A complex trade and peacekeeping arrangement in Northern Ireland after Brexit sours relations between London and Brussels and risks disrupting Britain’s close ties with Washington, as President Biden meets with British Prime Minister Boris Johnson this week.
It also causes headaches for Ashley Pigott, CEO of AJ Power Ltd., who says his company, which manufactures diesel generators in Craigavon, 30 miles from Belfast, is caught up in bureaucracy and burdensome new costs due to the so-called Northern Ireland Protocol. .
“It’s 100% bonkers,” says Pigott.
Officials from the EU and the British government met on Wednesday to discuss the protocol and its implementation. The aim had been to agree on the next steps to ease disruption for Northern Ireland companies while keeping the deal intact, but the meeting ended without a breakthrough, officials in both camps said.
Brussels has filed a lawsuit against the United Kingdom for unilaterally delaying the implementation of parts of the protocol until at least October, which it says is a breach of Britain̵
Mr. The bid to meet Mr. Johnson on Thursday ahead of a meeting of leaders of the group of seven advanced economies in the south-west of England over the weekend, has said Brexit must not undermine peace in Northern Ireland and is expected to call on both sides to reach agreement.
The Northern Ireland Protocol is one of the key components of the United Kingdom’s Brexit agreement with the EU. Brexit took Britain out of the EU Common Market Zone with common regulation and its customs territory. Although it was important steps if London were to have a free hand to negotiate its own trade agreements, this means that trade between the two territories has been subject to customs and regulatory control, where none has previously existed.
Exactly where the checks are to be carried out is the core of the protocol, which came into force in early 2021 after a brief transition period following Britain’s withdrawal from the bloc last year. The aim was to avoid control at the border between Northern Ireland, part of the United Kingdom, and its southern neighbor Ireland, an EU country, for fear of angering most Catholic Irish nationalists in Northern Ireland and threatening a 1998 peace deal .
So Mr Johnson accepted a scheme that leaves Northern Ireland, home to 1.9 million of Britain’s 67 million people, more economically linked to the EU than England, Scotland or Wales. The Protocol effectively shifts the economic border to the Irish Sea, which separates Northern Ireland from the British mainland, instead of placing it on the island of Ireland. Controls and customs procedures apply to goods entering Northern Ireland from the rest of the UK
For some companies, the result is a costly scrub of bureaucracy. AJ Power sells its diesel-powered generators in 80 countries, and Mr Pigott says it is more difficult to deal with the consequences of the agreement at his home borders than to navigate customs procedures in any of these foreign markets.
“This is off the scale,” he says.
AJ Power’s internal systems show 15,251 components involved in manufacturing its generators. About 80% of these components come from suppliers in the rest of the UK, such as engines from Peterborough and generators from Rutland, both in the UK. Bringing in a shipment of these essential components, says Mr Pigott, means a series of customs declarations and administration fees that were not necessary before Britain’s EU exit.
For example, the company buys cable in kilometers. Prior to Brexit and the protocol, AJ Power obtained its cable drums from a supplier in the UK, which cut them lengthwise from a manufacturer in France without incurring any transit costs or duties thanks to the EU single market and customs union.
Now, Mr Pigott says, because Northern Ireland is for practical purposes within the EU’s customs territory for many goods, he pays EU taxes of 3.7% when he brings these drums into Northern Ireland from his British supplier. The UK’s free trade agreement with the EU means that the first import of the cable to the UK is duty free, but cutting it in size makes it a new product that attracts an EU tariff when imported into Northern Ireland.
It’s a similar story with lead batteries imported from South Korea or Indonesia that attract an 80% higher duty from the EU than they do from the UK Getting them from its UK distributor effectively means he pays both sets of charges, Pigott says as he initially have to bear the cost of importing them to the UK and then sending them to Northern Ireland, where EU tariffs apply.
He says he can not easily buy directly because many international companies tend to carry all sterling business through the UK. Mr. Pigott says the extra cost – which he estimates will completely shave around 2% of his bottom line this year – puts his company at a disadvantage for its competitors in both the UK and the EU.
A broader issue is the stability of Northern Irish society. The protocol has gone badly down with Northern Ireland’s most Protestant unionist community believing it undermines Northern Ireland’s place in Britain. The Democratic Unionist Party, a one-time ally of Mr. Johnson and Northern Ireland’s largest unionist party, have called for being scrapped.
Irish nationalists who favor unity with Ireland are more supportive, believing that the protocol helps maintain ties with Ireland and the wider EU. As a reflection of the societal divide, voters’ attitudes to the protocol are divided, with a March poll of 2,100 Northern Ireland residents supporting the protocol at 43% and the opposition at 44%.
Recent riots in pockets in Belfast and other areas have raised concerns about further unrest this summer, with some trade unionists celebrating a decisive battle in 1690 that ended Catholic King James II’s hopes of regaining the English throne.
Some business leaders expect benefits from the protocol over time, as foreign investors realize that Northern Ireland is in a unique position with an unusually high level of access to both EU and UK markets.
“There could not be a better place to do business on these two islands,” said Richard Kennedy, CEO of Belfast-based animal husbandry firm Devenish Nutrition Ltd.
In a survey in April of 190 Northern Irish producers by the law firm Tughans, 31% said after initial disruption that they were now doing well. However, a further 36% said they expect the disruption to continue.
Mr. Pigott, whose company employs 130 people and had an annual pre-pandemic turnover of around £ 30 million, equivalent to approx. $ 45 million, says he can not see the case in the long run for making large investments in Northern Ireland. Emotional attachment is one thing, he says, “but then you have the economic sense that says investing in another country in the world.”
While officials in distant capitals are fighting for solutions, Mr. Pigott and two other AJ Power directors meet marathon meetings each week to make sure they meet all the correct requirements. The mountain of extra work “does not add any value to the business at all,” he says.
Write to Jason Douglas at firstname.lastname@example.org
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