Johnson’s Looming Trade War

Boris Johnson’s law breaking is about to cost us a fortune

Liam Byrne, Tom Tugendhat and Vice President Sefcovic at the Berlaymont

As bunkers go, it couldn’t be nicer. The British ambassador’s Brussels’ home is a large and elegant terraced townhouse on the Rue Ducale, just across the street from the Parc Royal, once the hunting ground of the Dukes of Brabant. But unless something changes fast, the neoclassical mansion with its staterooms hung with exquisite tapestries is about become the command centre for Britain’s first trade war with Europe since the Cod Wars of 1975.

Boris Johnson’s decision to upend international law and ram through Parliament new laws to override the very Brexit deal he sought, agreed and sold to the British people has nuked what was left of his reputation in Brussels. ‘How can we believe such a man?’ despairs one very senior EU diplomat. ‘What’s the point of negotiating with someone who’s promise simply isn’t worth the paper it’s written on?’.

The Northern Ireland Protocol Bill, which had its second reading in a rowdy House of Commons this week, has its roots in the deep divides of Northern Ireland and the historic Good Friday Agreement secured by Tony Blair and Bertie Ahern to end one of the longest civil conflicts in Europe.

Amongst its core commitments was the pledge never to restore a ‘hard border’ of checkpoints along the hundreds of miles of winding roads and emerald green fields that separate Northern Ireland and Ireland. But, Brexit left a problem: how to secure an essentially invisible customs check between the two countries? It wasn’t and isn’t possible. And so the answer in the Brexit deal was to basically move the checks from north-south between Ireland and Northern Ireland – and put them east-west, through the Irish sea.

But that created serious concern for Northern Ireland’s Unionist community which couldn’t countenence division from mainland Great Britain. And after May’s election, the DUP – which holds 25 seats – are simply refusing to participate in the formation of a northern Irish government until the Protocol is fundamentally reworked. And that in turn means a new Northern Irish government cannot form because the Good Friday Agreement requires participation of both Protestant and Catholic communities in any administration.

Of course, Mr Johnson as a fundamentally dishonest man was fundamentally dishonest about what the Brexit deal meant for Northern Ireland. And the DUP, like so many of the people in Boris Johnson’s life, was foolish enough to believe him. But now the chickens have come home to roost. The UK needs power sharing to work in Northern Ireland; we can’t countenence a return to violence and so the customs checks must change to end the DUP’s strike on serving in power.

But rather than persist in the sort of patient, creative diplomacy that got the Good Friday Agreement secured in the first place, Mr Johnson has chosen drama before duty and proposed a law that simply overrides the existing international treaty with Europe. If he persists, there’s going to be a trade war.

This is a conflict Britain can ill afford. With the worst forecast growth of any G7 country next year and sky high inflation, the last thing we need is battle with our nearest neighbours who happen to buy more of our exports than anyone else. The UK business community in Brussels is in utter despair. The costs to them are not only lost sales but more importantly the end of progress on negotiating regulations under the rather optimistically entitled Trade and Cooperation Agreement, which considerably adds to business risk. Worse may be still to come.

The EU has already prepared a secret set of highly targeted sanctions designed to hurt constituencies on which Tory support now rests – a little like the sanctions on Harley Davidson designed to punish Trump.

Now there are some who point to the current record level of UK exports to the EU with an airy wave and declare ‘that all is in fact well’. But today’s UK exports to Europe are flattered by huge re-exports of fuel as Europe weans itself off Russian oil and gas. It’s a short term sugar rush. In fact, underlying trade is at best flat at a time when Britain’s trade deficit with the world continues to get worse.

In all wars, both sides miscalculate. In Brussels, there’s far too much wishful thinking that the NI Protocol Bill will get stuck in the Commons or that Boris Johnson might soon fall (and so why make concessions now?) or that an election might be soon. Meanwhile, in the House of Commons there is very little understanding of just far Britain’s reputation has now collapsed. And the tragedy of it all is that the two sides are not a million miles apart.

The EU’S Vice President Sefcovic, who I met in the Commission’s vast Berlaymont headquarters, is not seeking some dogmatic Procrustean imposition of EU red tape. He’s says he’s willing to be creative and believes there is still time to move in a better direction.

From what I heard over two days, it seemed to me

1. On the core issue of customs there is a ‘landing zone’ for a deal around minimising the data that’s collected and shared but which gives the EU fast enough access to data which they can put through their risk management tools to identify trucks or crates they’d like British customs officials to pull over for inspection.

2. The EU’s idea for an Express Lane (for goods only sold in Northern Ireland) is pretty close to the Government’s Green Lane – which the Government’s own policy paper says would only be open to ‘trusted traders’. The EU talks the language of’bare minimum’ checks which might mean ‘a couple of trucks a day’ being pulled out for the full treatment.

3. Equally, on agriculture it seems pretty straightforward to agree a biosecurity assurance framework which allows ‘trusted traders’ to move back and forth albeit with full checks for live animals. As it happens the UK has long had lots of checks like this anyway from the days of foot and mouth disease.

4. And on state aid, VAT and court rulings, the negotiators closest to the coal face are confident that with trust and good will on both sides, a deal could be done.

But that’s that’s the problem.

Between them, David Frost, Liz Truss and Boris Johnson have destroyed what trust there was. Nor has Johnson made it a personal mission to put in the hard yards and kinetic energy needed to get a deal. Liz Truss is regarded as ruthlessly manufacturing a row to bolster her own leadership credentials. Despite the hardworking UK team, there is no heavyweight UK ‘sherpa’ like Kim Darroch with a hotline to the PM or a narrative to the deal as a sort of Good Friday Agreement Preservation evolution of existing arrangements or indeed much effort to creatively format a bigger deal. ‘Where is our Europe strategy?’ asked one UK civil servant, ‘Where is the overall framework for what we want to get out of this?’ The answer is, there isn’t one.

The EU isn’t looking for EU victories. They’ve accepted they ‘might need to suffer defeat in the British tabloids’. After all there is Brexit exhaustion in Brussels too. They want this irritant out the way. They too want ‘Brexit done’. They have other fish to fry. The media view is that ‘there are more concessions up their (EU) sleeves’ but these won’t be revealed while the Bill is still live. The EU is not going to negotiate when the Northern Ireland Protocol Bill is rolling through committee. ‘Why should we negotiate with ‘a gun on the table’ said one diplomat. ‘And why should we accept the UK saying ‘it’s my way or the highway’?’

EU politicians don’t want a trade war but are ready for it. There will be no peeling off of the Balts and Poles. It’s a thoroughly united block. And for all the cheers from Tory benches the truth is that without a resolution, Johnson’s tedious tactical gambit will prove a strategic defeat. Economically, Britain as a small nation needs strong tech and trade partnerships with our giant neighbours across the narrow channel and the wide Atlantic. Europe is pouring billions into its Horizon science programme. The US is pouring hundreds of billions into industrial subsidies and talking generously of new ‘friendshoring deals’ with its allies. But Britain’s behaviour is so angry-making we risk shut out from Horizon while American politicians from Speaker Pelosi down have made it perfectly clear they’ll be no deals with Britain until a ‘durable way forward’ is found for the Northern Irish border.

Speaker Pelosi and Liam Byrne in Congress earlier this year

Since time immemorial all trade has rested on trust. A handshake can mean so much more than a contract. But the Northern Ireland Protocol Bill is the proverbial two fingers to Brussels. And for that we will pay a price.