Economic and political impact of protocol may justify unilateral action, says new IEA briefing


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ECONOMIC AND POLITICAL IMPACT OF PROTOCOL MAY JUSTIFY UNILATERAL ACTION, SAYS NEW IEA BRIEFING 

Responding to the paper, The Rt Hon Lord Frost CMG said: “If the EU will not negotiate, then the Government will be right to intervene unilaterally to restore stability”

  • The Northern Ireland Protocol is failing to prevent massive disruption in Northern Ireland (NI).  



  • Economists have estimated the Protocol to NI, even only partially implemented, has cost £850m per year.   



  • The EU claims such costs will only be temporary and will be outweighed by NI’s unique access to both EU and UK markets. Modelling shows this is highly unlikely to be true. 



  • The UK’s position, as set out in the July Command Paper, is reasonable. The proposals for a dual regulatory zone are economically liberalising. 

  • The EU has provided no evidence that goods have been leaking into Ireland, even though they claim the implementation of the Protocol so far is not fit for purpose.


  • The UK’s proposals would require substantial rewriting of important parts of the Protocol, and the EU has rejected any amendments or renegotiation. The UK is therefore justified in considering unilateral action.


  • The Rt Hon Lord Frost CMG said: “The IEA’s report is a very timely contribution to the analysis of the political and economic situation created by the implementation of the Northern Ireland Protocol… It also rightly notes that the proposals by the UK Government last year would not only help to stabilise the situation politically, but would be economically liberalising… If the EU will not negotiate, then the Government will be right to intervene unilaterally to restore stability.”


A new report from the Institute of Economic Affairs suggests that, in the absence of agreement from the EU, the UK has grounds to take unilateral action to ensure prosperity and stability in Northern Ireland. 

The Protocol is failing to deliver in its key objectives. There has been significant diversion of trade, an outcome it expressly sought to avoid.   

The cost of the Protocol to NI has been estimated at £850m per year. This includes £360m establishing and operating the Trade Support Service in its first two years, a further £150m on digital agri-food certification and tens of millions more in related funding to the NI Executive.

There has been significant disruption to trade, with supplies of specialist goods imported and sold by small retailers particularly disrupted.   

In January to March 2021, checks on goods from GB at ports in NI represented 20 per cent of all checks carried out at the EU’s borders and more than any single member state, despite NI’s population comprising 0.5 per cent of that of the EU.

The EU should consider the UK’s proposals as set out in the July 2021 Command Paper, which set out ways to substantially renegotiate the institutional framework and the parts of the Protocol relating to trade in goods.

The proposals for a dual regulatory zone are economically liberalising and, in many ways, represent a free market solution to the issue of the Irish border, showing high levels of openness to trade with the EU.

As well as economic benefits from such openness, this would alleviate the concerns of Unionist parties about the constitutional position of NI, which may help to break political deadlock in the devolved institutions in NI.

The EU should be open to renegotiating the Protocol without the UK needing to take unilateral steps. Their proposals would make the situation worse, as they are conditional on full implementation before any flexibility will be granted.

The EU’s stance brings into question whether averting risks to the single market is its priority, or if it is not in fact using the protocol as leverage to procure regulatory alignment from the UK or in pursuit of other tactical priorities.

Commenting on the paper, Lord Frost, senior fellow at Policy Exchange and former Brexit negotiator, said:  

“The IEA’s report is a very timely contribution to the analysis of the political and economic situation created by the implementation of the Northern Ireland Protocol.  It underlines the many costs of the current situation – economic, fiscal, and in trade diversion.  

“It also rightly notes that the proposals made by the UK Government last year would not only help to stabilise the situation politically, but would also be economically liberalising and therefore constitute a gain for all sides. It would still be best to reach a negotiated settlement on these lines but, if the EU will not negotiate, then the Government will be right to intervene unilaterally to restore stability.”

Victoria Hewson, IEA Head of Regulatory Affairs and the report’s author, said: 

“The Protocol and the associated arrangements and documents are complex but the economic and political costs are clear.  

“Even with only partial implementation the UK has spent £500m to try and make it work, and massive diversion of trade has followed as business try to work around the trade barriers between Great Britain and Northern Ireland.

“Power sharing and north/south cooperation, institutions of the Belfast (Good Friday) Agreement, have broken down. The Protocol is not fulfilling the intentions of the parties, and it cannot be right to simply repeat that the UK entered into it voluntarily and should be strictly held to its terms, while the people of Northern Ireland suffer adverse effects.”

ENDS

Notes to editors

Contact: Emily Carver, Head of Media, 07715 942 731, [email protected]

IEA spokespeople are available for interview and further comment.

The Northern Ireland Protocol: Current position and ways forward is under embargo until 00.01 Monday 16 May. An embargoed copy of the paper can be found here: https://iea.org.uk/wp-content/uploads/2022/05/Northern-Ireland-Protocol-Current-Position-and-ways-forward.pdf

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.


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