The U.K. and the European Union are preparing for a fresh clash over Brexit this week, with both sides set to unveil major policy proposals related to Northern Ireland.
When Britain’s Brexit minister David Frost delivers a speech in Lisbon on Tuesday, he’ll call for “a significant change” to the Northern Ireland Protocol, the agreement reached by the EU and U.K. last year as part of the divorce deal. The protocol requires custom checks between Northern Ireland and the British mainland, allowing the U.K. to shed EU regulations while avoiding a hard customs border on the island of Ireland.
Frost will also say that the European Court of Justice’s authority over the protocol is a “red line” for the U.K. and that a major revision of the pact is required. The EU, which will release its own policy proposals on Wednesday, has already said that it won’t renegotiate the agreement and that it isn’t willing to back down on the role of the ECJ.
The EU’s chief Brexit negotiator, Maros Sefcovic, said he expects negotiations at least until the end of the year—and possibly beyond. The results will determine what the future EU-U.K. relationship looks like. Here’s what you need to know about the current crisis:
Why is this happening now?
Britain has been threatening to tear up the post-Brexit settlement in Northern Ireland for the past few months, but has now declared a public timetable of wanting to settle the issue in November.
British ministers argue that the Brexit deal, which created a de facto customs border in the Irish Sea, is hampering trade between two constituent parts of the U.K.: Northern Ireland and Great Britain. This, they say, justifies suspending the Northern Ireland Protocol, even though they agreed to the original pact.
The EU promised before the summer break to find pragmatic solutions to the problems arising from the protocol. But the European Commission’s proposals, which will be publicly unveiled Wednesday, are focused on addressing ways to facilitate the flow of food and medicines to Northern Ireland and will fall short of U.K. demands. London also wants to open up the protocol to review issues such as the ECJ’s oversight role, which isn’t negotiable for Brussels.
What could the U.K. do?
Under Article 16 of the protocol, either side is allowed to take proportionate, unilateral measures in the event of diversion of trade, or serious economic or societal difficulties.
The scope of what the U.K. could choose to do under Article 16 is broad. For example, it could suspend one part of the protocol, such as the requirement to conduct customs checks on goods crossing the Irish Sea. Alternatively, it could be more expansive, and suspend areas such as state-aid rules and any role for the ECJ, a particular gripe for the British.
Would the U.K. be able to act immediately?
No. Unless there are exceptional circumstances, the protocol requires a one-month notification period and talks following the activation of Article 16 before any action can be taken.
How might the EU respond?
The Article 16 clause would give the EU the right to take immediate and proportionate re-balancing measures, depending on the U.K.’s actions.
If Britain were to suspend all customs checks on trade entering Northern Ireland, it would create a major dilemma for the EU: Would the EU be prepared to construct a border of its own between Northern Ireland and the Republic of Ireland, to protect its single market? That’s a prospect that has been repeatedly downplayed by EU officials.
Could there be a trade war between the U.K. and EU?
Quite possibly. Given the major difficulty a suspension of the Northern Ireland protocol would create for the EU, the bloc may look to retaliate against the U.K. in other areas of their trade agreement. For example, it may seek to impose tariffs on sensitive industries, or dial up the intensity of customs checks on goods crossing the English Channel.
However, a tit-for-tat tariff dispute could also break the unity that EU member states upheld during the Brexit process. While some countries, including France, are talking tough to defend what was agreed in the Brexit deal, some other capitals, including Berlin, could be worried about the impact of a trade war on their companies.
What would the consequences be?
A trade war would be an unwelcome headache for businesses on both sides, which have already been battered by soaring global energy prices and a supply chain crunch. The EU is the U.K.’s largest trading partner, the destination for 43% of Britain’s exports and the source of 52% of its imports.
And if the conflict spirals out of control, the hard-fought peace and stability in Northern Ireland could be in jeopardy. European fishermen would be cut out of U.K. waters and companies from both sides would lose market access. Tensions could also affect the bilateral cooperation in other priorities, such as foreign and security matters.