The standoff over Boris Johnson’s Internal Market Bill continues, only now it has been internationalised.
A growing chorus of American voices have condemned the bill, from Nancy Pelosi to Joe Biden to President Trump’s Northern Ireland envoy. UK Foreign Secretary Dominic Raab returned from Washington empty handed, having failed to convince the US that it was the EU, not the bill, which was the greater threat to the Good Friday Agreement.
We can't allow the Good Friday Agreement that brought peace to Northern Ireland to become a casualty of Brexit.— Joe Biden (@JoeBiden) September 16, 2020
Any trade deal between the U.S. and U.K. must be contingent upon respect for the Agreement and preventing the return of a hard border. Period. https://t.co/Ecu9jPrcHL
By week’s end, Mr Johnson had struck a deal with Tory rebels that if the powers in the bill, which breach the Northern Ireland Protocol, were ever used, then MPs would have the final say.
Downing Street threw in a list of measures that, if implemented by the EU, would "prove" the EU was acting in "bad faith".
Then MPs would be right to invoke the powers of the bill, and by extension, breach the Protocol.
The double fix was dismissed within minutes by Brussels. This might give Mr Johnson parliamentary cover, but the "gun" of the Internal Market Bill was still on the table.
Not only that, another gun was on the way in the shape of the Finance Bill, which is also said to have provisions that breach the Protocol.
Trust is now in very short supply on the EU side, when it comes to both the implementation of the Protocol, and prospects for a trade deal with the UK.
On Wednesday morning, when Michel Barnier briefed EU ambassadors on both fronts, the mood among diplomats was described as one of "cold fury" at the UK’s approach.
This was not just about the bill itself, but about Mr Johnson’s attempt to justify it on the ground that the EU was threatening a food blockade of Northern Ireland.
Ostensibly, he has said the EU is hesitating to list the UK as a safe country from which to import food and live animals. Since Northern Ireland is de facto in the single market, then that could amount to a ban on food from GB.
The EU does, indeed, take sanitary and phytosanitary (SPS) rules seriously. Food hygiene and animal health scandals in recent decades have meant an expansion and tightening of regulations. Those regulations went to the heart of both the backstop and the revised Northern Ireland Protocol.
However, during the future relationship negotiations, which began in March, neither side has formally listed the other as a safe country from which to import food.
Depending on which side you are on, this is either the EU desperately wanting the UK to spell out its future SPS regime, or the EU is deliberately holding out to gain leverage in the talks.
Either way, what should be a minor irritant has blown up into a major crisis.
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Writing in the Daily Telegraph, Boris Johnson warned that the EU "might actually stop the transport of food products from GB to NI…" which amounted to the EU using the Withdrawal Agreement "to blockade one part of the UK, to cut it off; or that they would actually threaten to destroy the economic and territorial integrity of the UK."
This would "endanger peace and stability" in Northern Ireland and as a result, the UK would have to "close down" this "interpretation" of the treaty.
Needless to say, in Brussels and Dublin responses to Johnson’s framing have ranged from disbelief to outrage.
"People are furious," says one source. "It’s a cold fury. They know that the only option at this stage is to keep calm and carry on. It’s a cold-headed approach."
In Dublin, the manoeuvre was greeted with disdain, not least because if the European Commission was threatening a food blockade of one part of the island, then Ireland as a member state might have heard about it.
"The irony of it," says a senior Irish figure, "that the EU wants to starve Northern Ireland. If it was part of a strong arm strategy, you’d think we would know about it."
Minister Simon Coveney has said for many people it is 'pretty shocking that the British government is voting through its parliament a bill that breaks international law'. He said it makes complex negotiations even more difficult | Read more Brexit stories: https://t.co/RQiqrJHFRo pic.twitter.com/ybbAyokzZO— RTÉ News (@rtenews) September 15, 2020
While many observers believe the food row was used to provide retroactive justification for the Internal Market Bill (which actually doesn’t deal with the SPS issue), it is worth exploring the food issue, and why things escalated so dramatically.
The EU and UK currently operate the same food safety and animal health standards. At the end of the Brexit transition (31 December), the UK will set up its own regime, which the EU is expected to recognise as safe.
Granting a "listing" to a third country tends to be a relatively straightforward, uncontroversial process. "We carry out assessments for loads of countries around the world from Afghanistan to Zimbabwe," says one EU official. "It’s part of our normal processes."
However, Brussels has been pressing since the start of the trade talks for details of the UK’s new system. The UK has resisted, and it started to become an irritant.
"This is genuinely an area of frustration on the UK side," says one official. "But it’s also a massive area of frustration on the EU side as well. We’re not getting any further info from the UK on their SPS system."
The UK has argued that from 1 January the UK will continue to apply EU food safety rules, so there is no reason for the hold-up.
"On 3rd country listings," tweeted the UK’s chief negotiator David Frost last Sunday, "the EU knows perfectly well all the details of our food standards rules because we are operating EU rules. The situation on 1.1.21 is accordingly perfectly clear."
1/7 I would like to make a few comments and state a few facts, in my capacity as the PM's negotiator in the current and last autumn's talks. https://t.co/qJ2hGUf5RM— David Frost (@DavidGHFrost) September 13, 2020
One EU official responded: "We’re not just going to list them on an oral promise that they’re going to follow the rules. When are they going to come forward with their own legislation transposing EU rules?"
In an internal document circulated on Wednesday, the European Commission told member states: "We were informed by the UK last week that it will apply the EU Official Control Regulation, Animal Health and Public Health legislation with modifications."
However, what was still missing were details of the UK’s own legislation.
Referring back to David Frost’s tweet, the working paper noted: "The UK is indeed 'operating EU rules’ right now as we are in the transition period. We are still waiting for comprehensive information on what the UK’s future rules will be, in particular for imports, after 31 December 2020, and when these rules will be adopted."
The irony, it turns out, is that the UK has also yet to formally approve the EU in its listings system for food imports into the UK.
On Tuesday, the UK’s agriculture ministry Defra confirmed to RTÉ News that "existing EU import approvals for live animals and animal products will be enshrined in UK law under the European Union (Withdrawal) Act 2018 and associated legislation."
In other words, EU imports will be approved, but they haven’t yet. Those imports will be listed under the EU Withdrawal Act, but also through "associated legislation."
This is assumed to be the forthcoming agriculture bill. Not knowing what this bill contains, however, and whether or not it will override existing legislation, fuels suspicion in Brussels.
Yet, these are hardly deal-breaking issues. In reality, the UK does not have to wait to decide if it can list the EU as an approved third country, because the EU’s legislation is already there and is a known quantity.
Likewise, the EU is clearly not going to decline UK food imports. Wednesday’s internal EU document confirmed this. "Michel Barnier clearly stated that the EU is not refusing to list the UK as a third country for food imports," the paper notes.
Officials say that ahead of two No Deal deadlines last year, the EU twice listed the UK as a safe country for food imports, granting temporary listings even without knowing in detail what the UK’s SPS legislation would look like.
So why does the EU not simply grant the listing now as a way to take the poison out of the current political crisis?
"The perception seems to be," muses one senior British figure, "that they’re sort of holding it over our head. That seems to be the weak point in Barnier’s explanation, given that we already adopt EU level food standards and given that we’ve said we will maintain those food standards.
"I can’t quite see why they haven’t given us third country approved status. It’s granted to countries like Myanmar."
The response from the EU is that they need to know the details, not just of what kind of SPS regime the UK is going to operate, but what third countries for its part the UK is going to list, and what kind of food the UK will be bringing in from other parts of the world.
If chlorinated chicken or hormone-treated beef are admitted to the UK market, that will impact what kind of controls the EU will want to implement, not just at Calais, but also at Larne.
Over time divergences could emerge over food that the UK believes is safe for consumers, but which the EU does not.
GM foods could fall into this category. Brussels says structures need to be created to resolve these issues if they arise.
The UK strongly denies it will import chlorinated chicken or hormone-fed beef.
Some in Brussels suspect, however, that the reticence over its SPS legislation is because the UK does not want to alienate Donald Trump, who has long argued that any trade deal will depend on the UK accepting US agrifood exports.
While EU capitals are still scratching their heads over Mr Johnson’s strategy, Dublin believes that neither the food blockade allegation, nor the bill itself, are about protecting the Good Friday Agreement, as senior UK ministers have been claiming.
Dublin views it as either a late-in-the-day case of buyer’s remorse, or a hardball attempt to get the things Johnson couldn’t get in the final days of the Withdrawal Agreement negotiations this time last year.
"It’s a fairly blatant attempt to secure some additional leverage," says a senior Irish source, "probably in both [the free trade negotiations and the Joint Committee, which implements the Northern Ireland Protocol]. We shouldn’t be overly surprised by that, even if it’s clearly annoying, and if the means by which they’ve chosen to try it is, at the very least, strange."
British sources say there always was a long term plan to introduce an Internal Market Bill after the summer break. It was assumed the Bill would be an uncontroversial one, but which would attract controversial amendments. However, say sources, it was decided that Johnson should front-load the law-breaking elements.
"In terms of negotiating dynamics and leverage," says one senior source, "it would be better and more honest to show the colour of their money straight away, rather than appear to have it forced on them by people in the House of Commons. It’s not like they’re a government without a majority. So they decided to do the more straightforward thing."
If this was, indeed, a last-minute decision, that would explain the frantic news management that followed.
That the Internal Market Bill would "consciously" override provisions within the Protocol was first revealed in Peter Foster’s Financial Times exclusive on Sunday 6 September.
London’s grip on the narrative then moved from DEFRA Minister George Eustice’s tying up of "loose ends", to Northern Secretary Brandon Lewis’s startling admission that the UK would breach international law, and finally the bill itself.
Observers believe the reaction of veteran eurosceptics such as Lord Lamont and Michael Howard caught Johnson’s team off guard. Dominic Raab, the foreign secretary, was then dispatched to Washington to try - in vain, it seems - to quell the clamour about the bill.
For now, the EU’s response has been decidedly cautious. "We are going to continue to talk through September," says one EU diplomat, "both in the context of the Protocol and the future relationship.
Some of this will be a discussion to see, what are the British concerns, but also it will be against a backdrop of condemnation of what they’re planning to do. There’s a strong view that we are not going to be provoked into taking rash action."
On Wednesday, member states told Michel Barnier they would be even more demanding on the need for a tough dispute resolution mechanism if the trade talks ever bore fruit.
"That means double vigilance on governance and enforcement measures if there is to be a deal," says one EU source. "There is no mood to compromise on that."
Boris Johnson, meanwhile, appears determined that the bill go ahead, although with mounting opposition he has been forced to reach an agreement with Tory rebels.
Any attempt to invoke the powers under the bill, which would allow the Northern Ireland Secretary of State to override aspects of the Protocol, would have to be approved by the House of Commons.
MPs would have to show the EU was showing bad faith and "undermining the fundamental purpose of the NI Protocol".
But what would this bad faith look like?
Number 10 listed five examples of what would amount to bad faith by the EU.
1. If the EU insists that tariffs on goods going from GB-NI are charged "in ways that are not related to the real risk of goods entering the EU single market."
This seems academic, as tariffs should only apply to goods at risk of crossing the border south.
In any case, officials in Brussels insist the EU’s objective is to apply tariffs only where there is a significant tariff differential. In other words, the higher the EU tariff that a good attracts, then the greater the incentive there would be to circumvent those tariffs by bringing the relevant goods in from GB and getting them across the border. That’s where the at risk thing bites.
"Our focus is very much on tariff differences," says one source. "Less on good by good." Of course, if a tariff- and quota-free trade deal is agreed, then none of this will apply.
2. If the Joint Committee cannot agree on the criteria establishing which goods are at risk, then the default would be that all goods are deemed at risk.
The problem there is that the Protocol is written in such a way that all goods are deemed to be at risk unless the Joint Committee agrees on a list of goods that are not at risk. The European Commission believes that if the Committee can not agree on the list, then the default applies.
3. If the EU insists on exit summary declarations, as this goes against the Article 6 principle of "unfettered access" for goods going from Northern Ireland to GB.
Article 6 does indeed state that: "Nothing in this Protocol shall prevent the United Kingdom from ensuring unfettered market access for goods moving from Northern Ireland to other parts of the United Kingdom’s internal market."
However, that promise is immediately qualified. Article 6 continues that EU rules which in any way restrict trade between the North and the rest of the UK are permitted so long as they are "strictly required by any international obligations,"
The EU believes that exit summary declarations represent such an obligation.
4. If the EU insists on using the so-called "reach back" of its state aid rules to the rest of the UK where there is "no link or only a trivial one" between the UK subsidising one of its companies and that company having a subsidiary in Northern Ireland.
The "reach back" effect, which was detailed extensively in last week’s blog, is seen by many as the real reason for the Internal Market Bill, as it hinders Downing Street’s ambition to be completely untethered from any restrictive arrangement with the EU on state aid.
As with the other examples of alleged "bad faith" on the EU’s part, this is unlikely to impress member states. According to a number of sources, at various stages during the Withdrawal Agreement negotiations, capitals voiced concerns that with Northern Ireland effectively remaining in the single market, London could use it as a beach-head by locating UK subsidiaries there.
"That was part of the safety net of state aid reaching back," says one source closely involved in the negotiations at the time, "so you couldn’t have subsidiaries from GB getting the benefit of that. There’s an internal logic to the EU position that has been there pretty much from day one."
5. If the EU refuses to grant third country listing to UK agricultural goods for "manifestly unreasonable or poorly justified reasons."
That issue has been dealt with above.
The Johnson compromise has gone down badly in Brussels. It is seen entirely as a desperate fix for his parliamentary troubles, and not remotely as something to reassure the EU. "The statement doesn’t do anything to assuage any of those worries with respect to the legality of the [Internal Market Bill] act," says one EU source.
What happens next?
The EU regards the bill as a loaded revolver which must be off the table before any free trade agreement is concluded. The talks remain in the balance, and while things may have moved forward on fisheries in last week’s round, there is no guarantee a successful outcome will be reached.
The big concern for member states must be if the bill is still lingering in the House of Lords when the 31 October deadline for a trade deal approaches, but a deal is within reach.
Deciding to walk away would be problematic. "Such a conclusion pushes the EU further into a corner," says Totis Kotsonis, a partner at Pinsent Masons law firm in London, "being seen to be walking away from the negotiating table, without a wider trade agreement to regulate a post-transition UK-EU relationship and with the UK potentially disapplying in any event unilaterally key aspects of the Northern Ireland Protocol."
Alternatively, the EU will insist on the bill being amended as a price for a trade deal being ratified.
The sequencing would be that Frost and Barnier reach agreement on all the issues, before Boris Johnson and Commission President Ursula von der Leyen shake on it.
The Commission would then recommend to the European Council (EU leaders) that the deal be concluded. If leaders agree, then it goes to the European Parliament for final consent, pending the normal period of legal scrubbing and legal translation.
Any conditionality would have to bite at some point along this timeline.
"There’s never going to be a deal with this gun on the table," says one EU source. "But that all comes together at the very end. So you could have an agreement to get the gun off the table when you do the deal in October. You could imagine the gun has got to be gone by the time the [Internal Market] Act is adopted, and the Act has got to be adopted before we ratify."
A cliffhanger October awaits.
Meanwhile, there is cold comfort for Dublin on one score: vindication of Ireland’s insistence that the border issue be dealt with during the Withdrawal Agreement rather than the future relationship negotiations. Dublin and Brussels always feared Britain would use the border for leverage in the trade negotiations.
"It’s part of the reason," says a senior Irish official, "why the Irish thing was put clearly and cleanly into the Withdrawal Agreement up front."