Preparing for the end of the Transition Period Contents

4Ireland/Northern Ireland Protocol

60.The Ireland/Northern Ireland Protocol will apply indefinitely, subject to continuing Assembly assent.118 Under its provisions, Northern Ireland will continue to follow some EU rules, notably on goods, VAT and state aid. This will mean more paperwork and checks for goods arriving from Great Britain, particularly agrifood products. Northern Ireland will still be part of the UK’s customs territory; however, the EU’s customs duties will be payable on goods arriving from Great Britain unless these goods are not at risk of entering the EU .119 This much has been clear for over a year. Yet, as Dr Anna Jerzewska, Director of the Trade & Borders consultancy, explained:

the Northern Ireland protocol is a very good example of the difference between reaching a high-level deal, in terms of a political agreement in theory, and implementing this deal in practice and making sure everyone is ready to do what they need to do to get this deal implemented.120

61.Over the last year, there have been two sources of delay. The first is the uncertainty that arises from slow decision making of the Withdrawal Agreement Joint Committee, the body co-chaired by the UK and EU that oversees the implementation and application of the treaty. As Colin Murray and Dr Clare Rice of Newcastle University explained:

Much of the detailed thinking about how the measures outlined in the Protocol will work in practice has been passed to the Joint Committee. This was a pragmatic decision at the time of the Withdrawal Agreement; pushing some of these difficult questions onto a future technocratic body enabled the deal to be concluded and ratified.121

Important details about the Protocol left to be decided by the Joint Committee included the criteria for determining goods to be not ‘at risk’.122 It was clear that until decisions were taken, and detailed guidance could be published, it would be difficult for businesses and communities to prepare.

62.The future relationship between the UK and the EU was also expected to affect how the Protocol operates: the more comprehensive a deal, the fewer checks would be needed. Uncertainty over the deal’s provisions, while inevitable, has been a second source of uncertainty. As the Northern Ireland Retail Consortium said:

The Protocol is intended to be the legal baseline [ … ] If the two sides were to negotiate a safety and security agreement, the requirement to make entry and exit summary declarations could be waived. If the two sides negotiated a veterinary agreement then the incidence of physical SPS checks could be lowered, and simplified forms or pre-lodging electronically of SPS paperwork could be arranged.123

Conversely, Professors David Phinnemore and Katy Hayward of Queen’s University Belfast told us that the more the UK diverges from EU regulations the more controls will be needed on goods arriving from Great Britain to protect the EU’s single market.124

63.While technically separate the two sets of talks appeared to have become intertwined. Aodhán Connolly, the Northern Ireland Retail Consortium’s Director, told us:

The big problem here is the politics of the FTA; although they are supposed to be separate but parallel negotiations, there has been a crossover. The machinations over the FTA have slowed up those deliberations in the Joint Committee.125

More fundamentally, the EU made clear, as we noted in our last Report, that timely implementation of the Protocol is a prerequisite for any deal. This position was re-emphasised following the Government’s introduction of the UK Internal Market Bill, which included clauses on NI to GB trade and state aid that ran counter to the provisions of the Withdrawal Agreement.126 Mr Gove told us this was a “safety net” to protect Northern Irish business and citizens.127 In October, the EU launched infringement proceedings for breach of the Withdrawal Agreement, giving the UK a month to respond. This deadline was not met.

64.The Covid-19 pandemic has caused significant disruption across Northern Ireland, and this has reduced the capacity of business and government to prepare for the end of the transition period. Stephen Kelly, Chief Executive of Manufacturing NI, told us that “at best 9%” of businesses were ready for the end of the transition. He continued:

The business community [ … ] has been dealing with the coronavirus pandemic. That is sucking up all the capability, capacity and capital [ … ] Attentions are focused on a rescue mission in terms of their businesses and the jobs that depend upon them rather than focused on what comes on 1 January.128

He said that in his experience, the Government had also faced similar problems:

in the first half of the year, the people that we would have dealt with in terms of implementing the protocol have been moved off and on to coronavirus issues. That meant that we have lost two or three months at the beginning of this year and everyone is trying to play catch-up at this point in time.129

65.Protracted wrangling over how the Protocol should be interpreted has worsened these problems. Last month, Dr Denis McMahon, the civil servant responsible for implementing new Sanitary and phytosanitary checks at Northern Irish ports told an Assembly Committee that his department still lacked “clarity” about what procedures it would have to put in place. He said:

a range of issues from the beginning has had the potential to derail the work schedule necessary [ … ] for example, physical constraints at the sites, IT issues, the response of the market and transport considerations. Even without such issues, the deadline was almost impossible [ … ] for reasons outside the control of DAERA, none of us has been granted the time necessary to reflect fully the outcomes of the negotiations or to take forward this complex programme in the way that we would need to. [ … ] We have, therefore, had to make some very significant assumptions. That is the nature of the space that we are in. The unknowns are such that we cannot be ready for all eventualities.130

66.In the spring we wrote to Northern Ireland business groups about the implementation of the Protocol. They told us they needed clarity about its outworkings as soon as possible so their members had enough time to prepare for new trading conditions.131 Yet, last month, representatives of Northern Ireland retailers, manufacturers and farmers told us that many unanswered questions remained.132 Victor Chestnutt, President of the Ulster Farmers Union, said

the uncertainty is the thing that is exercising us the most [ … ] It feels like we are going forward with both hands tied behind our back and a blindfold on.133

67.Our witnesses identified several areas where they needed clarity:

Witnesses also expressed concerns about access to both UK and EU trade deals with third countries, continuing uncertainty about product labelling and VAT.141

68.Summarising our discussion, Mr Kelly said:

If there was one message for the Committee to understand today it is that Northern Ireland’s business community will not be ready for 1 January. Quite simply, it does not have the detail nor the time required. With all the will in the world, we will not get there in six weeks[ … ] The beginning of the year is going to be really ugly [ … ] We hope that the UK and the EU can show the flexibility required, knowing that we have made every effort that we can.142

Mr Connolly agreed, stressing that businesses needed some kind of implementation period to “to make sure that there are no balls in the air that fall down”.143

69.Last month Arlene Foster MLA and Michelle O’Neill MLA, Northern Ireland’s First and deputy First Minister, wrote to Vice President Maroš Šefčovič, the EU’s senior representative on the Joint Committee. They stated:

The Protocol includes a statement of determination “that the application of this Protocol should impact as little as possible on the everyday life of communities in both Ireland and Northern Ireland” [ … ] Hence we would ask you to recognise how important it is that the current consideration of the detail of how the Protocol will be applied takes our unique context into account.

[ … ] We look forward to urgent resolution of these issues, as businesses here need clarity as soon as possible on the precise detail of the changes that will affect them [ … ] Some of these issues will be easier to implement in the context of a free trade agreement, but urgent action to resolve the issues in the Protocol need not and should not be dependent on that process.144

70.Earlier this month, progress was made. Agreement in principle was reached on all matters concerning the Protocol, with the Government agreeing to remove those clauses from the UK Internal Market Bill to which the EU objected.145 Draft Joint Committee decisions were published, alongside several draft unilateral declarations.146 The Joint Committee formally adopted these decisions at its fifth meeting on 17 December 2020.147

71.Following the announcement, Mr Gove told the House:

This deal [removes] export declarations for Northern Ireland goods moving from Northern Ireland to Great Britain [ … ] Northern Ireland businesses selling to consumers or using goods in Northern Ireland will be free of all tariffs [ … .] whether we have a free trade agreement with the EU or not.

[ … ] we have been talking to traders, supermarkets in particular, to make sure that they are ready for any export health certificate requirements [ … ] they requested a grace period [ … ] We have managed to secure three months, which is sufficient time, we understand, to ensure that supermarkets are ready. On the chilled meat provision, it is the case that we have secured a six-month period during which there will be absolutely no change [ … ] we have time for reciprocal agreements between the UK and the EU on agrifood, which can be discussed in the months ahead.148

72.Later in the week, the Government published a command paper setting out how the Protocol would work, including details of a UK Trader Scheme—allowing authorised businesses to undertake that goods moving into Northern Ireland are “not at risk” of onward movement to the EU—and a Movement Assistance Scheme for agri-food traders.149 Government funding was also announced to help supermarkets and other businesses to adapt to the new trading environment.150

73.We welcome that formal agreement has been reached in the Joint Committee on how the Ireland/Northern Ireland Protocol will work in practice. We urge HMRC to intensify its working relations with the Irish Revenue Commissioners and other relevant authorities to ensure consistency in application of the agreed processes and avoid further disputes in future on their interpretation. The new arrangements will affect GB businesses and hauliers involved in moving goods, particularly agrifoods, to Northern Ireland, as well as the ports of Holyhead in Wales and Cairnryan in Scotland. The UK Government should work closely with the Devolved Governments and put contingencies in place to minimise traffic disruption near to the sites of the affected GB ports.

74.It has been disappointing that the Joint Committee’s decisions have been so long delayed; the citizens of Northern Ireland deserved to know far sooner the terms of trade within their own country. Even with the pragmatic solution the UK and EU have reached, the early months of the Protocol are likely to be difficult. Some challenges have been avoided and some postponed for a few months, but not all, and very little time remains for Northern Irish businesses and civil servants to meet them. To make things work will require continuing flexibility, creativity and generosity of spirit from all parties over the coming months and years.

118 For details of the democratic consent process, see: The Protocol on Ireland/Northern Ireland (Democratic Consent Process) (EU Exit) Regulations 2020 (SI 2020/1500)

119 For a detailed review of the Protocol, see: House of Lords, The Protocol on Ireland/Northern Ireland, Ninth Report of Session 2019–21, HL Paper 61.We intend to explore options for ongoing scrutiny of the Protocol in a future Report.

121 Colin Murray and Clare Rice (FRE0018) paras 33–36

122 The Joint Committee was also tasked with decisions about EU supervision of the Protocol’s implementation, agricultural subsidies and fisheries customs exemptions. The Protocol sets out several factors to be considered by the Joint Committee in defining an at risk good including the likelihood of it being subject to commercial processing, and the nature, value and destination of the good. For further discussion of at risk goods, see: UKTPO, Determining goods at risk, 14 January 2020; CER, How to implement the Northern Ireland Protocol, 14 May 2020.

123 Northern Ireland Retail Consortium (FRE0070)

124 Dr Katy Hayward and David Phinnemore (FRE0023)

126 United Kingdom Internal Market Bill,[Bill 234 (2019–21)]; Q787

131 FSB NI (FRE0016); FTA NI (FRE0015); Northern Ireland Retail Consortium (FRE0070)

134 Qq1005, 1017, 1020 & 1025–1028. For rates of physical and documentary EU SPS checks on third country agrifood goods, see: European Commission, Implementing Regulation (EU) 2019/2129, 25 November 2019. As we noted in paragraph 37, Mr Connolly told us that a supermarket load could require up to 400 different EHCs with each one costing between £56 and £200.

142 Qq1008 & 1023. We note that many of these questions were addressed, if not all conclusively answered, by representatives of Cabinet Office and HMRC before the Northern Ireland Affairs Committee, see: Oral evidence taken before the Northern Ireland Affairs Committee on 2 October 2020, HC (2019–21) 767

144 A copy of the letter was leaked to the broadcaster RTE: Letter from the First Minister and Deputy First Minister to the Vice President of the European Commission, 5 November 2020

146 HMG, “The Northern Ireland Protocol”, accessed 10 December 2020

148 HC Deb, 9 December 2020, cols 847–849 & 854

149 HMG, The Northern Ireland Protocol, CP346, 10 December 2020. Different provisions apply for goods subject to commercial processing although “a series of sectors will be exempt from the default commercial processing definition and therefore can qualify to be not considered “at risk”.

Published: 19 December 2020 Site information    Accessibility statement