The Northern Ireland protocol was never some kind of magic, far-thinking solution to the conundrum of keeping trade flowing freely after Britain’s exit from the European Union. Brexit is Brexit, after all, and Britain’s exit from the EU single market created a circle which can never be squared. It can just, maybe, be worked around.
The protocol was a hastily drawn-up compromise to allow Boris Johnson to “get Brexit done” and then taoiseach Leo Varadkar to claim a victory by avoiding any immediate threat of a border on the island of Ireland. But it left many questions unanswered; in the black-and-white area of trade regulation, things coloured a fudgy grey tend to cause problems. And so it transpired. Trade expert Sam Lowe has pointed out that companies in Northern Ireland now deal with six different sets of rules and regulations depending on where they are exporting to, or importing from.
No one thought of this when the deal was done between Johnson and Varadkar in October 2019 in a country pile near Liverpool. But we can see that the rules of economics work. Extra regulations cause some costs and problems. An explosion of trade across the Irish Border reflects a re-routing of some trade as well as new business. The problem is that the protocol has now been weaponised and so much of the debate is not based on fact.
British prime minister Rishi Sunak would surely want a deal. The last thing he will want is a trade war with the EU
The protocol also brought an economic opportunity to Northern Ireland. It allows companies to export goods freely to the United Kingdom and into the EU single market. This gives manufacturers an opportunity not afforded to those in the Republic or in Britain, or anywhere else for that matter. It could be a unique selling point used to attract foreign direct investment (FDI) and be to the advantage of a group of companies already located in Northern Ireland. It had already, according to Invest Northern Ireland, the body responsible for attracting investment, attracted significant interest from some big manufacturers.
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These big companies will now be sitting on their hands — for two reasons. One is that the future of the protocol is in doubt. What happens if the EU and UK cannot reach a deal on its future, the UK refuses to implement the required checks on goods crossing from Britain to Northern Ireland and the whole thing collapses? Logically, British prime minister Rishi Sunak would surely want a deal. The last thing he will want is a trade war with the EU. But while he won’t worry too much about the DUP’s upset, he will be concerned about the Brexit purists in the European Research Group who he needs to keep on side. Whether there is enough wriggle room here to do a deal is questionable. Whether such a deal would allow the DUP to shuffle back into powersharing is another.
The second problem for longer-term FDI investors is the issue of political stability. They will have looked askance at the goings-on in Westminster and the instability and uncertainty this creates. To take just one example, the corporate tax rate in the UK, due to stay at 19 per cent, will now rise to 25 per cent next year. Introducing that kind of change, that quickly, is not a good idea.
Now Northern Ireland risks falling back under the direct control of Westminster for a prolonged period, from where the shots look likely to be called notwithstanding any consultation with Dublin. As well as creating more policy uncertainty, this will alarm nationalists and create instability. If you are planning an investment for the next, say, 10 or 15 years, political or social instability is a red flag; you simply go elsewhere.
There has been a clear case for some time for considering an all-island approach to attracting foreign direct investment
How to avoid ongoing political uncertainty in Northern Ireland is now a live and vital question as we wait to see if and when an Assembly election will be held. For now, opportunities slip away. There has been a clear case for some time for considering an all-island approach to attracting FDI, using the skills and contacts of the IDA and Invest Northern Ireland together, in the same way as Ireland markets itself as a tourist destination under one banner. But for this to work, the Northern part of the equation has to offer a stable proposition. And right now it does not.
Perhaps it is not too late, but for now the DUP cannot find a way to climb down their ladder of opposition. An Assembly election - for which a date has not yet been set- would drive everyone back into their own corner and the space to sell a compromise deal on the protocol would disappear. If, indeed, such a compromise can be reached between London, Dublin and Brussels in the first place. Northern representatives should be included in this talking too, but in the middle of an election campaign this would not happen.
Brexit cannot be unwound. And Northern Ireland risks repeating the economic underperformance of recent years if we are heading for more rows and uncertainty. The alternative, an agreement to work the protocol and to seek support in doing so from London, Brussels and Dublin is clearly, in economic terms, the best way forward.
Politically, the DUP also need to ask themselves what the alternative will be — reliance solely on an austerity regime run from London does not, right now, look like a particularly good bet. And the ongoing stalemate is spurring debate on whether the formula outlined in the Belfast Agreement under which an executive is formed is fit for purpose.
The DUP wants the protocol scrapped, when, in fact, it is the only way forward after Brexit which will allow for some kind of stability and progress. It is not perfect. And parts of it need to be improved — and can be. But the alternative is a trade war and instability — and for Ireland the threat of a return to checks on the Border or on goods as they leave for the continent.
Spend 10 minutes talking to senior figures in Brussels or big EU capitals and you realise that they will not compromise on the integrity of the EU single market. Post-Brexit border checks have to happen somewhere — the only argument is how. This is one circle that can never be squared.