Q&A: What is the problem with the Northern Ireland protocol?

The Northern Ireland protocol was designed to prevent a hard border on the island of Ireland but the solution, a new Irish Sea trade border, has created headaches for businesses in the North.

What is the protocol?

It is part of the EU-UK Brexit deal that allows goods to pass freely between Northern Ireland in the UK and the Republic of Ireland in the EU. The UK voted to leave the EU in 2016, requiring a deal on the post-Brexit trading rules applying to Northern Ireland to allow this to happen.

What does this mean in practice?

Goods entering Northern Ireland must continue to follow EU regulations and standards, including strict sanitary rules on food products. This has resulted in the checks moving to Northern Ireland’s ports on products brought into the country from the rest of the UK. To avoid checks on north-south trade, they had to be imposed on east-to-west trade crossing the Irish Sea.

What problems has this caused?

In the business world, companies and other traders say this has added significantly to their administrative burden and that this burden will only increase with the expiry of grace periods introduced by the UK to delay the full checks. In the political world, Unionist parties also argue that the new Irish Sea border undermines Northern Ireland's place in the United Kingdom.

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Are some businesses more affected than others?

Small- and medium-sized businesses say they are particularly affected because, unlike larger companies, they bring multiple products in single containers on lorries and so this requires greater volumes of paperwork, more staff resources and higher costs to bring goods in.

"It is the level of the administration barriers that it creates," said Seamus Leheny, policy manager for Logistics UK in Northern Ireland, the trade association for the transport industry. "It costs time and money and it affect the shelf-life of goods and takes a lot administrative effort to keep them moving."

How have some businesses adapted?

To avoid the red tape on goods moving from Britain, companies in Northern Ireland have instead sourced materials in the Republic and directly from the rest of the EU. This has led to a surge in north-south trade under the new post-Brexit rules. New Central Statistics Office figures yesterday showed that imports from Northern Ireland into the Republic rose again in the first quarter of this year, by 34 per cent, while exports to Northern Ireland also rose, by 49 per cent.

Business groups in Northern Ireland say companies have broken supply chains with Britain where they can, but goods still flow from there for cultural, historic and economic reasons and because of a common currency. In Britain, the new rules have turned some exporters off Northern Ireland. A survey by industry group Manufacturing NI found that one in five Northern Ireland manufacturers said their suppliers in Britain were unwilling to send goods to the North.

"Whatever could move has moved and whatever is left is the stuff that can't and that is causing the continuing pain for traders here," said Manufacturing NI chief executive Stephen Kelly.

What is the UK government proposing to do?

British prime minister Boris Johnson is preparing to introduce domestic legislation that would allow UK government ministers to override parts of the protocol, lifting the requirement for checks required to meet EU rules under the agreed 2019 deal – a move that would likely lead to retaliatory action from Brussels, potentially sparking a trade war with the EU. Johnson said the protocol was designed before a global pandemic and a European war created a cost of living crisis.

What do Northern Ireland’s businesses want?

They want an agreed and negotiated outcome. Business groups have privately tabled five possible fixes. The most important proposal involves easing sanitary checks on food products coming into Northern Ireland with a trusted trader scheme. This would create green channels and solve a major headache given that 70 per cent of freight heading into the North is destined for retail shelves, while 90 per cent of food products come from supermarket chains based in Britain.

Secondly, businesses want a large reduction in the data fields that must be filled in on customs forms. Thirdly, they want meaningful representation in any future changes agreed to the protocol between the EU and UK so they have a pragmatic say on what those changes mean for companies.

Fourthly, businesses want a formal review mechanism around how the protocol works. Finally, they want barrier-free trade to benefit from easy access to both the EU and the rest of the UK.