Could the ongoing Brexit conflict around Northern Ireland suddenly result in distorted trade relations and perhaps even sanctions? And what does that mean for companies that trade across that border?
Even before the Brexit referendum, People pointed to the complexity surrounding Northern Ireland, both in terms of trade and keeping the peace. Northern Ireland played a leading role in the exit negotiations and has not disappeared now, almost two years after the deal was reached.
Officially, the core of the continuing problem is the so-called Northern Ireland Protocol, which regulates that there is actually a border through the Irish Sea. A border, nicknamed Boris Border, that causes much trade to and from the island of Ireland to completely bypass the island of Great Britain. Secretly, is it really the role of the European Court of Justice, which, through specific parts of the treaty with regard to Northern Ireland, there is a bit of a role in the British government. You won’t hear about the man and woman on Northern Irish Street, this is especially hot for a small group of Brexiteers in London.
Moreover, a ‘ war ‘ with the EU can be a great distraction for the British government, which is currently suffering corruption scandals and fuss over dubious side jobs of politicians.
From peat fire to forest fire, the British government is now alluding to the use of Article 16, a kind of emergency brake in the existing treaty. The question is whether it is a legitimate use, but that is a matter for lawyers and is of little use to us. For entrepreneurs who trade across borders, the practical consequences are far more important than the procedures. The greatest danger is an accidental trade war, because the British government thinks it will be able to force concessions.
The British probably want to secretly challenge the EU to re-raise the border between the North and south of Ireland to guard the EU’s external border. The EU member states cannot and will not just drop a fellow member state like Ireland and suddenly introduce import controls from an EU member state. That is why I expect a swift and strong response to any attempt by the United Kingdom to move in this direction.
There is a lot of pressure to put on the British government thanks to very specific targeting of some industries. During the Airbus-Boeing trade dispute between the EU and the US, the EU raised import duties on Levi’s jeans, Harley-Davidson engines and Bourbon whiskey. That seems very random until you see who the American politicians were from whose area those products come from and what their role was in the decision-making process.
A logical candidate for the EU would perhaps be the British car industry. For example, seventy percent of all Nissans produced in the UK are destined for export. And let the Nissan factories just stand in areas where much of the new government support comes from. Conversely, the UK could respond with increases for cars, cheese and wine, for example.
Now you do not have to introduce these measures at all, sometimes threatening them is enough. I therefore think that we will very soon see lists of products that the EU sees as targets.
Furthermore, several EU member states could make border traffic more difficult, especially France, where a large proportion of all British cargo has to pass through. Instead of random customs controls, perhaps 100 percent controls. If you want to make it annoying, you can make it very annoying very quickly. The players in a trade war are usually governments. One government wants to strike at the other government in a very targeted and specific way. The victims are businesses and consumers. They often have little to say about it but all the more to notice.
If you do business with the UK, I fear the coming weeks will be very similar to 2019. That peat fire is not quenched and can become a forest fire again.