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For Business in the Republic of Ireland

The main benefit of the Withdrawal Agreement is it provides a framework for a managed exit. Time will tell whether a sufficiently attractive FTA can be negotiated before the end of the Transition Period.

For many businesses operating in Ireland, the focus will be on the terms that emerge from the future FTA, not only in goods but also in services – the latter are not typically dealt with as comprehensively as goods in FTAs.

For businesses trading across the border with Northern Ireland, the Protocol is welcome in that it will allow for free movement of people (British and Irish nationals) and goods across the border with no tariffs, duties or paperwork, and this will apply irrespective of whether an FTA is agreed before the end of the transition period.

It will be interesting to see how the Withdrawal Agreement and the future FTA impact on the competitiveness of businesses based in Northern Ireland and the Republic of Ireland.

It will be important that the operation of these mechanisms do not have an impact on Ireland’s reputation or secure place in the Single Market – particularly should the UK diverge significantly from EU rules.

For Business in Northern Ireland

The Protocol relating to Northern Ireland is welcome in some respects. It brings certainty to Northern Ireland business that trading relationships with the EU (including ROI) and Great Britain will remain substantially unchanged until the end of the transition period. For those NI businesses which trade only across the island of Ireland, the Withdrawal Agreement will provide certainty of the status quo position (including unfettered access to the EU market for goods) even after the transition period expires and regardless of whether a free trade agreement (FTA) is reached between the UK and the EU.

The terms of the EU/UK FTA reached and the extent of any UK divergence from EU rules in the future will dictate the level of complexity for NI businesses as regards their ability to deal with and adhere to the application of the Protocol in practice, in particular those trading largely with GB. These arrangements could be costly for businesses and consideration will need to be given to possible derogations, relief measures and compensation.

The role of the joint committee will be of particular importance for Northern Ireland businesses and it is positive that the NI Assembly is back at work in order to input into the joint committee to ensure their concerns are addressed. It will also be important to obtain protections from the UK that exports from NI into the UK internal market will not be impacted by any future regulatory divergence between the UK and EU.

Key aspects of the Withdrawal Agreement include:

  • The maintenance of the Common Travel Area between Ireland and the UK.
  • Regulatory alignment on agricultural products and industrial goods (note that this does not extend to services).
  • NI should benefit from both membership of the EU’s Customs Union and membership of the UK’s Customs territory.
  • NI should remain part of the UK VAT area but EU VAT rules concerning goods will continue to apply in NI.
  • An all island Single Electricity Market will be maintained.

The above elements of the Withdrawal Agreement are designed to achieve frictionless trade on the island of Ireland and maintain North-South cooperation.

Transition

The transition period will run from the 31 January 2020 until 31 December 2020. During the transition period, the status quo will essentially be maintained, however the UK will have no role in EU decision making and will have to make a contribution to the EU’s budget.

The UK and EU may agree to a single extension to this transition period of up to one or two years and, if so, would need to do so before 1 July 2020. The decision will be made by a “joint committee” comprising representatives of the EU and the UK.

The “Joint Committee”

A “joint committee” will be established comprising representatives of the EU and the UK. The joint committee will play a key role in finalising issues included in the Protocol and indeed the Withdrawal Agreement more generally. For example, key issues like determining NI compliance with EU regulatory alignment, ensuring that the Protocol operates as intended, determining criteria for whether goods entering the UK will be at risk of entering the EU Customs Union and ensuring that checks on goods moving between GB and NI can be kept to a minimum. As such, the decisions of the joint committee will have a direct impact on issues relating to moving goods between GB and NI both in terms of logistics and paperwork.

Northern Ireland protocol

Consent

Within 2 months of the “initial period” (the period ending 4 years after the end of the transition period), and any subsequent period (each 4 year period thereafter where the Northern Ireland Protocol continues to apply), the UK will provide the opportunity for democratic consent in Northern Ireland – in line with the 1998 Agreement and respecting the roles of the Northern Ireland Executive and Assembly.

Remain

Where the Assembly votes by a majority to continue to apply the terms of the Protocol, it will continue to apply for a further 4 years. Where the decision has cross-community support, it will continue to apply for a further 8 years. Cross-community support means a majority, including a majority of unionist and nationalist members or a weighted majority of 60% of members, including at least 40% of each of the nationalist and unionist members.

Leave

If the Assembly votes to exit the Protocol, it will cease to apply 2 years after the end of the relevant 4 year period. In such a case the “joint committee” which includes representatives from the UK and the EU will address recommendations to the EU and the UK on necessary measures taking into account the obligations of the parties to the 1998 Agreement. Before doing so, they may seek an opinion from the institutions created by the 1998 Agreement.

Regulatory Alignment and the Single Market

The Northern Ireland Protocol effectively places Northern Ireland in the regulatory sphere of both the UK’s internal market (e.g. in relation to financial services) and the EU’s Single Market (e.g. in relation to Agricultural products and manufactured goods).

Article 12 of the Protocol on Northern Ireland provides that the UK will be responsible for ensuring the implementation of relevant EU law in Northern Ireland. EU representatives will have the right to be present during any activities of the UK authorities in relation to policing implementation and can request the UK authorities to carry out control measures on a case by case basis.

Ultimate oversight will rest with the Court of Justice of the European Union, though the UK may participate in the proceedings in the same way as a Member State.

Further information