The UK and EU have signed a Trade and Co-operation Agreement (TCA) which, credit where credit is due, is a great achievement given only ten months of negotiations – the average time to complete a trade deal is over four years.
The agreement is, of course, hugely welcome, but what, if anything, does it do for Northern Ireland? The first thing to note is that this is not a comprehensive free trade agreement but rather it is an Association Agreement under Article 207 of the Treaty on the Functioning of the European Union.
Sadly that looser bond sets the tone for what the TCA does for businesses and households in Northern Ireland. It was envisaged (and business in NI hoped) that a UK-EU agreement could ‘supersede’ parts of the Northern Ireland Protocol by providing a closer relationship, key to which would be removing some of the tariffs and non-tariff barriers down the Irish Sea.
Unfortunately, the TCA contains no ‘superseding’ provisions, and the Protocol remains intact. The areas in which the TCA could have reduced frictions are extremely light on substance. Nevertheless, it does complement the Protocol in a few significant areas.
On road haulage, UK operators are now limited to undertaking one laden journey within an EU member state, whereas NI operators are permitted to undertake two such journeys in Ireland, and cross-border passenger transport services on the island of Ireland are protected.
And the TCA does plug the obvious gap in the Protocol on fishing, removing the need for Joint Committee decisions on customs exemptions for fish landed in NI by NI vessels.
There also is a good win on tariffs that removes £3.1 billion per year in tariffs on goods for UK consumers, and the ‘zero-tariff, zero quota’ deal reduces some of the friction on GB-NI goods movements. There will be no tariffs on GB goods even if they are ‘at risk’ of onward movement into the EU.
The significance of this is reduced given the Joint Committee agreement reached on 8 Dec 2020, which settled on 98% tariff-free trade GB to NI. Yet a win is a win and should be recognised as such. But even this ‘zero tariff, zero quota‘ deal does not remove the need for customs formalities.
The TCA contains no measures to reduce paperwork, checks and controls on the Irish Sea border, although managing the border could become easier with further customs cooperation. But even the chance of future co-operation is scant comfort to businesses who are sending or bringing goods into Northern Ireland.
Supermarkets sell around 50,000 items, each needing a customs code and some will need meursing codes depending on their ingredients. These formalities will need man hours to input data, and will have to be 100% accurate if a lorry is to be allowed to cross the Irish Sea.
Where there is friction there is cost, which neither the retail industry nor NI households (with half of the discretionary income of GB households) can afford. The area in which the TCA is most spectacularly unhelpful is on sanitary/ phyto-sanitary goods. Northern Ireland businesses had been hoping that any agreement might go further than the Protocol. It does not.
The TCA includes very limited provision for mutual recognition and equivalence, and this increases the likelihood of regulatory divergence between GB and NI. That means there will be non-tariff barriers to trade and costs including paperwork, Export Health Certificates and checks.
The percentage of physical checks needed has yet to be decided and there is room for further co-operation in this area. But, again, that does not help businesses in Northern Ireland now. Future divergence between GB and the EU would only increase the ‘hardness’ of that regulatory border within the UK.
It is good news that the TCA does cover some issues of importance to NI business and those trading with NI not addressed in the Protocol, such as services, and security and judicial cooperation needed for cross-border cooperation.
The bad news is that the substance of the new arrangements in the TCA are so wafer thin that they do little to address the Brexit disruption for cross-border cooperation or for businesses trading with NI.
And so, in the same way the NI Business Brexit Working Group began 2020 trying to combat the narrative that Northern Ireland is ‘sorted’ by the Protocol, we start 2021 having to refute that either the 8 December agreement or the TCA has provided a workable solution for NI. There is a plethora of red tape for business in Northern Ireland and, notably, those in GB who trade with NI.
And remember, the supply chain will always take the path of least resistance. It doesn’t matter if the new costs are 1% or 1000% above the profit margin, it means those businesses won’t deal with Northern Ireland.
The non-exhaustive friction list includes:
- EORI numbers
- Simplified frontier declarations
- Safety & security declarations
- Goods Vehicle Movement System
- TRACES pre-notification
- Export Health Certificates
- Plant Health Certificates
- Identity, document & physical checks on SPS goods
- Dual VAT system
- UK Trader Scheme
- ATA carnet
- Catch certificates
- Trader Support Service
- And again – friction means cost.
We at the Northern Ireland Retail Consortium will continue to hold the UK Government and the EU to account. They must meet early in 2021 to look at how there can be further simplifications on processes such as customs formalities or SPS requirements.
They must provide a long term, practicable and workable solution to allow NI business to be competitive and keep costs down for NI households.
As for the TCA, the best thing about it is that it presents a platform on which to enhance the EU/UK relationship. We now need to see movement towards a closer relationship that will have tangible benefits for the UK and especially for Northern Ireland.
It took Switzerland 40 years and 210 separate agreements to get to where they are now with the EU. Quite frankly, NI doesn’t have that time.
This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.