The text of the new agreement between the UKG and EU was finally published on 27 February 2023, outlining new trading arrangements for Northern Ireland which aim to help correct some of the friction and challenges caused by the Northern Ireland Protocol.
The ‘Windsor Framework’ and accompanying legal documents were published by the UK Government on Monday afternoon, with the EU publishing their own factsheet on the parameters of the deal shortly afterwards.
Whilst it is clear that Northern Ireland will continue to follow EU rules for trade, creating some challenges if / when GB diverges from the EU, the Prime Minister was keen to emphasise how this new agreement would effectively remove or significantly soften the Irish Sea border by introducing new green and red lanes for goods, introduce a new mechanism at Stormont to allow locally elected MLAs a say on any new regulations and restore decision making on issues such as VAT, State Aid and taxation to London.
On the face of it there are many issues and solutions which have been agreed that were previously dismissed as unworkable, including monitoring and surveillance of movements between Northern Ireland and the Republic of Ireland along the border.
As ever, although there seems to be a range of improvements on the protocol, the ‘devil is in the detail’, and it will inevitably take some time to fully digest and understand the impact of this deal and how it will effect various sectors and supply chains.
Red and Green Lanes
The concept of red and green lanes has been floated for some time now, and is generally well understood as an attempt to remove frictions and restore the integrity of the UK Single Market.
Under the deal, the green lane is for goods that are destined for Northern Ireland and will remain there. Companies will be required to register as trusted traders and there will be a significant reduction in the volume and nature of declarations required in order to move goods through the lane.
There will be particular attention on how small businesses are equipped to deal with this, and whether the range of goods available to NI customers is restored to the levels experienced pre-protocol.
The EU has suggested that the green lane will reduce the number of data fields for declaration with each consignment from 80 to around 21, which whilst demonstrably better, is not quite the frictionless movement of goods suggested by the UKG yesterday.
Packages sent from GB to Northern Ireland (to friends and families etc) will no longer be subject to customs paperwork, and online shopping businesses using approved parcel carriers will have simplified customs procedures too (which falls some way short of what the UKG was aiming for).
The red lane is for goods that are destined for the European Union via the Republic of Ireland, and these goods will be subject to the full range of customs and SPS checks. Some exporting businesses in NI have already expressed concerns that this may add costs and process compared to what they have experienced previously.
Labelling
The EU has said that it will accept UK public health standards for agri food products, although they will be required to carry a ‘not for EU label’, and a range of plants previously unable to travel from GB to NI will no longer be banned as they were under the protocol.
The EU has however said that European Union rules on plant and animal health will still apply.
UKG and the EU has come to a data sharing agreement meaning that real time data on trade flows will be monitored for any fraud or abuse of the red / green system.
State Aid
No 10 sources over the past week had been briefing journalists that state aid decisions had been returned to London, which would unpick the existing obligation under Art 10 of the Protocol that any UK subsidy decision that might have an impact on NI goods trade must be referred to the EU.
State Aid is a particularly complex subject area, and it will take some time to fully understand the implications of any changes made, but the UKG claim that all but the largest subsidies have been removed from EU scope.
VAT
The Protocol had prevented domestic VAT rules being applied across the whole of the UK, meaning that some positive changes for consumers in GB were not realised by people in Northern Ireland.
Using the example of a pint of beer, the UKG now claims that this has been corrected, and that any cuts to duties will now equally apply in NI, although it would appear that this change would only cover goods which are for ‘immediate consumption’.
The one caveat is that at present, save for permanent objects such as solar panels, the UK cannot undercut minimum EU VAT rates. An agreed list is to be published in due course on goods and what approach can or will be taken.
The Stormont Brake
The ‘democratic deficit’, where Northern Ireland was required to adopt EU law, has been a point of contention for many locally elected representatives. The ‘solution’ in the Windsor Framework provides for an ‘emergency brake’ to be applied to any new or updated EU law, triggered when 30 members, from two or more parties in the Northern Ireland Assembly, sign a petition.
This procedure would effectively pause the introduction of any new regulation, sending it to be discussed by a joint committee of delegates from the UKG and EU in an attempt to resolve the issue.
If the UKG decide not to implement the new measure, then the EU can take remedial measures.
Although the PM put much emphasis on this new mechanism, the effect of the ‘brake’ may be of limited value given that UKG can choose to override the Assembly objections, particularly if concerned that actions could escalate and result in a trade war.
Much focus in the coming days will be on precisely which circumstances such a ‘brake’ could be used, who makes the call on its admissibility and what happens if the UKG comes into conflict with the Northern Ireland Assembly.
Role of the ECJ
The deal does not end the jurisdiction of the European Court of Justice over Northern Ireland, nor has it created a new dispute resolution mechanism as had been mooted in recent weeks. The new green and red lane system should in theory dramatically reduce the risk of ECJ interference however.
Steel Tariffs
The Windsor Framework has brought about an agreement on the movement of the most sensitive categories of steel subject to EU tariff rate quotas (TRQs) from Great Britain to Northern Ireland.
Northern Ireland companies will be able to use the EU’s tariff rate quotas for steel and be able to access UK-origin steel in these categories.
Medicines
Changes to the rules on medicines have been welcomed by local pharmaceutical companies, but there is no long term resolution to the problem of veterinary medicines included in the deal.
