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Brexit & Beyond newsletter

27 November 2023

Welcome to the 27 November 2023 Brexit & Beyond newsletter

On Wednesday, the Secretary of State for Northern Ireland took questions in the Commons. The European Parliament has passed a report on the EU-UK Trade and Cooperation Agreement, which includes recommendations relating to NI and the Windsor Framework. The Lords Sub-Committee on the Windsor Framework heard evidence from businesses and the farming sector about regulatory divergence. The Commons European Scrutiny Committee has published its latest report assessing EU legal proposals and their implications for NI.

 

Question Time in the Commons

On 22 November, Secretary of State for Northern Ireland Chris Heaton-Harris took questions in the Commons. He stated that more than 7,000 businesses are now registered to use the UK Internal Market Scheme, 3,000 of which did not use previous schemes. The Minister was asked by Conservative MP Jonathan Gullis if he accepts that “for as long as there are customs declarations, physical searches and ID checks for businesses moving goods from Great Britain into Northern Ireland, even in the green lane, the Prime Minister’s view that there is no “sense of border in the Irish sea” will ring hollow?” Heaton-Harris said, “I do not accept that. When we agreed to the Windsor Framework, we committed to a certain number of EU laws being maintained in Northern Ireland, which has been of economic benefit to Northern Ireland even up to this point and will continue to be in future. Pretty much everybody involved in movements across the Irish sea—the businesses involved, including the new businesses using them—believe that they are simple and very straightforward.”

 DUP leader Sir Jeffrey Donaldson speaking in the House of Commons

DUP leader Sir Jeffrey Donaldson speaking in the House of Commons | Source: UK Parliament

DUP leader Sir Jeffrey Donaldson asked if the Secretary of State will work “to ensure that, where goods are moving from Great Britain to Northern Ireland, they are not subject to EU customs processes that are neither necessary nor fair and right? Save for reasons of animal health and the risk of smuggling, there should not be checks on those goods.” Heaton-Harris said he “very much enjoy[s] working with [Donaldson] on a regular basis to try to achieve the aims he has set out. We have so far gone a long way in this space with the Windsor Framework, but I look forward to continued engagement with him in the next few days, because we do need to find a resolution to these issues that also means we can re-form Stormont and deal with the other domestic issues in Northern Ireland.”

 

View from the European Parliament on EU-UK relations

On Thursday 23 November, the European Parliament voted to pass a report on the implementation of the EU-UK Trade and Cooperation Agreement (TCA) (512 votes for, 9 against, 42 abstentions). MEPs welcome the Windsor Framework and the report “underlines the specific situation of Northern Ireland, thanks to its unique position with access to both the EU and UK internal markets”. It calls for the “swift implementation” of the Windsor Framework “in order to ensure lasting certainty and predictability for businesses and people in Northern Ireland”, and stresses that the EU “has reacted quickly to implement the Windsor Framework and now expects the UK to promptly implement its part”.

The European Parliament also emphasises the “need for effective mechanisms to ensure compliance with regulatory requirements in order to provide legal certainty for both businesses, especially SMEs, and citizens, enhance consumer protection and guarantee a level playing field”, suggesting the establishment of a ‘one-stop shop’ in Belfast, “where people and businesses could get the assistance they need to navigate the new arrangements set out in the Windsor Framework.”

The European Parliament is “deeply concerned” by the UK Government’s Retained EU Law Act, arguing that it creates uncertainty for businesses and stakeholders in the EU and UK and “could remove existing rights derived from EU law from workers in the UK”. It calls on the Commission to continue to closely monitor regulatory divergences in the UK, which “could pose a risk of non-compliance with the TCA, notably in areas relevant to the level playing field such as subsidy control, taxation, labour and social standards, the environment and the climate.”

 

Regulatory divergence: views from businesses

On 22 November, the Lords Sub-Committee on the Windsor Framework heard evidence from business representatives about the impact of regulatory divergence and the UK Government’s management of this. Anjulie Patel, ADS Aerospace Programme Manager, said the aerospace sector is keen to foster regulatory alignment wherever possible. She highlighted current issues including the administrative burden, lack of access to the green lane (established in the Windsor Framework to ease trade in goods GB-NI), and the risk of future divergence. She mentioned differences between EU and UK REACH (regulation of chemicals) and a future risk regarding alignment between the UK Civil Aviation Authority and EU Aviation Safety Agency: “any differences there [in aviation safety regulations] will cause a risk and friction between movements between GB and Northern Ireland,” she explained. Patel said aerospace components cannot use the green lane, because of the trader’s turnover, or because components are deemed ‘at risk’ of entering the EU and are subject to processing.

Chief Executive of Manufacturing NI Stephen Kelly said three years into the operation of the Protocol and then the Windsor Framework (WF), issues around regulatory divergence “have not emerged at this point”. He said EU law updates often relate to new information, for example carcinogenic material. The UK may decide not to change its laws immediately but “the reality is both the lawyers and insurers would insist that it would happen because of the risk these items would cause potentially to UK consumers”. He said regulatory divergence and NI’s alignment with EU law on goods is “theoretically is an issue”, but the people operating this day to day “have not flagged this as being a massive issue for them to-date”.

Nichola Mallon, Head of Trade and Devolution at Logistics UK said the new trading requirements have reduced their flexibility, and added costs. She highlighted the example of the food additive titanium dioxide: its removal was a real concern for retailers given it appears in so many products, but this has been resolved by the WF as goods moving via the green lane don’t need to comply with EU public health or consumer protection standards. She called for clarity regarding the movement of ‘rest of world’ goods via GB to NI, for example, raw material from New Zealand cannot move GB-NI unless further processed. She noted that whether the UK will align with the EU on certain standards will affect whether certain products can come to NI. She highlighted that, as things stand, the Trader Support Service (TSS) will end in December 2024, and this will be at a cost to smaller businesses. She added that for hauliers, the “big test” will be in October 2024 when the full green lane is implemented.

Stephen Kelly noted commitments from the European Commission to provide impact assessments (on new EU legal proposals, which set out the implications for Northern Ireland), and to involve stakeholders in early conversations about these proposals. He said at this point, they haven’t seen any of that detail or these structures operating to any great extent. Mallon said her understanding is that the Special Body on Goods hasn’t met yet. She said industry should have “a clear path for input”, and be provided with enough information about the legislation. The Office of the Internal Market (OIM) is tasked with monitoring any impacts for Northern Ireland arising from relevant future regulatory changes. Kelly suggested there is an opportunity for this OIM team to be bolstered, and suggested it could be based in Northern Ireland. On the Stormont Brake he said business would prefer “much more stability” in what our longer-term trading relationship would be. He said the “risk of Stormont intervening and causing some disruption in the middle of that isn’t necessarily appealing.” He added, “it would be really interesting to find out how they [the NI public figures who have asked for NI to have a voice] see the Stormont Brake operating in practice”.

Kelly said the improvement in the EU-UK relationship has led to a more pragmatism, giving the example of the EU’s change to tariff rate quotas following the invasion of Ukraine, which was resolved in the WF. The EU have announced that from 1 January a similar approach will be taken to five additional types of steel. Kelly said they have done that because the relationship is better and NI “doesn’t present a backdoor risk”.  He noted the Department for the Economy and University of Sussex Trade Policy Observatory’s work looking at NI’s dual market access and where regulation has its biggest impact and regulatory intensity, saying they are identifying “sweet spots” for industries and products in NI.

Kelly also highlighted areas not covered by the Windsor Framework, which have led to divergence. For example, NI companies cannot be the lead contractor in EU public procurement. The Common Travel Area doesn’t apply to people from third countries to cross the border for work. He referenced the mapping exercise, in which the EU and UK identified around 145 areas of North-South cooperation, and the role of EU membership. He said it would be useful for the EU and UK to re-run that exercise to see that those areas can continue.

Kelly told the committee that businesses had started asking questions about the EU Carbon Border Adjustment Mechanism (CBAM), which introduced mandatory reporting requirements from 1 October. He said, after much effort and everyone “going round in circles”, he eventually got an answer from the EU that NI companies are exempt from the reporting requirements in the transition period. He stated that NI is “stuck in the middle”, and while it is in an “advantageous position at this time…it won’t always be like that”.

Farming and regulatory divergence

Alexander Kinnear, Parliamentary Officer at the Ulster Farmers Union (UFU) also gave evidence to the committee. He said they approach these things with a “glass half full...[but] we are running out of glasses”. He stated, “divergence is here for the agri-food sector in NI…and has so far been negative”.

 Alexander Kinnear, Parliamentary Officer at the Ulster Farmers Union (UFU)

Alexander Kinnear, Parliamentary Officer at the Ulster Farmers Union (UFU) | Source: UK Parliament

Kinnear said regulatory divergence is a “very worrying prospect” and highlighted regulations of particular concern: the EU’s renewal of glyphosate’s approval, regulations on animal welfare, deforestation, the Carbon Border Adjustment Mechanism, animal health, and the breakfast directives. He explained that NI arable farmers use glyphosate for pre-harvest desiccation to ensure they can harvest at one time. The EU’s proposal (which will apply in NI) prohibits the use for pre-harvest and Kinnear said the viability of cereal sector in NI will come into question. He told peers that some EU member states, including Ireland, are seeking derogations.

Another concern is EU regulations on organic eggs which are more stringent than those in the UK (requiring 100% rather than 95% organic feed), which essentially risks the viability of the sector which cannot compete which GB farmers. The industry in NI supplies about 15% of GB organic eggs and is probably worth around £5million. Kinnear also commented on issues around the UK and EU’s regulation of gene edited plants (more on this issue below), NI’s access to seed varieties, and moving agricultural machinery GB-NI.

Kinnear described divergence as “like an assassin, we don’t know when it’s going to happen”, adding that a lot of information is received second-hand, rather than from official channels. Kinnear remarked that divergence makes the case for a SPS veterinary agreement “very clear”.

Kinnear called the new agri-food subgroup, established in the WF a “closed shop”, adding that they don’t know what they are going to discuss and “transparency…is key”. He called for official channels, where they can provide information and get information, remarking that currently “those pathways are far from clear.” Kinnear said ideally issues would be “thrashed out before we even get to the Stormont Brake stage, because a policy that is affected by divergence needs an answer before slamming a brake on it…prevention is better than cure.” He emphasised that the farming sector wants to trade in the EU single market.

Kinnear told the committee that the onus is on the UK Government to respond to the implications of divergence and it is their responsibility “to now deliver a mechanism to properly deal with divergence, and not only to listen on divergence, but to act on it and mitigate it”. He described it “nearly like a game of pass the parcel. The parcel is representing responsibility here; the only thing is, when the music stops, nobody wants to be the one holding the parcel”.

 

EU legislative proposals and Northern Ireland

The Commons European Scrutiny Committee has published its latest report scrutinising EU regulations. A proposed EU Regulation to replace the Packaging and Packaging Waste Directive would apply in Northern Ireland, and the Government is assessing under which procedure (as a new law under Article 13.4 of the WF, or an amended EU law under Article 13.3) it would apply. The reports sets out the differences in EU and UK policy approaches in this area and says its adoption could “lead to significant divergence between GB and NI, which in turn could provide some challenges for the operation of the UK internal market.” It encourages the Government to engage the Common Framework on Resources and Waste to identify areas where “intra-UK divergence would be problematic”. The committee further notes, “As UK exporters to the EU will have to apply these new rules when placing products on the EU market, we also think it necessary for the Government to consider what effect this may have on stakeholders’ preferences for the future direction of UK legislation in this area.”

The Committee highlights EU proposals on gene editing, as covered in our previous newsletter. The European Commission has published an animation explaining its proposals on new genomic techniques. England has already updated its laws on GMOs and Precision Breeding. The Committee states, “Working out the differences between the two [EU and UK] approaches will be critical to understanding the differences between what an English producer can place on the NI market and what a NI producer can place on the same market. It may also have implications for any changes that Scotland and Wales may choose to make.” It notes that negotiations within the EU institutions on the legislation “are likely to be intense and that changes to the text proposed by the Commission are likely”. The committee also asks whether the Government is engaging with the EU on the proposal through new mechanisms in the Windsor Framework.

The EU’s proposals on construction products would apply in NI. The UK is also preparing regulatory reform in this area. The Committee notes the Government’s intention that “qualifying NI goods” can be placed on the GB market with only the “CE” mark (the EU’s product safety mark) for as long as the Windsor Framework is in effect; and under the Internal Market Act this would normally still be permitted even there is substantive divergence between the EU rules applying in NI and the rest of the UK’s rules. It states, “Over time, the UKCA and CE marks may then also come to denote different things in relation to the same construction product.” The committee is concerned about the “inherent complexity” of a system where EU and UK law apply in parallel.

The Committee has also considered the implications for Northern Ireland of EU proposals on customs reform, the establishment of a VAT ‘one stop shop', and rules on material used for the reproduction of plants and for tree planting.

 

Other news

  • The Department for Agriculture, Environment and Rural Affairs is holding a consultation on the new EU Batteries regulation, which will apply from 18 February 2024. The EU view is that it will apply in NI under the Windsor Framework. The findings “will be anonymously shared directly with UK Government, to ensure they are fully aware of potential implications for businesses in Northern Ireland.”
  • The Commons European Scrutiny committee has launched an inquiry on processes for reforming retained EU law. The Committee welcomes evidence, which can be submitted via the Committee’s website by 5 February 2024.
  • The British-Irish Council held its 40th summit meeting, hosted by the Irish Government on 24 November.
  • In his first intervention in the House of Lords, Foreign Secretary David Cameron spoke on the Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill. He said, “The deal offers possibilities for our whole country, from distilleries in Dorset to AI pioneers in Wales, car part manufacturers in Northern Ireland and digital forensic experts in Scotland. It is an investment in a brighter future—and I should know, because I was the future once.”
  • The EU-UK Specialised Committee on Citizens Rights is meeting on 4 December 2023. EU and UK representatives will hear from civil society organisations about issues encountered by EU citizens in the UK, and UK nationals in the EU, as well as from the Independent Monitoring Authority and the European Commission. The UK and EU agreed in the Withdrawal Agreement to protect EU citizens who were already living in the UK, and vice versa.
  • The UK Government says a “raft of common-sense changes to the Data Protection and Digital Information Bill will build an innovative data protection regime in the UK, crack down on benefit fraud cheats, and allow the country to realise new post-Brexit freedoms while delivering new economic opportunities to the tune of £5.9 billion”.

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