a result of the Protocol.”

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