More than two years after the UK and EU completed their post-Brexit trade deal, the two sides are still locked in a bitter disagreement over the implementation of trading arrangements for Northern Ireland.
But with Rishi Sunak, prime minister, now determined to reset relations with Europe and the 25th anniversary of the landmark Good Friday Agreement that secured peace looming in April, political pressure is building on all sides to settle their differences.
After several months of technical pre-negotiations, London and Brussels are poised for a final diplomatic heave to secure a deal that could restart Northern Ireland’s stalled power-sharing executive and help to normalise EU-UK relations.
However, despite warming diplomatic mood music, securing a lasting settlement will require Sunak to thread the needle through a knot of intense political and technical challenges that have defeated all his post-Brexit predecessors. The Financial Times looks at what needs to be done.
Fixing the border in the Irish Sea
To avoid the return of a north-south border in Ireland, Boris Johnson agreed in the Northern Ireland protocol that the region would continue to follow EU rules for goods after Brexit. This necessitated a trade border in the Irish Sea.
Unionists say this cuts them off from the rest of the UK and creates bureaucracy that deters small businesses in Great Britain from trading with Northern Ireland.
Fixing this will require “de-dramatising” the border by reducing the number of physical checks, but the EU says this can only be done if the UK provides sufficient data on all goods flowing from Great Britain to Northern Ireland. A computer system to do this is being tested. But creating data sets requires businesses in Britain to fill in forms, which is what the UK is trying to avoid.
Resolving this dilemma to the satisfaction of the Democratic Unionist party — the largest pro-UK party in Northern Ireland, which has paralysed local politics since May to press for sweeping changes to the protocol — will be the first step towards a deal.
The negotiators must then resolve the question of whose regulations — those of the UK or the EU — goods circulating in Northern Ireland must comply with, and try to find mechanisms to allow the region’s institutions to be better consulted over the future EU regulations it must accept.
Lastly, will come the question of “governance”. Since Northern Ireland must follow EU rules for goods, VAT and subsidy control, the agreement is policed by EU’s top court, the European Court of Justice — Conservative Eurosceptics say that is an affront to UK sovereignty. This will be a very difficult circle to square, but if a deal is close, some EU diplomats and officials say that a way could be found to “soften the edges” of ECJ’s role, even if it cannot be completely removed.
Selling a deal in Westminster
The pro-Brexit European Research Group helped to put Liz Truss into Downing Street and her humiliating failure as prime minister was a serious blow to the Eurosceptic cause.
Nevertheless Sunak, with a working majority in the House of Commons of 69, knows he cannot afford to alienate dozens of MPs in his party’s troublesome pro-Brexit wing by “selling out” to Brussels.
To manage the ERG, Sunak has installed Brexiter Chris Heaton-Harris as Northern Ireland secretary, and brought back Oliver Lewis, who helped to negotiate Boris Johnson’s Brexit deal, as an adviser.
David Jones, deputy chair of the ERG, said that the “fundamental” issue in the talks with the EU was ending the jurisdiction of the ECJ from UK territory. Sunak’s challenge is to find a legal fudge that satisfies both sides.
“Our position is we have now left the EU and it’s about sovereignty,” Jones said. “The question is whether the ECJ’s judgments have binding force in the UK.”
Jones claims the EU would be ready to compromise and says it would be perfectly acceptable for British courts to take account of ECJ rulings. “The issue is whether we’re bound by those decisions,” he said.
Getting Northern Ireland’s unionists to compromise
There is no easy climbdown for the DUP, which has prevented the power-sharing Stormont executive and legislative assembly from working since elections in May in protest at the protocol.
It feels that its hardball tactic is working: indeed, London and Brussels now agree that no deal is possible without the backing of the unionist community, and polls show its support has increased in Northern Ireland.
The DUP, runner-up to the pro-unity Sinn Féin party last May, says London has a simple choice: the protocol or Stormont. It has set seven tests to measure any future deal — including no Irish Sea border, no checks on goods from Britain staying in Northern Ireland, and a say for the region’s people in making laws that affect them.
While these are not all seen as politically achievable in London, the DUP insists that devolved institutions will remain in limbo until the protocol is changed to its liking or Westminster passes a bill (currently on hold in the House of Lords) giving ministers powers to scrap key parts of it.
The Easter anniversary of the 1998 Good Friday Agreement, which ended the three decades-long conflict known as the Troubles, means London is particularly keen to get a deal done. But there is a growing feeling that the DUP will continue to hold out, raising the prospect of a yet another long hiatus for devolution in Northern Ireland.
Working with Europe to seal a deal
EU officials and diplomats are willing to compromise and believe the UK is serious in wanting to find a solution to the impasse. “Work at technical level is going better than it was so we hope that the preference for a negotiated solution is genuine,” said one.
Maroš Šefčovič, the Brexit commissioner, has offered to reduce checks between Britain and Northern Ireland to a minimum but as trade outside the EU’s borders becomes harder — the US is becoming more protectionist and the Russian market is off limits for many industries — the bloc’s desire to protect the single market has intensified.
Many EU capitals are clear that they cannot allow an unprotected border between the single market and a third country. Failure to enforce any checks on the Irish Sea would also leave Brussels open to legal challenge by companies that believe competitors in Northern Ireland have an unfair advantage.
While there is little evidence so far of dangerous food or faulty products slipping across the Irish Sea, there have been some reports of counterfeit electric goods clearly destined for the EU single market being shipped to Northern Ireland.
Diplomats also say there can also be no deal until London abandons the Northern Ireland protocol bill, which would unilaterally abolish much of the protocol. “The UK has to take the loaded gun off the table,” said one.
However, they weigh the prospect of a less satisfactory deal against the instability in Northern Ireland, where the bloc has invested billions in the peace process.