Explained: How the Northern Ireland Protocol might spark a post-Brexit trade war

The U.K. will announce planned legislation on the Northern Ireland Protocol that could end up killing its E.U. trade deal.

Many questions around the Northern Ireland Protocol will still have to be sorted out.

The Northern Ireland Protocol is back in the news. Indeed, it has never really gone away. Neither a two-year global pandemic nor a devastating European war have been able to take the sting out of what remains by far the biggest block to positive E.U.-U.K. relations. The protocol is part of the U.K.'s Brexit deal with the E.U. It lays out a system of rules which governs trade in Northern Ireland since the U.K. left the E.U. It was devised as a means of avoiding a hard border on the island of Ireland, allowing Northern Ireland to remain in the E.U.'s single market.

However, the complicated political situation in Northern Ireland means questions over the region's status have been the primary sticking point between the E.U. and the U.K. since Brexit negotiations began. The pro-union community in Northern Ireland (those in favour of continued union with the U.K.) generally resent the protocol as they feel it dilutes the strength of its union with the U.K., and that it needlessly complicates trade with Britain.

The Irish nationalist community in Northern Ireland (those who favour union with Ireland) is generally in favour of the protocol, as is the main political party, the Alliance Party, which represents the "other" category (those who are neutral on the question of Irish reunification). They say it enables Northern Ireland to have the best of both worlds, namely free trade with both the U.K. and the E.U.

So what's the latest?

The British government will on May 17 introduce legislation to scrap parts of its Brexit deal with the E.U., specifically those parts related to Northern Ireland. The U.K. government says it will only enact the legislation if negotiations with the E.U. over the protocol fail and collapse.

Such unilateral action would breach the E.U.–U.K. Trade and Cooperation Agreement, signed in December 2020, and would be a breach of international law. The E.U. has urged London not to go ahead with the plans. Simon Coveney, the Irish foreign minister, said: "Unilateral action will make all of this worse. It will result in legal action. It will result potentially in countermeasures." The E.U. has said it is open to improving the protocol, but it will not renegotiate it, having already made considerable concessions previously to change how it operates.

What about the political situation?

Two weeks ago, elections took place in Northern Ireland. For the first time since the statelet was created over 100 years ago — and whose structures were specifically designed to perennially enshrine unionist power —an Irish nationalist party (Sinn Féin) won the most seats, topping the poll with 29 per cent.

The Good Friday Agreement, the peace deal struck in Northern Ireland in 1998 following a 30-year ethno-nationalist conflict, requires that power is shared between the biggest unionist and Irish nationalist parties. However, the Democratic Unionist Party (DUP) has refused to help form a government until the protocol is removed. They are fully behind any move by the U.K. government which would override the protocol.

On May 16, Johnson visited Northern Ireland where he met the leaders of the main political parties. His plan was to convince the DUP to help form a government, hoping the planned legislation on May 17 would reassure them. However, that plan appeared to have backfired when the hardline DUP announced after the meeting that it would only allow Northern Irish political institutions be reestablished once legislation to remove the protocol had actually been enacted, and not only proposed. Sinn Féin said Johnson had acted "shamefully," pointing out that the protocol was something Johnson's government had willingly signed up to. "No ifs, no buts, no conditionality, no unionist veto," the party's leader, Mary Lou McDonald, said after the meeting.

Is the Northern Ireland Protocol working or not?

There are mixed views. Businesses say additional paperwork and bureaucratic requirements as a result of the protocol have been a problem. "One in five manufacturers say their GB supplier is no longer willing to send goods to Northern Ireland at all," Stephen Kelly, CEO of Manufacturing Northern Ireland said last October. Northern Irish businesses reliant on the import of components from Britain have had the most issues, with the new paperwork requirements complicating trade flows. Another grievance businesses and consumers have is that goods which are highly unlikely to leave the Northern Irish market, including certain food products, are still subject to strict checks.

However, the Northern Irish business community is not in favour of scrapping the protocol and prefers tweaks to see it operate more efficiently. The Northern Ireland Business Brexit Working Group, which includes almost all major business groups in the region, believes the protocol can work and it has highlighted five possible improvements. They include a reduction on sanitary checks on food products coming into Northern Ireland, specifically for produce that will remain in the region. They also want a reduction in the amount of detail required on paperwork, a voice in future changes to the protocol, a review mechanism for the protocol and barrier-free trade to help Northern Ireland benefit as best it can from access to both the E.U. and U.K. markets.

However, some economists have argued that Northern Ireland is already benefiting. A recent study from the U.K.'s National Institute of Economic and Social Research found that the Northern Irish economy outperformed the U.K. economy as a whole recently, reversing a trend in which the opposite has happened for several years. "This is partly an outcome of the Northern Irish protocol and its special status in the Brexit arrangements, including better trade and investment conditions as part of the E.U.'s single market and customs union," the report said. "Closer links with the E.U., through trade and also potentially labour mobility, have benefited Northern Ireland post-Brexit," it added.

What happens now?

The U.K. government has threatened to take unilateral action on the protocol several times before, but has always backed down due to the possibility of the E.U. retaliating by withdrawing from its Brexit deal with the U.K. A trade conflict could follow. The E.U. and the U.K. are still officially negotiating the protocol, although talks have stalled in recent months. Coveney said on May 17 that the E.U. was still trying to find solutions that would distinguish between goods which remain in Northern Ireland after arriving from Britain, and those which move on to E.U. member state Ireland.

The next big question will be when, and how seriously, negotiations between the E.U. and U.K. resume. The E.U. says the U.K. has not seriously engaged with negotiations for several months now. As it has largely been since the beginning of the entire Brexit process, the situation regarding Northern Ireland remains at a perplexing impasse.