Brexit: David Frost risks EU trade war over Northern Ireland protocol

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Our best hope is that Lord Frost is a fool rather than a madman.

The EU has made its big offer on the Northern Ireland Protocol. It’s broad and generous – a massive reduction in controls on goods stretching from Britain to Northern Ireland, a significant relaxation of rules on agricultural products, concessions on governance and medicine. But Frost’s response was inexplicably blunt.

He didn’t even have the grace to wait for the EU’s offer to be published before rejecting it. In a speech in Portugal on October 12, he blasted – citing as virtues the very things he has spent the past two years eradicating, including EU-UK cooperation, democratic consent in Northern Ireland and the peace process. It was as if we were looking at a new organism, which had somehow inhabited the body of the man once known as Lord Frost, and were furious at the things he had pursued before.

And then Frost said something with devastating implication. He demanded that the European Court of Justice be completely withdrawn from the protocol and warned that it could trigger Article 16, which allows parts of the agreement to be overridden. The former set a red line he knew the EU could never agree to and the latter threatened to blow up the protocol if he did not accept it.

One can only hope that this is an act of belligerent geopolitical theater. Because if it doesn’t, and Frost intends to bring it to fruition, we all have a lot of problems.

The best way to understand what’s going on is to remember what Brexit is. It is a return to the world of borders – for people, goods and services. The EU had virtually eradicated the borders on its territory by creating a customs union, which eliminated the need to verify the tariffs of goods, and a single market, which eliminated the need to verify their regulatory compliance. When Britain left the EU, those checks returned.

Boris Johnson and Lord Frost have decided to put the border in the Irish Sea. In October 2019, the Prime Minister wrote to Commission President Jean-Claude Juncker and proposed a “regulatory area for the whole of the island of Ireland”. The explanatory notes pointed out what this would entail: checks on goods going from Britain to Northern Ireland.

But the UK never met the conditions it set. It took the grace periods, which were supposed to give businesses time to adapt to the new rules, and unilaterally extended them. In response, the EU initiated two legal proceedings. One concerned a violation of Article 5 of the Withdrawal Agreement between the UK and the EU and the other concerned Article 258 of the TEU, for violation of the protocol itself.

These cases were put on hold while the EU tried to find solutions. But whenever the EU has offered concessions, the UK government has responded in a belligerent and aggressive manner.

We have now reached the culmination of this strategy, with the EU offering major concessions and the UK once again increasing its demands. Frost knows that the EU cannot take the European Court out of the equation. It is the body which decides on questions of Community law. He signed an agreement in which EU law would apply to trade in Northern Ireland. This is what is meant by a “regulatory area on all the islands of the island of Ireland”.

It is deeply embarrassing to see the government behave in this way: make a deal, attack those who raise objections, then backtrack on the deal, insist that it did not realize the objections and ask the government to do so. other partner to find solutions to a problem. that he himself created. But somewhere behind all this nonsense, there is a strategy.

Frost does one of two things. On the one hand, he could use British aggression as a negotiating tactic. Maybe he truly believes his antagonism triggers European concessions, or at least he can convince his target audience at home that it does.

It would be a bad way to behave, but it would be the better of the two options. Because the alternative is that he starts a trade war. If Frost triggers Article 16, things can quickly get very serious.

The problem is not really with the section 16 procedure itself. If Britain triggers, it can adopt “safeguard measures” and the EU can impose its own measures in response. But Brussels is cornered. He cannot move the border to the island of Ireland because that would endanger the peace process. And it cannot suddenly introduce retaliatory tariffs, because Article 16 is a fundamentally political process that remains primarily the responsibility of the UK-EU Joint Committee.

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That leaves him weaker options: oversight mechanisms, freezing a memorandum of understanding on financial services, suspending UK participation in the Horizon research program – nothing that threatens to alarm London unduly.

But Frost’s obsession with the European Court is changing the dynamic. If it mentions this in its Article 16 decision, the EU would characterize it as an illegitimate use of the mechanism. And then they can take legal action. This would be in addition to the two legal proceedings they have already initiated. And they’re not taking place under the restricted Article 16 process. They’re taking place under the Withdrawal Agreement, which is much stricter.

The key to what could happen is found in Article 178 (2) (b), which describes what happens if an arbitration proceeding takes place and a party does not accept the outcome. In this scenario, there may be a “suspension of obligations” in any other UK-EU agreement. This includes the Trade and Cooperation Agreement, which eliminated tariffs between the UK and the EU.

This means that the EU can start to retaliate against the UK by imposing tariffs on it. And suddenly Britain is in a trade war, with a much bigger and more powerful neighbor.

Frost might actually think that’s a pretty appealing political prospect. After all, it will take a few years for the tariff retaliation to kick in. The government can head into the next election with a useful enemy, who can be blamed for all the different crises it faces – labor shortages, skyrocketing energy prices, inflation, pig slaughter, batch. And what better enemy than the EU? What better way to tap into that old culture war Brexit juice that propelled them in the last election?

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But as appealing as it may be, there is a pretty big downside: it would pulverize the UK.

Look at the currency markets. In recent weeks, as inflation fears have grown, the pound has started to behave in rather unusual ways. Usually, a country’s currency rises when its central bank is expected to raise interest rates. This is what happened recently with the euro and the dollar. But that doesn’t happen with the pound sterling. The correlation seems to have broken down.

Correlations can collapse for all kinds of reasons, but most experts believe the crises in the UK are discouraging investment. In this context, the very last thing you want to do is create a new crisis with your biggest trading partner.

Frost would get the political result he wanted. But in return, Britain will face declining investment, currency volatility, international isolation, perpetual trade uncertainty and a trade war.

So of the two options, we had better pray that Frost would follow the first one. It is humiliating, disheartening, dishonorable and childish. But this is currently the best option we have.


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