20.To ensure the smooth trade of goods between Northern Ireland and Ireland, Northern Ireland must remain aligned with a number of EU laws, which are set out in Annex 2 of the Ireland/Northern Ireland Protocol annexed to the Withdrawal Agreement. At its meeting of 17 December 2020, the Joint Committee (JC) established by the Withdrawal Agreement agreed a addressing a number of “errors and omissions” in the Protocol. The JC decided to add eight EU laws to Annex 2, in addition to three explanatory notes providing clarification on the scope of existing laws in Annex 2. It also agreed to remove two laws from Annex 2.
21.In June 2020, we scrutinised an earlier proposing that the EU support a number of changes to the Withdrawal Agreement, including the Protocol. On 12 June, the Government agreed to some of the EU’s proposed amendments at a meeting of the UK-EU Joint Committee, with the notable exception of those relating to the Protocol on Ireland/Northern Ireland. The suggested changes were not agreed at that stage. In our scrutiny, we expressed grave concern about the degree of information provided by the Government as it neither clarified the implications for the UK (and Northern Ireland in particular) of accepting or rejecting the EU’s proposals, nor confirmed the Government’s intentions when they were to be put to the Joint Committee for approval on 12 June.
22.Even now, following adoption of the JC Decision on errors and omissions, we do not know what the Government’s approach was as the from the Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office (Rt Hon. Michael Gove MP) does little more than describe the final outcome. His comments are included in the summary of the Decision that follows.
23.The JC agreed to add eight EU acts to Annex 2, as set out below.
24.The Single-Use Plastics Directive aims to prevent and reduce the impact of certain single-use plastic products and fishing gear containing plastic on the environment, and to progress towards a circular lifecycle for plastics. It includes measures to restrict placing certain items on the market, introducing new product design and labelling requirements, and extended producer responsibility schemes.
25.Only those parts of the Directive that are required to allow a proper functioning of goods movements between Northern Ireland and Ireland/the European Union have been added to Annex 2. The main requirements are therefore:
26.The date for the Directive to be transposed in Northern Ireland has been extended to an earliest date of 1 January 2022 compared to the earlier 1 July 2021 date applied to EU Member States.
27.The Minister describes the approach as providing “a pragmatic way forward overall.” On the one hand, he says, it ensures there would not be market access barriers for products with plastics sent from Northern Ireland to the EU. On the other hand, it ensures that Northern Ireland is not constrained by any EU rules on issues not directly connected to the movement of goods. The Minister emphasises that the Government and Northern Ireland Executive are both strongly committed to reducing single use plastics as a matter of policy.
28.The Directive sets the conditions for markings on foodstuffs to identify the lot they belong to. The Directive complements other EU foodstuff measures in Annex 2 of the Protocol and focuses on ensuring the easy traceability of foodstuff from production, thereby enabling removal from the market if necessary due to safety issues or a dispute.
29.The Directive sets out rules concerning the marketing of fodder plant seed within the Union. It includes requirements concerning the identity, health and quality, as well as certification requirements of those seeds, pursuant to which they may be freely marketed in the European Union or Northern Ireland.
30.The Directive sets out rules concerning the marketing of propagating material of ornamental plants in the European Union. It includes requirements concerning the quality and health of that material, pursuant to which it may be freely marketed in the European Union or Northern Ireland.
31.The Directive sets out rules concerning the marketing of vegetable propagating and planting material in the European Union. It includes requirements concerning the identity, health, and quality, as well as control measure of that material, pursuant to which it may be freely marketed within the European Union or Northern Ireland.
32. establishes rules for monitoring trade in drug precursors between the EU and third countries. Drug precursors are chemical substances which have legitimate uses, for example in the production of pharmaceuticals and cosmetics, but which can also be used in the illicit manufacture of narcotic drugs and psychotropic substances. The EU rules implement the United Nations Convention against the Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988 and are intended to prevent drug precursors being diverted into illicit drug production. Licensing requirements apply for operators within the EU who import or export scheduled substances listed in an Annex to the Regulation.
33.The Minister says that the inclusion of the Regulation in Annex 2 of the Protocol means that Northern Ireland will “continue to enjoy access to the EU’s drug precursor markets, and Northern Ireland businesses will not be required to impose any additional licensing beyond what is currently required for intra-EU trade in drug precursor chemicals”. There will, however, be new licensing requirements for trade in drug precursors between Great Britain and Northern Ireland “in order to maintain the integrity of the UK and EU regulatory regimes”. We understand this to mean that UK laws governing trade in drug precursors will only apply in Great Britain (GB), with Northern Ireland remaining bound by EU law in this area.
34.The Regulation sets out the conditions for the introduction of cultural goods into the EU and the conditions and procedures for the import of cultural goods for the purpose of safeguarding humanity’s cultural heritage and preventing the illicit trade in cultural goods, in particular where such illicit trade could contribute to terrorist financing. It does not apply to cultural goods which were either created or discovered in the customs territory of the EU.
35.The Minister considers that the policy implications of this Regulation being included in Annex 2 of the Protocol are, in practice, minimal, given that there are very few imports of cultural goods from the rest of the world into Northern Ireland, and those imports from non-EU countries that do take place are likely to be covered by exemptions within the Regulation. The Regulation will have no effect on cultural goods moving from Northern Ireland to Great Britain.
36. establishes a set of principles and procedures for implementing safeguard clauses in the EU’s trade agreements with countries listed in the Annex to the Regulation (currently Japan, Vietnam and Singapore, with the expectation that further countries will be added as the EU negotiates new agreements). Safeguard clauses operate as a safety valve, allowing one party temporarily to withdraw preferences if they are causing serious injury to their domestic industry, giving it more time to adapt to new trading conditions.
37.As the Minister notes, the Regulations already listed under heading six of Annex 2 to the Protocol concern the implementation of bilateral safeguard measures under a range of EU/third country trade agreements. In future, the EU is expected simply to amend the Annex to Regulation (EU) 2019/287 rather than adopting separate implementing Regulations for each new agreement.
38.The JC also agreed that two EU acts be removed from Annex 2.
39.Regulation 443/2009 set CO₂ emission performance standards for new passenger cars by setting average CO₂ emission targets for manufacturers and monitoring and reporting responsibilities for Member States. The Minister says that the Government did not consider this Regulation to be relevant to the movement of goods and therefore supported its removal from Annex 2. The policy implications of removing this legislation from Annex 2 are to ensure that Northern Ireland vehicle CO₂ emissions may count towards UK rather than EU targets.
40.Regulation 510/2011 operated in the same way as 443/2009, but its scope covered new light commercial vehicles. The UK Government did not consider this Regulation to be relevant to the movement of goods and therefore supported its removal. As with 443/2009, its removal from Annex 2 will ensure that Northern Ireland CO₂ emissions may count towards UK rather than EU targets.
41.The Minister notes that both of these Regulations were repealed and replaced by Regulation (EU) 2019/631 on 1 January 2020, though their successor Regulations would have remained in scope of the Protocol. Removing this from scope will therefore ensure that vehicles in Northern Ireland will not count toward EU manufacturer CO₂ targets, and may count toward UK manufacturer CO₂ targets instead. This clarifies Northern Ireland’s place in the UK internal market.
42.The JC agreed three explanatory notes which seek to clarify how various EU trade-related Regulations listed in headings four, five and six of Annex 2 will apply in respect of Northern Ireland. According to the Minister, these explanatory notes do no more than clarify Northern Ireland’s place in the UK’s international trade regime.
43.The first of the three explanatory notes concerns which establishes the EU’s scheme of generalised tariff preferences (GSP) for developing countries. It identifies specific provisions of the Regulation which “shall not be read as including” (variously) Northern Ireland, the Northern Ireland market, and Northern Ireland producers or industry. The effect of reading the provisions in this way is to preclude the UK Government (acting on behalf of Northern Ireland) and Northern Ireland producers from requesting an investigation to establish whether goods imported at a preferential tariff from developing countries are causing (or threaten to cause) serious difficulties which may damage their economic or financial position. Moreover, the interests of Northern Ireland producers would not be considered in any investigation undertaken by the Commission at the request of an EU Member State or producers elsewhere in the EU. If an investigation leads to the introduction of safeguard measures Northern Ireland would nonetheless be required to apply the standard duty applicable under the EU’s Common Customs Tariff, rather than the preferential GSP tariff.
44.The second explanatory note concerns EU trade defence instruments dealing with anti-dumping measures (), countervailing duties () and surveillance and safeguard measures on goods imported into the EU which cause (or threaten to cause) serious injury to EU producers (). The explanatory note says that references to “Member States” or to the “Union” in these Regulations “shall not be read as including the United Kingdom in respect of Northern Ireland”. While Northern Ireland will therefore be bound to apply any anti-dumping duties, countervailing duties (to offset unfair subsidies on imported goods), surveillance or safeguard measures agreed on by the EU, the Northern Ireland market (and the interests of Northern Ireland industry and consumers) will not be taken into account by the EU in determining whether duties or other trade defence measures are necessary. According to the Minister, the effect of the explanatory note is to “exclude Northern Ireland industries from the EU’s calculations for the purposes of trade remedies investigations and Northern Ireland importers from being able to seek refunds of duties from the Commission”. A published on 18 January 2021 makes clear that all EU anti-dumping and anti-subsidy measures in force on 1 January 2021 only apply to goods imported by the EU27 (not the UK), but adds that “aspects of EU trade defence in relation to Part 3 of the Withdrawal Agreement and the Ireland/Northern Ireland Protocol will be the subject of a separate notice”.
45.The third explanatory note concerns all the Regulations on bilateral safeguards listed under heading 6 of Annex 2. Bilateral safeguard measures may be necessary when preferential market access results in a surge in imports of certain goods which causes (or threatens to cause) serious injury to industry in the EU. While making clear that bilateral safeguard measures taken by the EU (such as increased duties) will apply in Northern Ireland, the explanatory note specifies that the Regulations “shall not be read as including the United Kingdom in respect of Northern Ireland”. The UK Government (acting on behalf of Northern Ireland) and Northern Ireland producers cannot therefore request an investigation to determine whether safeguard measures are necessary, nor can the interests of Northern Ireland producers be taken into account in any investigation requested by an EU Member State or by producers elsewhere in the EU.
46.We take note of the outcome of the Joint Committee’s deliberations on ‘errors and omissions’.
47.The Explanatory Memorandum largely summarises the content of the Decision without explaining how the Government approached the negotiations in the Joint Committee or how the outcome agreed will affect businesses trading in or with Northern Ireland. We note that the only differences between the Commission’s of 15 May 2020 and the final outcome are the following: partial (rather than full) inclusion of the Single-Use Plastics Directive; and the removal of two EU laws from Annex 2.
48.We assume that the Government largely agreed with the proposals put forward by the Commission, but that it negotiated the two changes highlighted above. If that is the case, we further assume that the Government undertook some analysis before reaching its position.
49.We therefore seek from the Government:
50.We note that the inclusion in Annex 2 to the Protocol of Regulation (EC) 111/2015 on trade in drug precursors means that new licensing requirements apply to trade in these substances between Northern Ireland and Great Britain, as set out in . Depending on the substances being traded, importers and exporters may need to apply separately to the Home Office Drug and Firearms Licensing Unit for an import and an export licence.
51.The Minister states in his Explanatory Memorandum that the new licensing requirements are necessary “to maintain the integrity of the UK and EU regulatory regime”. He does not explain what impact they have had on the costs for businesses in NI and GB trading in substances covered by the EU Regulation or on the continued viability of NI to GB and GB to NI supply chains.
52.We therefore ask the Government to provide further information on the following matters:
53.We understand that the regulatory regimes applicable in GB and NI are, for the time being, the same. We also ask the Government what factors it would expect to take into account in deciding whether to use its regulatory autonomy to diverge from EU rules on drug precursors or to remain in alignment.
54.Turning to the explanatory notes which are to be inserted under headings four, five and six of Annex 2 to the Protocol, the Minister states only that they “clarify Northern Ireland’s place in the UK’s international trade regime”. We are disappointed that the Minister did not explain what their practical effect would be or how their application might be affected by . That Decision provides that all goods entering Northern Ireland which are subject to EU trade defence measures are to be considered at risk of subsequently being moved into the EU market and subject to the payment of any applicable EU tariff. As far as we can tell, the main effect of the Explanatory Notes and the Joint Committee Decision on at risk goods is that the interests of Northern Ireland industries and consumers will not be taken into account by the EU in determining whether to introduce trade defence measures, yet these measures (in many cases, an increased tariff on imports) will apply in Northern Ireland.
55.We ask the Government whether this is indeed the case and what system the Government has put in place to reimburse duties paid by Northern Ireland importers.
12 Council number: 13914/20; ELC number: 41739
13 DECISION NO 3/2020 OF THE JOINT COMMITTEE ESTABLISHED BY THE AGREEMENT ON THE WITHDRAWAL OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FROM THE EUROPEAN UNION AND THE EUROPEAN ATOMIC ENERGY COMMUNITY of 17 of December 2020 amending the Protocol on Ireland and Northern Ireland to the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community
14 Twelfth Report (2019–21) “UK-EU Joint Committee: Decision of 12 June 2020 amending the Withdrawal Agreement” (18 June 2020).
15 dated 3 June 2020 from Rt Hon Michael Gove MP (Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office)