Great Britain

Here's how Northern Ireland can become the United Kingdom's tiger economy

One of Theresa May’s greatest failings was her allowing the EU and Ireland to weaponise the Irish border issue in their negotiations with the UK. She failed to appreciate that Ireland and Northern Ireland already have a border with different currencies, different VAT rates, different income tax rates, different corporation tax rates and a whole host of other differences operating quite happily on either side of it.

The island was ,and is already, prone to tax and regulatory arbitrage but she allowed the EU and Ireland falsely to argue that the requirement to make customs declarations and possibly pay tariffs on cross-border trade would be a breach of the Good Friday Agreement and a risk to peace on the island. 

When Boris Johnson became Prime Minister last July, he repeated the offer of customs checks away from the border. Again this was rejected by the EU and Ireland. Later, when his position was fundamentally compromised by the passing of the Benn Act with its stipulated deadline for a deal of 19 October, he buckled and accepted a border down the Irish Sea. 

The Irish Sea border was documented in the Northern Irish Protocol, a part of the Withdrawal Agreement and passed into law with effect from 11pm on 31 January 2020. It is important to note that the Protocol is already effective and will remain in place irrespective of what is agreed between the EU and UK for their future arrangements following the Transition Period. We have yet to experience the effects of the Protocol because, for the duration of the Transition Period, the UK remains within the EU’s Single Market - but it is already effective.

So what are its effects?

Sovereignty

From the view point of UK sovereignty, its effects are less than ideal. 

As with the rest of the Withdrawal Agreement, the worst aspect of the Protocol is that it makes the European Court of Justice the supreme authority over all aspects of the EU’s relationship with NI and the interpretation and application of the Protocol itself. 

Whilst the Protocol can theoretically be reversed by a majority vote at Stormont every four or eight years, until then or unless otherwise jointly decided by the EU and the UK, NI remains bound by it. And, even if Stormont should vote to bring the Protocol to an end, it would be another two years before it would cease to apply and the arrangements to follow would be determined by a joint committee (Joint Committee) of the EU and UK with the ECJ being the ultimate arbiter in the event of a failure to agree. In short, the Protocol surrenders NI to the judicial authority of the EU for as long as the EU wishes it.  

The Protocol also makes NI subject to EU state aid laws. The British government will have to adhere to these as far as industries in NI are concerned. This in turn means that any industries operating in both Great Britain and NI would be caught by these restrictions – the UK will not be able to entirely escape EU state aid laws whatever the outcome of the negotiations with the EU over future arrangements. 

Finally, as far as sovereignty is concerned, the Protocol obliges NI to adopt new laws passed by the EU that are in the scope of the Protocol. NI is therefore partially condemned to being in dynamic alignment with EU laws even though the UK has no say over these. 

The Protocol prohibits the British government from truthfully claiming that the UK has taken back control of its laws.

Trade

From a trade perspective, the effect of the Protocol is to put NI into the intersection of a Venn diagram of the EU’s and UK’s customs union. 

This means that goods entering NI from the EU will not be subject to tariffs. Nor will goods entering NI from Great Britain be subject to tariffs as long as those goods are intended for use within NI and/ or are not used to form part of another good after processing which is itself intended for the EU. Any disputes in this regard will, of course, be determined by the ECJ.

Being in this Venn diagram’s intersection also means that goods exported from NI to either the EU or GB will be tariff free. This is the principal and hugely important redeeming feature of the Protocol, to which I return later. 

Irrespective of the above advantages, customs declarations will be required for goods going either way across the Irish Sea to and from NI. The suggestion that customs declarations will not be required for goods entering GB from NI is simply wrong. The UK has no control over the actual Irish/ NI border and so controls have to be implemented across the Irish Sea. Just as there is a need for customs declarations for goods entering the UK from Calais, there have to be customs declarations for goods entering GB from NI. The British government cannot waive the requirement for such declarations without undermining the integrity of the UK’s customs area and without making it impossible for the UK to reach trade agreements with other countries around the World. 

The Protocol prohibits the British government from truthfully claiming that the UK has taken back control of its borders.

The implications for NI

Unionists are naturally deeply upset by the provisions of the Protocol. They correctly assess that important aspects of NI’s governance have been unnecessarily left with the EU. They fear that the provisions of the Protocol will be used as a stepping stone for Irish reunification. Many unionists now wish for the future arrangements between the EU and the UK to be as close as possible. They hope that, by diluting the effects of Brexit and staying closely aligned with the EU, they will neuter the adverse implications of the Protocol for the union of NI and GB.

Ben Habib is  CEO of First Property Group plc and former Brexit Party MEP for London

They must resist the temptation to push for close alignment between the EU and UK. 

NI has been afforded one major advantage by the Protocol. It will be able to export goods tariff-free to both the EU and GB. This is a unique position, the advantages of which grow the greater the divergence of the UK from the EU. 

NI should be the perfect home for businesses seeking to export to both the EU and GB. The British government should assist by ensuring that businesses wishing to locate in NI are able to access cost effective funding and that the tax environment for businesses in NI is made at least as accommodating as it is in Ireland. The rest would happen automatically. Indeed, with the right support NI could and should become a tiger economy within the UK. 

If the NI economy does as well as it should, irrespective of the obvious drawbacks of the Protocol, there is every chance of Ireland itself aligning more closely with Great Britain, rather than NI aligning itself more closely with the EU. The border down the Irish Sea should diminish greatly as a threat to the UK’s union.

Undoubtedly the Protocol and associated border down the Irish Sea was an unnecessary and hefty concession made by the British government to get Brexit over the line. Undoubtedly it belies any claim that the UK is leaving the EU whole, in control of its laws and borders. But instead of resisting the inevitable, NI should embrace it and make it work for its own great benefit and that of the United Kingdom.