Most Favoured Nation: The Art of [Selling] the [NI] Deal

Slowly, slowly ...

Welcome to the 84th edition of Most Favoured Nation. This week’s edition is free for all to read. If you would like to receive top-quality trade content in your inbox every week, please consider becoming a paid subscriber.

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We have a pretty good deal of what a UK-EU deal on the NI protocol could look like.

From the moment the EU accepted the possibility of differentiation and that goods entering Northern Ireland could be treated differently depending on the location of final consumption — as it first did when deciding whether tariffs should be levied, but then also on SPS (reduced checks for goods destined for supermarkets) and medicines (UK authorised medicines can be given to patients in NI) — the practical outline of what a deal could look like was written. 

As of now, we can confidently assume that the deal will include:

• some sort of green lane/express lane system. Subject to firms meeting stringent audit requirements, goods entering Northern Ireland via a green lane/express lane will not be subject to checks [or at least subject to fewer checks].

• Some sort of ECJ fudge where it is not involved day-to-day but remains the ultimate arbiter when it comes to deciding how EU law should be interpreted.

• Some sort of commitment from the UK to build some of the border infrastructure it is meant to and probably a commitment to drop the Northern Ireland Protocol Bill.

All-in-all, this will improve matters on the ground for companies moving goods from Great Britain to Northern Ireland. It will be better than what currently exists.

But will it be enough?

For the DUP, you would expect not. My flint colleague Philip Wilson has written a good thread on the UK government’s failure to bring NI unionists along with it.

Philip Wilson @PhilipWilson04

1) While Rishi Sunak's inheritance as Prime Minister on Northern Ireland was a mess, it should not camouflage how inadequate his Government's handling of Unionism has been, particularly following the decision to reach a compromise deal with the EU on the NI Protocol.

And for Brexit hardliners? It’s complicated. My assumptions are as follows:

• Most don’t really care about Northern Ireland

• Some will oppose anything because it ensures media attention / boosts their public profile  

• Some will oppose anything because they don’t like Sunak / want to embarrass him 

• Some will oppose anything because they don’t like the EU

• Some will oppose this specific deal because it doesn’t give enough of what they want, but they could conceivably support a different deal

• Some might be convinced to support this deal 

• Some just want Brexit to be viewed as a success and the vibes to be better

I suppose the question for Sunak is how many dissenters can he live with? Ten? Twenty? Thirty? I dunno.

Another factor is sequencing. It is quite possible that a deal on the NIP (which, again, will inevitably be better than the deal that exists but probably not as good as the fictional deal in some people’s heads) is shortly followed by positive news on CPTPP. Which could cheer up a few people and create some good vibes for those Brexiters who mainly just want good vibes.

Also need to consider the alternative options:

1. Do nothing; keep bumbling on. This would see things continue much the same as now. EU and UK keep talking and nothing much changes. This option is obviously appealing. On the UK side, it means Sunak doesn’t need to have a fight with his party. On the EU side, it means they can just wait for Labour [see option 3]. Buuuuuuuuuuut it really is time to draw a line under all of this. And the lack of progress on the Protocol is making things difficult elsewhere, for example with the US.

2. Trade war. Screw the EU. Unilaterally make changes to the Protocol and how it operates. Scrap it even. What are they gonna do about it? Well … sure. It’s an option. But time and time again, under different types of UK government, the UK has demonstrated it does not actually think it would fare well in a trade war against the EU.

3. All-UK solution. At least on SPS, there is another route forward. And one that shouldn’t upset the unionists. All-UK alignment, baby! Not popular with Brexit hardliners, though.

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Other things

• Mirror Clauses. With thanks to Alan Matthews for spotting, at the beginning of February, the European Commission adopted new rules lowering the maximum residue levels for two pesticides. In practice, this means that producers abroad will not be able to use these pesticides – which are banned for use in the EU but not elsewhere – on the food they are planning on exporting to the EU.

• CBAM station. India has ramped up its objections to carbon border adjustments at the WTO. Read more here.

• Services. The 2022 OECD Services Trade Restrictiveness index has been published. And guess what? The UK is [almost if you ignore Japan] the WINNER. Take that, haters.

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As ever, do let me know if you have any questions or comments.

Best,

Sam