Richard North, 22/07/2021  

It's happened as advertised: the recently ennobled David. Frost has delivered his statement to the House of Lords to coincide with the publication of a Command Paper proposing changes to the Northern Ireland Protocol (NIP).

Considering that the Protocol is 63 pages, there is not a lot of detail to be going on with in the Command Paper – which is a mere 28-pages long, bearing the somewhat optimistic title "the way forward".

But then, in keeping with the tone set by the Great Leader, detail is not the "thing". We are dealing with principles (or the lack of them). There's not a lot of point in the government producing detail if, despite the title of the Command Paper, there is no way forward for its suggestions.

That much became evident within hours of Frost making his statement when the EU conveyed its refusal to entertain renegotiations on the protocol. This led The Times to come up with the startlingly unimaginative conclusion that Britain and the European Union are at "loggerheads", a word that conveys strong disagreement.

On balance, a more appropriate word to use would be impasse. If the EU stays firm in its determination not to talk, then the Command Paper is essentially redundant and we move straight to the next phase, without passing "go" or collecting £200 (or should it be euros?).

This phase is signalled in that very Command Paper, right up-front in Johnson's foreword. There, he asserts that it is "increasingly clear" that we cannot solve the problems encountered simply by "a rigid and unpurposive" application of the Protocol in its current form, on which basis he has "had to consider" whether invoking Article 16 is necessary.

Although he thinks use of the Article would be justified, he nevertheless concludes "that there is still an opportunity to proceed differently and to agree with the EU a new balance in how the Protocol operates", in the belief that "there is still political will to address shared problems on all sides".

Given that this "opportunity" seems illusory, the Command Paper helpfully sets out the case for using the Article, noting that it can be invoked where "diversion of trade is borne out in practice or would occur". This, according to the text is indeed the case – without any apparent qualification.

Here, the government does have a point. There has, it says, "been significant disruption to longstanding trade flows between Great Britain and Northern Ireland, and a significant, measurable increase in trade on the island of Ireland". It thus says:
The value of Ireland's exports of goods to Northern Ireland is trending far above historical levels in 2021: up by nearly 40% this year compared to the same period in 2020, and by more than 50% on the same period in 2018. Some sectors particularly susceptible to that diversion, such as food and pharmaceuticals, have experienced even stronger growth. Meanwhile, as set out above, surveys continue to underline the disruption being caused to business with Great Britain, with movements of specific commodities (such as chilled meats) seeing particular impacts.
Looking back to the time when this Protocol was agreed, one wonders whether it occurred to either party that a necessary and inevitable consequence of its implementation was going to be diversion of trade. There are no possible circumstances where that wasn't going to happen. If Brussels didn't realise this, then it cannot walk away from the mess. It too agreed the Protocol.

Furthermore, it cannot be denied that the trade diversion experienced is having "societal and economic impacts". Says the government:
…consumers face higher costs and real risks to goods supplies on which they rely; businesses face increased operating costs that put their survival in jeopardy; and, as many businesses and business organisations have made clear, if the flexibility provided by the grace periods were to be removed, there would be questions as to whether food supplies and parcel deliveries would continue without serious disruption, with significant knock-on impacts for day-to-day lives.
However, the government also sees limiting factors, which deter it from immediately invoking Article 16. They actions are limited to the specific difficulties faced, are subject to the uncertainty of an as yet untested dispute settlement process, and would be temporary (though could nevertheless persist, provided they remained strictly necessary to remedy the situation).

This last, bracketed observation is interesting, redolent of the Liechtenstein application of Article 112 of the EEA Agreement, leading to a long-term settlement incorporating an amendment to the treaty. On the face of it, the UK government is being squeezed in the same direction, with a very strong case for invoking Article 16, as drafted. If the EU doesn't play ball, then the only option left to Johnson is to pull the plug.

One wonders, in this instance, whether the EU will be quite as immovable as it makes out. Whether it was intended or not, Article 16 can be used in the event of any evidence of trade diversion, which gives the UK government exactly the justification it claims it has.

Should there be no movement from Brussels, one must thus assume that we will see Article 16 invoked. This would then trigger the so-called "Annex 7" dispute procedure which, in the first instance, imposes a one month "cooling off" period (except in "exceptional circumstances") during which "the Union and the United Kingdom shall immediately enter into consultations in the Joint Committee with a view to finding a commonly acceptable solution".

In the context, "immediate" is relative. We are heading for August when the European quarter in Brussels is a ghost town. But, with the full implementation of the Protocol delayed until 30 September, lodging the Article 16 papers in the near future would give time for full-throated talks to take place when the "colleagues" are back from their hols.

The one thing that comes clear, therefore, is that the UK has Brussels over a barrel when it comes to further talks. Either party entirely within its rights to invoke Article 16 and the EU cannot complain that UK is in breach of the agreement if it follows this route, and then works within the parameters set by Annex 7. One way or another, Brussels must come to the table and talk, either before or after Article 16 is invoked.

Despite this, we're getting a certain amount of rhetoric from Brussels, obligingly conveyed to us by the Guardian, which tells us that EU officials are exasperated by government claims not to have foreseen the changes to trade between Britain and Northern Ireland.

Be that as it may, EU officials apparently did not foresee that the Article 16 text, as drafted, would give an opening to the UK in the event of any trade diversion. The insertion of the single word, "substantial" as a qualifier would have made all the difference.

However, to use that awful cliché, we are where we are. For all that it can be applied, it is unlikely that the situation can be resolved entirely by Article 16. But, by using the Liechtenstein gambit as a precedent, the UK could use the leverage afforded by the Article to force a renegotiation.

Then, of course, we have rock meeting hard place syndrome. The EU is unlikely to be particularly enthusiastic about some of the changes the UK wants and may, under duress, come up with its own (extremely limited) proposals.

That makes it rather unlikely that we will see a resolution by 30 September, or even any time this year. The "oven ready" deal is going to look more like a Jurassic fossil before we are finished.

Also published on Turbulent Times.

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