The UK government on June 28 won a vote in the House of Commons to scrap the Northern Ireland protocol – despite heated opposition from the European Commission, whose vice-president Maroš Šefčovič called the decision a “breach of international law”.
The protocol, agreed in 2019, means that goods shipped from Great Britain to Northern Ireland are subject to checks and controls at Northern Irish ports, rather than when crossing from Northern Ireland into the Republic of Ireland. In this way, the spirit of the Good Friday Agreement, which prohibits a hard border on the island of Ireland, is respected, while still ensuring the integrity of the European Union’s (EU) single market for goods.
However, the UK government argues that the protocol has resulted in an “untenable situation where people in Northern Ireland are treated differently to the rest of the United Kingdom”. Only one-sixth of goods that move into Northern Ireland are likely to enter the EU market, yet all exports are subject to customs declarations and potential physical checks, the government says.
Its alternative proposal, and one that amounts to a unilateral amendment to international law, would see the creation of red lanes and green lanes for goods imported from Great Britain into Northern Ireland. The green lane would be for goods that will remain in Northern Ireland, with the red lane for goods that will be moved into the EU. Red lane goods would be subject to checks, controls and customs procedures, underpinned by strict penalties and robust data sharing, the government says.
While the draft bill has passed its first hurdle, with MPs voting 295 to 221 in favour, it now has to proceed to the Committee stage, where each clause and any proposals for change may be debated.
In a statement released when the draft legislation was published earlier this month, Richard Burge, chief executive of the London Chamber of Commerce and Industry, said the UK government’s action “risks significant harm to businesses in London and right across the whole of the UK”.
Speaking at the Society of Motor Manufacturers and Traders (SMMT) summit yesterday, Mike Hawes, SMMT chief executive, said that the upheaval around the Northern Ireland protocol was impacting business activity, saying: “Investment needs stability. It needs trust not uncertainty.”
As exporters grapple with the threat of further trade disruption with the EU, Chris Southworth, secretary general of the UK chapter of the International Chamber of Commerce (ICC), outlines to GTR a number of steps that could be taken to ease friction when moving goods over the Irish Sea.
GTR: What are you hearing from business currently about the uncertainty being caused by the debate over the Northern Ireland protocol?
Southworth: This is an issue that we’ve got to take head on. We’ve clearly got a problem here. The ongoing political situation is unhelpful to businesses who need certainty so that they can plan, invest and get on with doing business. It sounds counter-intuitive to treat the problem as we would dealing with another country but that’s how we need to approach it because in reality we have an EU border between two parts of the UK.
Ireland is the UK’s sixth-largest trading partner, while at a sub-national level, 60% of Northern Ireland’s imports come from Great Britain. Given the makeup of these trade flows, things like animal welfare and phytosanitary checks are creating real problems, and the processing of documentation across that border is clearly problematic – indeed, in the first month of post-Brexit trading arrangements, exports from Great Britain to Ireland plunged by 65%. Businesses need to be able to get on with the practical realities of making this work. We have a border in the Irish Sea, for better or for worse, so what we need to do is reduce the friction on that border.
GTR: What can be done to reduce friction on the UK-Ireland border?
Southworth: We should be looking at this as an opportunity to create the best border in the world, and we can achieve this by operating on fully paperless trade. Let’s be pragmatic here: we can’t remove the border but we can make cross-border transactions cheaper, faster and simpler, which can help to boost trade. What’s more, we have the solutions and expertise to make this a reality.
There are five steps: the first is law reform in Ireland to allow for commercial trade documents to be handled digitally and to align the legal system there to the United Nations Commission on International Trade Law’s (UNCITRAL) Model Law on Electronic Transferable Records (MLETR). The EU has already committed to doing this within the G7, so we’re not asking for anything new here; we’re just asking for it to be implemented. On the UK side, this will be achieved by the Electronic Trade Documents bill.
The next step is to align all processes and systems to the World Trade Organization/ICC Standards Toolkit. This will enable data and trade information to flow seamlessly across the border between both governments and industry. The third step involves the running of cross-border pilots to test that all the systems work and interoperate, while the fourth would see the provision of digital standards, digital identities and electronic documents training for those SMEs that need it.
The fifth and final step is to go live on a fully digitalised paperless border. This would remove all paper and inefficiency, cut transaction costs by 80%, cut the trade finance gap by 50%, reduce cross-border compliance times from weeks to minutes and increase export growth. This is all possible and we could do it quickly if there is the political will to help us and we are given the space to work.
GTR: How can industry collaborate to achieve this?
Southworth: You can’t solve a problem like this by just having two customs departments talking to each other as customs is only one part of the trade system. We know this because despite all of the investment and collaboration across customs departments in the EU, less than 1% of trade transaction documents are digitalised. That’s why it’s so important to work across the supply chain with all stakeholders, and that’s exactly what we’re doing through the Centre for Digital Trade and Innovation (C4DTI).
Off the back of the UK-Singapore digital economy agreement, the C4DTI is currently launching pilots to test interoperable systems over the course of the summer and autumn. We can do the same with Northern Ireland, and this could really become the model for a digital border everywhere in the world, because we need to do this everywhere, although we’ve got a burning platform here. What this means is that we need to roll up our sleeves, decouple business from the politics, and let the experts come in. We should be accelerating action on this border, because it’s just so urgent.
If this can be done, then this border between the UK and the EU can be the smartest in the world – and it can be a model for others.