12 August 2020

Dividing the Kingdom: the consequences of the new border down the Irish Sea

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On Friday, in Northern Ireland, Michael Gove announced the formation of a Trader Support Service (TSS), to help the province’s businesses with paperwork when an Irish Sea border comes into force at the end of the Brexit transition period. Despite the fact that this scheme is deemed necessary, and despite the fact that Northern Irish companies will soon have to complete import declarations to buy goods from the rest of the UK, the cabinet office minister maintains doggedly that no such border will exist.

Still, the government has promised to spend up to £200 million on the TSS, which will initially provide traders with information about how Brexit affects them. Eventually, it will ask for the necessary data to complete import paperwork and take care of this administration on behalf of companies in Northern Ireland, free of charge. An additional £150 million will be invested to make sure that these processes are electronic and streamlined.

Businesses have welcomed this help, which should at least limit costs at the end of the transition period, but they have many anxieties that are unaddressed and questions that are unanswered.

Although the TSS will handle forms, companies still have to collect information on the new service’s behalf and therefore they will have extra work to complete before they can buy goods from the rest of the UK. The service is aimed at businesses in Northern Ireland, so it’s also unclear whether firms in Wales, Scotland and England will find it as straightforward to access the Northern Irish market after January.

A high proportion of goods arriving in Ulster from Great Britain are mixed containers of food products, destined for local branches of national supermarkets. The government’s own impact assessment suggested that the new administration these deliveries would require could discourage chains from operating in Northern Ireland, or result in significant price rises for consumers. It now hopes that the TSS will absorb these costs and that the EU will accept a ‘trusted trader agreement’ to simplify things for big retailers, but there is little detail on how this will be achieved.

Additionally, the Northern Ireland Protocol states that Ulster companies will have to pay up front tariffs on purchases that are ‘at risk’ from subsequently moving into the European Union. The definition of ‘at risk’ currently includes all materials ‘for processing’, and while the joint committee set up to implement the protocol can exempt categories of goods, currently this has not happened. The government will be relying on Brussels agreeing to sweeping exemptions, and so far the EU has been prepared to exploit Northern Ireland issues ruthlessly in its negotiations with the UK.

Unless there are positive developments soon, manufacturers will have to assume that they must pay tariffs and then recoup them if the finished product stays in Northern Ireland. And the procedure required to do this has not yet been explained.

Away from trade between businesses, Gove’s announcement also fails to address how companies, particularly micro-businesses, can continue to sell goods directly to Northern Irish consumers without declarations. For small internet traders, including Amazon sellers, it may no longer be worth the extra hassle to serve customers in the province. It’s likely that some of the public will only understand the full consequences of drawing an internal UK border down the Irish Sea when ‘not in Northern Ireland’ starts appearing more frequently for their transactions online.

Perhaps the most serious thing we can infer from Gove’s announcement is that the government is no longer seriously trying to solve the pressing problems with the Northern Ireland protocol. Instead, it is putting in place technical solutions that implement customs controls, a customs border and a regulatory border relatively unobtrusively, just without using those terms.

We’re scarcely four months away from the end of the implementation period. Yet, there’s no indication that the government is close to securing a trade deal with the EU that might lessen friction. Northern Ireland is set to remain in the single market for goods, without any explanation of what will happen if the rest of the UK diverges significantly from EU rules in the future. There are enormous questions that remain unanswered about VAT, animal health and even export summary declarations, which Brussels thinks will be required between Northern Ireland and Great Britain, even though ministers claim they will not.

Meanwhile, any planning that has come to light seems to involve preparing infrastructure that the government previously insisted wasn’t necessary.

Just weeks ago, the business secretary, Alok Sharma, published a white paper emphasising the importance of an integrated internal market to all parts of the UK. It explained in detail why the government was determined to avoid new barriers, regulatory or otherwise, between its regions. Yet, while it pointed out Northern Ireland’s particular dependence on trade with England, Scotland and Wales, it contained few ideas to overcome the new obstacles created by the protocol.

The government has promised Ulster companies ‘unfettered access’ to the rest of the UK’s internal market, while it says any procedures that are necessary will be administered with a ‘light touch’. It seems that its case that no Irish Sea border will exist is an exercise in semantics. The truth is that, even if ministers hope to limit the effects on business, they are preparing for significant barriers to trade between Great Britain and Northern Ireland.

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Owen Polley is a writer, commentator, consultant, and the co-author ‘An Agenda for Northern Ireland After Brexit‘.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.