Peter Foster at the FT wrote an interesting Twitter thread yesterday about EU thinking on the NI protocol. It seems they are thinking about measures that might make it more palatable for some goods with tariffs not too different to from the EU's which might be exempted from paying duty if they can show, with monthly statistics, that the goods are for use in Northern Ireland only. I think this might be cold comfort since they will still need to fill in export declarations and all the other paraphernalia.
I also think what it demonstrates is the size of the problem. The EU's suggested mitigation (it hasn't yet been formally tabled) is really just scratching the surface. Foster's tweet is here by the way:
He claims EU diplomats have been told that the new regime would still be a "significant change" from the status quo and that Brussels intends to interpret "widely" the clause that saying that all goods for "commercial processing" will be a "at risk" and therefore attract tariffs.So. The #Brexit talks seem stuck. An extension is a no-no. A new cliff-edge looms. But what of the Irish Protocol that must be implemented deal or no deal? How will that work? Good Q. Here with @jimbrunsden I have some intel on EU thinking 1/Threadhttps://t.co/IxGlDvPwPz— Peter Foster (@pmdfoster) May 8, 2020
He gives a link to evidence given to the NI Affairs Select committee on April 30 by various experts (who all seem as much in the dark as everyone else about how it is all going to work - an indication that the transition will have to be extended) including Aodhán Michael Connolly of the NI retail consortium. When asked for his assessment of how attractive the NI market will be to GB suppliers after Brexit, this is his answer:
"Those are some very big ifs on whether it will be viable. Perhaps if I give you an example it would bring it to life a wee bit better. We [the retail sector]account for about 70% of the value of everything that crosses from Great Britain to Northern Ireland; 70% of the value of everything from Great Britain to Northern Ireland is going to retailers’ shelves. We did a bit of work before Christmas looking at different loads and what that would actually mean. One of the loads that a member picked at random had 1,392 different products on that one lorry, which was going to a grocer. Each of those different products needs an export declaration, and that can be from £15 to £56 for the export declaration.
"Of those 1,392 products, around 500 were products of animal origin. Under the current protocol, unless there are mitigations and all those big ifs, there would need to be an export health certificate. Currently, in Great Britain, an export health certificate goes to over £200. If you multiply that by the 500 products of animal origin, and given that you need a different tariff code for each of those 1,392 products, as well as people to do the work, you can see how the costs rise. The fact is that, if all the paperwork is not right, that lorry is not getting on that boat and there is a delay, and that affects the just-in-time supply chain.
"This is where I keep talking about the myriad and the jigsaw that needs to be put together. If we do not have those mitigations, it is a very simple equation. If the new costs because of this protocol are higher than the profit margin, either the product or the business model becomes unviable. It is as simple as that."
The Export Health Certificates alone add up to £100K for one truck!. What this tells me is that Johnson had no idea what he was agreeing to last October. It seemed like a quick-fix to his self-made political difficulties - the reckless pledges and stupid deadlines - but it has only led further down the road to more and probably bigger problems. He is the signatory to an international treaty and one that he hailed as a good deal, now he is stuck with it.
Karin Smyth, MP for Bristol South asked about GB based businesses who trade with NI and asked if anyone knew what they had been advised. Nobody knew:
Karin Smyth: Businesses in my constituency are possibly going to have to do something different, as I think Mr Aston has said. I do not think they have been told what they need to do differently. I would just like you to confirm or deny that.
Angela McGowan: I do not know if any conversations have been had with those businesses around what they will have to do. I guess we do not know what they will have to do until we see what kind of a deal we get with the EU.
Angela McGowan is a Director of the CBI for Northern Ireland by the way, so if she doesn't know of any 'conversations' you can be sure there haven't been any.
Foster says the British side are going to rely on Article 6 paragraph 2 of the protocol which says:
"Having regard to Northern Ireland's integral place in the United Kingdom's internal market, the Union and the United Kingdom shall use their best endeavours to facilitate the trade between Northern Ireland and other parts of the United Kingdom, in accordance with applicable legislation and taking into account their respective regulatory regimes as well as the implementation thereof. The Joint Committee shall keep the application of this paragraph under constant review and shall adopt appropriate recommendations with a view to avoiding controls at the ports and airports of Northern Ireland to the extent possible."
In other words, the negotiators last October pushed the problem into the future. Let the Joint Committee solve it. The EU see minor 'easements' from the full EU Customs Code while the British see a few small concessions on the existing frictionless trade to allow for the odd 'risk based' check with nothing like the UCC being applied in full. There is a gulf in between and in my opinion no chance of a solution to be agreed, designed and implemented with infrastructure in place and tested, by December this year. It is I-M-P-O-S-S-I-B-L-E. Impossible even if the government actually wanted to do it - and they do not.
The Irish Deputy Prime Minister Simon Coveney has said the Covid-19 pandemic has made the timeline for a UK-EU trade deal “virtually impossible.” But it isn't just Covid-19 is it?
As Foster points out what is lacking is trust"
"But even bigger is the issue of TRUST - the British govt spend lots of January hinting it wouldn't implement the Protocol, or at least the EU 'version' of it.
"The UK willingness to implement what it ratified is now a key good faith issue for all other negotiations. The failure of @BorisJohnson and others to explain/own up to the 'deal' has further angered the EU side."
Conclusion? There is no way the trade talks currently stalled will be allowed to end in another fudge. Johnson has shown himself to be what we always knew he was. Untrustworthy, a man who's word means nothing.
As Max Hastings once said: "I would not take Boris's word about whether it is Monday or Tuesday"
The EU will not make the same mistake twice.
