The breakthrough deal on Northern Ireland’s trading arrangements heralds a reset in the often thorny relationship between the United Kingdom and the European Union — and could be the first step to repairing some of the damage Brexit has done to the UK economy.
Unveiled Monday by UK Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen, the “Windsor Framework” addresses problems with the Northern Ireland Protocol, a source of bitter disputes between Britain and the European Union ever since they finalized their divorce agreement three years ago.
The Protocol was designed to allow Northern Ireland, which is part of the United Kingdom, to remain within Europe’s huge market so that it could trade goods freely across its land border with the Republic of Ireland, an EU member state. Its effect, however, was to disrupt trade between Great Britain and Northern Ireland, and to infuriate unionist politicians in Belfast.
Trade experts say the new deal ends the threat of a UK-EU trade war and enhances goodwill between the two sides, which will deliver a boost to business confidence. It also paves the way for greater cooperation in other areas, which could unlock much-needed investment into the United Kingdom.
“I think it is an important moment,” said David Henig, UK director at the European Centre for International Political Economy, a think tank. While not immediately meaningful to trade, it marks “a new stage” in the relationship, “of saying, ‘we are back to the UK and EU trying to do more together,’” he told CNN.
A warmer relationship
The deal means a “stronger EU-UK relationship, standing as close partners, shoulder-to-shoulder, now and in the future,” Von der Leyen said Monday. It delivers “long-lasting solutions” that will work for the people and businesses of Northern Ireland, she added.
To avoid a politically sensitive hard border on the island of Ireland and risk the return of sectarian violence, the Northern Ireland Protocol created a de facto customs border in the Irish Sea between the island and mainland Britain.
But the new checks on goods moving between mainland Britain and Northern Ireland upended supply chains, raised costs for businesses and angered the pro-British Democratic Unionist Party, forcing the collapse of Northern Ireland’s devolved government last year.
Sunak and Von der Leyen are confident that the newly agreed changes will resolve these tensions.
For example, the deal creates a “green” lane that will allow goods from Britain destined for Northern Ireland to go through ports with minimal paperwork, checks and duties, while those traveling on to the Republic of Ireland will have to use a “red” lane.
It also allows the UK government to determine sales tax rates for businesses in Northern Ireland and gives the Northern Ireland government emergency powers to oppose new EU rules on some goods.
“Today’s agreement delivers smooth-flowing trade within the whole United Kingdom, protects Northern Ireland’s place in our union and safeguards sovereignty for the people of Northern Ireland,” Sunak said.
A boost to Britain
Beyond its importance to Northern Ireland, the deal eases the uncertainty Brexit created for Britain.
It lifts the threat of a “tit-for-tat trade war with the UK’s biggest market,” which has “badly held back” business investment, according to Kallum Pickering, a senior economist at Berenberg.
“While the UK will suffer a lasting impact on its growth potential following its decision to increase the barriers of trade with the EU, the major factor holding the UK economy back since the referendum has been uncertainty,” he wrote in a note Monday.
“If this comes to an end, we expect the UK’s healthy fundamentals — well-capitalized banks, cash-flush households and firms, and well-regulated markets — to reassert themselves.”
The UK needs all the help it can get. It’s the only major economy expected to shrink this year, according to the International Monetary Fund, and it has yet to regain its pre-pandemic size.
The new Northern Ireland deal opens the door to closer UK-EU cooperation on financial services, energy, immigration and scientific research, according to experts.
In an immediate win for British universities, the United Kingdom will now be allowed to join Horizon Europe, a key EU funding program for research and innovation with a budget of €95.5 billion ($101 billion).
This is a “very clear prize,” and not only for researchers and academics, said L. Alan Winters, co-director of the Centre for Inclusive Trade Policy at the University of Sussex.
It “locks Britain back in to the scientific research community in Europe… Research and development is a big part of the modern economy,” he told CNN.
Strengthening US ties
The deal could also help Britain forge closer ties with the United States, which under President Joe Biden has taken a keen interest in the Northern Ireland issue.
Biden, who has Irish heritage, has in the past warned against making Northern Ireland’s peace deal — the Good Friday Agreement — a “casualty of Brexit.” Democratic lawmakers in the United States have also criticized attempts by the UK government under former Prime Minister Boris Johnson to rewrite and even override the Protocol.
Biden welcomed the agreement Monday.
“I am confident the people and businesses of Northern Ireland will be able to take full advantage of the economic opportunities created by this stability and certainty, and the United States stands ready to support the region’s vast economic potential,” he said in a statement.
Marjorie A. Chorlins, senior vice president for Europe at the US Chamber of Commerce, added that the deal created a “solid foundation for more effective partnership” between the United States and Europe.
For any UK government, by far the biggest economic victory for Britain would be a free trade deal with the United States. While that still looks a long shot, given that Biden has little appetite for international trade treaties, the Northern Ireland deal removes at least one obstacle.
“It will really improve the tone of relations with the US,” said Henig of the European Centre for International Political Economy, adding that it could reinvigorate regular dialogue between the two parties on their future trade relationship.
A step forward
In many ways, the deal on Northern Ireland is just the first step toward repairing the damage Brexit has done to Britain’s economy and its international reputation.
“You need to address the Protocol before you do anything else,” said Anna Jerzewska, the founder of international trade consultancy Trade & Borders.
Although the new deal doesn’t change burdensome UK-EU trading arrangements, it provides a stronger and more stable base from which the United Kingdom can navigate its post-Brexit future, even if the road ahead still looks perilous.
“There’s still a lot of uncertainty about what the ultimate steady-state relationship between the UK and EU is going to be, particularly how much the UK is going to diverge from EU regulations,” said John Springford, deputy director of the Centre for European Reform, a think tank.
That could trigger fresh conflicts in future, but resolution on Northern Ireland increases the likelihood that these will be settled in a way that involves “more compromise and less confrontation,” he said.
