Will the Northern Ireland Issue Now "Disappear"?

Will the Northern Ireland Issue Now "Disappear"?

With Covid no longer taking up international relations, the Northern Ireland Protocol was back creating tension between London and Brussels. But, over the weekend, a proposal was quietly put forward by EU representative Sefcovic that could potentially put an end to the issue. Which could help improve the risk situation in the UK, and the EU, as well as speed along a trade agreement between the UK and the US.

What changed?

While Liz Truss was the leading contender to replace Johnson, there was quite a bit of speculation over what would happen in the relationship with the EU. She was the Foreign Secretary, and had been pushing heavily to resolve the remaining issue between the two economies: How to trade with Northern Ireland. Most importantly, she had been publicly threatening to invoke Article 16 over the issue. That would allow the unilateral suspension of a part of the agreement. Were that to happen, it was expected retaliation from Brussels, and an escalation of the dispute.

Yet now that Truss is the PM, the issue seems to have stopped being as prominent. Of course the EU and UK are facing an unprecedented energy crisis and need to be on good terms to deal with that. But, there is another issue: Politics.

Finding a solution that looks good

One of the main issues around the Protocol is that any agreement would likely imply one side or the other offering concessions. And that would be politically unacceptable. However, the current situation is untenable, and the "easiest" resolution might simply be to stop making an issue of it. Which is basically what Sefcovic proposed over the weekend.

The main problem is that the Brexit agreement effectively creates a customs border for goods between Northern Ireland and the rest of the UK. This was in order to prevent the customs border being between Northern Ireland and Ireland, a violation of the Good Friday agreement. The EU did not want to have an "open border" with the UK, which would allow British goods into the common market without being checked.

Starting a problem, and ending it

When Brexit became effective, the EU was draconian in the application of customs rules (to the point of infamously seizing ham sandwiches in the cabs of trucks crossing the Channel). That meant enforcement across the Irish Sea was tedious, leading to supply delays from the UK to Northern Ireland.

On top of the supply chain problems due to covid, this meant Northern Irish grocery stores were starting to go empty at times. Naturally this led to a lot of unhappy people, and included the resignation of the government.

Sefcovic's proposal would be to drastically scale back the amount of checks on cargo going across the Irish Sea to "a few lorries a day". That would technically satisfy the EU on the basis that a border was still in place, but not create the supply bottlenecks that have made trade difficult. Of course both sides could potentially present this as either having provided concessions to or obtained concessions from the other. Which could be politically costly, depending on how it's perceived, so simply letting the situation "fade" without a formal announcement, might be a solution.

Jing Ren

Jing Ren

Jing-Ren has extensive experience in currency and commodities trading. He began his career in metal sales and trading at Societe Generale in London. Later on he worked as a senior analyst within the FX brokerage industry where he developed strategies in trading and risk management. With solid understanding of market dynamics he founded Wensfer to offer research and asset management services.