Brexit unrest radically changes trade on the island of Ireland

Brexit unrest radically changes trade on the island of Ireland

The recently announced bill by the UK government, which will remove some aspects of the Northern Ireland protocol, casts a shadow over the state of trade.

Paul Vera | Afp | Getty Images

DUBLIN — With the political uncertainty and turmoil associated with Brexit, the movement of goods on the island of Ireland is being transformed and accelerated significantly.

Since the UK officially left the EU in January 2020, companies have changed their stance, rethinking the roads they drive on and the ports they use.

This was driven by the Northern Ireland Protocol, an arrangement that allows a UK province to remain on the EU single market but requires goods coming from the rest of the country (England, Scotland and Wales) to be inspected. The EU single market seeks to guarantee the free movement of goods, capital, services and labor within the bloc.

The recent shift can be seen in the state of trade between the Republic of Ireland, which is part of the EU, and Northern Ireland.

In the first quarter of 2022, imports from Northern Ireland were up 34% year-on-year to €294m ($310m) while exports to the north were up 49% to €368m, according to data from the Irish Central Statistics Office.

“It was clear that Irish buyers were leaving the UK. [English, Scottish and Welsh] suppliers and continue to trade with the UK by buying in Belfast rather than Birmingham,” Stephen Kelly, chief executive of Manufacturing NI, which represents the industry in the region, told CNBC.

This manifests itself in the movement of goods such as food, pharmaceuticals and manufacturing materials across the land border of two jurisdictions, crossing road networks, as well as to ports for onward movement.

Ian Talbot, chief executive of Chambers Ireland Business Group, told CNBC that the movement in trade is the result of a significant adjustment in Irish and Northern Irish business in the wake of the Brexit turmoil.

“There are no catastrophic failures anywhere. There are no idle ports, there are no idle roads. Trade is going on and in large quantities,” he added, referring to the current agreement facilitated by the protocol.

However, he said there is still a cautionary note about differences in trade and the movement of goods on the island of Ireland, as most of these changes have occurred amid the disruption of Covid-19 in 2020 and 2021.

“With the impact of Covid and the lockdowns, it’s very hard to figure it all out when you compare. What year are you comparing this to?

Driving directions

From the beginning of 2021 there has been a rapid increase in the number of cargo ships sailing from Irish ports such as Dublin and Roslare in the southeast of the country to ports in France and Spain to avoid bureaucratic delays when crossing the border through the UK.

This marks another shift in the profile of freight transport on the island of Ireland, with companies moving away from the UK’s traditional “land bridge” where trucks cross the Irish Sea to the UK and travel across the country to the Port of Dover and beyond. to France for continental deliveries.

“Northern Irish companies can also easily access these routes without having to go to the UK east coast,” Talbot said.

But the port of Belfast, too, felt the echoes. Belfast Harbor’s operating profit rose 13% to £34m in 2021, with over 25m metric tons of cargo passing through the port.

In its annual report, the harbor cited the grace period for implementing the Northern Ireland Protocol as a factor in increasing levels of trade. But he acknowledged that “risks and uncertainties” remain with the end of the grace period. The UK has not yet introduced checks on goods coming from Northern Ireland.

“The ultimate impact of Brexit and the NI protocol on overall economic activity, as well as their concomitant impact on trade, remains difficult to predict,” the report says.

Protocol account

UK government newly announced bill the abolition of certain aspects of the Northern Ireland protocol casts a long shadow over the state of trade and the movement of goods to and from the island of Ireland. EU files lawsuit over plans to scrap part of dealand the impeding departure of UK Prime Minister Boris Johnson has also added uncertainty – though would-be successors Rishi Sunak and Liz Truss are likely to go ahead with the plans.

The bill, as proposed, would create green and red lanes for goods moving into or out of Northern Ireland. The green stripe will be for goods destined for Northern Ireland only and will not be subject to checks, while the red stripe will apply checks to goods that end up going to the Republic of Ireland or other EU countries.

Kelly said some elements of the bill, such as the green stripe, “are not offensive,” but doubts still remain about how practical it would be to implement.

These doubts will again raise trade concerns in Northern Ireland, similar to those raised when a no-deal Brexit is possible.

“Potentially we will be in a worse position than no deal if the UK and the EU do not come to an agreement in the coming weeks and months, it will not just be no deal, but no deal plus a trade war,” he said.

“This will cause huge damage not only to Northern Ireland, but to the whole of the UK and the EU, which will be a double whammy for us.”

This is coupled with rising inflation and the war in Ukraine, which has blocked supply chains in the wider European context.

Kelly said there are many moving parts in the trade, but the unique situation in Northern Ireland will not change.

“Northern Ireland will not physically cease to be the border between the UK and the EU,” he said. “Our geography will not change.”

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