Trade war looms as UK set to spurn EU offer on Northern Ireland

EG analysis by Mujtaba Rahman

Fears that the UK is heading for a trade war with the EU have been fuelled by strong indications from the government that it thinks proposals to be unveiled in Brussels on Wednesday over Brexit arrangements do not go far enough.

The Brexit minister, David Frost, will use a speech in Portugal on Tuesday to say that the EU scrapping its prohibition on British sausages to resolve the dispute over the Northern Ireland protocol does not meet the UK and unionists' demands.

Lord Frost will call for “significant” changes to the post-Brexit agreement he negotiated, including over the role of the European court of justice, something the EU is highly unlikely to concede to.

“Without new arrangements in this area, the protocol will never have the support it needs to survive,” he will warn on the eve of a significant move by the EU to resolve the row.

Ireland's foreign minister, Simon Coveney, reacted with incredulity at the UK's “red line” and its timing just days before what he said was a “serious” offer from the EU.

He tweeted: “EU working seriously to resolve practical issues with implementation of Protocol – so UKG creates a new “red line” barrier to progress, that they know EU can't move on … are we surprised? Real Q: does UKG actually want an agreed way forward or a further breakdown in relations?”

Frost immediately responded to Coveney, saying his demands over the ECJ were nothing new.

“I prefer not to do negotiations by Twitter, but since @simoncoveney has begun the process … the issue of governance & the CJEU [court of justice of the European Union] is not new. We set out our concerns three months ago in our 21 July Command Paper. The problem is that too few people seem to have listened,” he said.

The EU's Brexit commissioner, Maroš Šefčovič, will table four papers on Wednesday on the subject of how the Northern Ireland protocol can be improved – which he has described as “very far-reaching”.

Included will be a proposed “national identity” exemption for British sausages from the EU's prohibition on prepared meat from a third country, sources said.

However, Mujtaba Rahman, the managing director of the Eurasia Group consultancy, warned in a note to clients on Saturday that the absence of concessions on the ECJ will give Frost the justification for triggering article 16, the mechanism for putting the Northern Ireland protocol into formal dispute process or putting it into abeyance by disapplying the arrangements altogether.

“There is a huge amount of cynicism in the EU about what the government's actual objectives are. Is it to fix substantive issues in Northern Ireland or is it to keep an ideological fight with the EU rolling because it serves certain sections of the Tory party?” said Rahman.

“The French president and the German chancellor and the European Commission president cannot wake up every single day to a new argument with Boris Johnson. At some point they need to send a stronger, simpler message.

“Use of a termination clause within the trade and cooperation agreement itself can be triggered unilaterally and would fully suspend the zero tariff/quota trade deal between the two sides.”

This cross-retaliation mechanism allowing trade penalties for breaches of the withdrawal agreement was agreed by both sides, but others think the EU will not be so keen to go nuclear.

Catherine Barnard, professor of EU law at the University of Cambridge, believes short sharp shocks in the form of tariffs on such British products as Scottish whisky or salmon are more likely.

She also said that the ECJ is not a significant issue in relation to the trade of goods. Its annual report cites just 24 cases relating to customs union laws currently pending, among more than 1,045 in total.

Frost also told delegates at the Conservative party conference last week that the rules required the EU to be “proportionate” but said he still hoped to come out of negotiations with a fresh deal.

Retaliatory measures are unlikely until next year, with the EU expected to respond with infringement and legal proceedings as its first response to any suspension of the Northern Ireland protocol by the UK.

The protocol, designed to avoid a hard border between the UK and the single market operating in the Republic of Ireland, placed a border in the Irish Sea, enraging unionists who see checks on goods coming into Northern Ireland from Britain as an attack on the integrity of the UK and their British identity.

The EU is expected to propose eliminating checks on goods destined to remain in Northern Ireland, with checks only on those products that are intended for sale in the republic.

Both sides have said they expect to go into a period of intense negotiation, which Frost put at three weeks, after the EU's response to the UK's demands are published on Wednesday.

However, one school of thought is that Frost and the home secretary, Priti Patel, are being used to keep the Brexit pot boiling to show how the UK is sticking up against “EU bullies”.

Others think the fight over Northern Ireland is more fundamental. One former Downing Street official said he had been told that Boris Johnson “was going round telling people he had been misled” over the protocol and was determined it would have to be rewritten.

Frost will say on Tuesday that “the UK-EU relationship is under strain” but if the two sides can put the protocol “on a durable footing, we have the opportunity to move past the difficulties of the past year”.
The Guardian