Deal on the Northern Ireland Protocol
But also — Environment, Inflation, China
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The Briefing
As expected after the announcement of Ursula von der Leyen's visit to London on February 27, negotiations between the UK and the European Commission on the Northern Ireland Protocol were finally concluded. The resulting Windsor Agreement aims to resolve instabilities caused by the application of the protocol.
PROTOCOL • As a reminder, the Northern Ireland Protocol is part of the EU Withdrawal Act of 2018. To avoid re-establishing a physical border between the Republic of Ireland and Northern Ireland after Brexit, the protocol states that controls on goods shall be carried out between Northern Ireland and Great Britain. As a result, several EU rules on the internal market and the customs unions continue to apply to Northern Ireland.
CRITICISM • In Northern Ireland, unionists criticise the de facto border created by the Protocol in the Irish Sea. They argue that the protocol creates a "democratic deficit" because it means that Northern Ireland remains subject to certain rules of EU law, while the country is now absent from the legislative process that produces them.
Moreover, the CJEU (Court of Justice of the EU) retains jurisdiction over disputes involving EU law, which is also heavily criticised by the Democratic Unionist Party (DUP).
AGREEMENT • Under the Windsor Agreement, commercial goods from Britain will now be labelled in two distinct ways to facilitate trade between Northern Ireland and the rest of the UK.
On the one hand, goods destined for Northern Ireland — which will not be re-exported to the EU — will go through a "green lane,” which means that they will be subject to reduced customs controls and a reduced administrative burden; on the other hand, goods destined for the EU will go through a "red lane,” which means that they will be subject to controls to ensure that they comply with internal market requirements.
The UK government has also committed to sharing its customs data in real time to enable the EU to effectively detect fraud.
CONCESSIONS • While Northern Ireland continues to be subject to EU single-market rules, Brussels has given green light for a local reduction in VAT rates on certain products, such as beer.
Meanwhile, while Belfast continues to be subject to the jurisdiction of the EU Court of Justice in the event of a dispute, the creation of the "Stormont brake" allows the Northern Ireland Assembly (also known as "the Stormont") to sound an alarm if 30 of its elected representatives believe that new EU legislation could harm Northern Ireland's interests.
In doing so, Northern Ireland will apply a veto to the EU legislation. However, the mechanism is intended to be used as a last resort, and only in cases of major importance.
REACTIONS • Despite many tensions over the negotiations between Brussels and London, the agreement has so far not been overwhelmingly criticised by the British conservative party’s eurosceptic wing. This represents a victory for Rishi Sunak, who is struggling to build a consensus within an extremely divided conservative party.
This eurosceptic fringe of the conservative party, as well as the DUP, remains vigilant about British sovereignty, while a de facto border continues to exist within the United Kingdom.
"Our legal experts will go through the agreement with a fine-tooth comb. They [the DUP] are also planning to scrutinise the text," said Mark Francois, chairman of the European Research Group (ERG), which coordinates the work of Eurosceptic MPs in Westminster.
The DUP also reacted cautiously. "We continue to have concerns," said party leader Jeffrey Donaldson, while some unionists are already expressing reluctance to continue to accept the application of EU law and the case law of the EU Court of Justice.
Boris Johnson said he would find it difficult to vote for the deal, which does not align with his personal vision of Brexit. "I hope it will work," he nonetheless added.
Rishi Sunak, meanwhile, welcomed the agreement. The British Prime Minister promises to unlock significant investments. "With the Stormont Brake, the assembly and the people of Northern Ireland are in the driving seat," he said.
NEW START • The Windsor Agreement allows the UK to project itself into better trade relations with its European and American partners.
Joe Biden has expressed his support for the agreement and is planning an official visit next month on the anniversary of the Good Friday Agreement. The resolution of the Northern Irish issue was one of the preconditions for the possibility of a new free-trade agreement between the UK and the US.
WHAT NEXT? • While a favourable vote in the House of Commons is not required, Rishi Sunak wants to show that the agreement has strong political support. The British Prime Minister said that a vote would take place "at the appropriate time, and that vote will be respected.” He also insisted that the DUP should have "the time and space to consider the details of the framework.
In Case You Missed It
ENVI • While the official approval of the new CO2 emission standards for cars and vans was supposed to take place on March 7, the Swedish Presidency of the Council has decided to postpone this meeting to a later date.
Indeed, the prospect of a ban on sales of combustion engine vehicles from 2035 is raising concerns in several member states, including Germany, Italy, Poland and Bulgaria. They are calling for a specific plan from the Commission on synthetic fuels.
Meanwhile, the co-legislators have agreed to define a standard for European Green Bonds (EuGBs)'. Today, investors are faced with a heterogeneous set of national standards.
The agreement requires issuers of green bonds to ensure that their activity is aligned with the European taxonomy, which defines sustainable activities. For sectors not yet covered by this taxonomy, the agreement provides for a 15% flexibility margin.
Until now, negotiations on green bond rules had been stalled by disagreements over the degree of flexibility and the scope of the rules.
ECO • Eurozone inflation slowed less rapidly than expected last month, rising to 8.5% in February from 8.6% in January. While inflation has been falling steadily for four months now, the decline was smaller than expected last month.
According to the latest Eurostat figures, core inflation — which excludes energy and food, whose prices are highly volatile — continued to rise in February, rising to 5.6% from 5.3% in January.
As for energy prices, they rose significantly less rapidly in February (13.7%) than in January (18.9%). Conversely, food prices rose faster in February (15%) than in January (14.1%).
Christine Lagarde, President of the European Central Bank (ECB), stated that key interest rate hikes are coming.
CHINA • This week, European Commission President Ursula von der Leyen will travel to Washington for talks with the US President Joe Biden. One of the main topics of the meeting will be the potential shipment of military weapons from China to Russia.
German Chancellor Olaf Scholz has said on Sunday that China declared that it won’t send lethal weapons to Russia in the war against Ukraine, which suggests that he has received bilateral assurances on this matter. Josep Borrell, the EU High Representative for Foreign affairs, has received similar assurance from Beijing last month. Both however insist on the importance of closely monitoring China.
Across the pond, US president Joe Biden said in a White House interview that he did not believe that China would provide lethal weapons to Russia, which undermines US Secretary of state Anthony Blinken’s comments that China is “considering sending arms and other lethal aid” to Russia.
This meeting will be the opportunity for UVDL and Joe Biden to agree on a shared stance on the issue and think about a coordinated response in case China is found to send lethal weapons to Russia. During this week’s meeting, the two leaders will also discuss the EU’s coordinated response to the US IRA.
What we’ve been reading
A report published by the EIB warns that skills shortages, energy costs, and a lack of productive investments are hampering innovation and growth in Europe.
Matthias Bauer for the ECIPE and Zach Meyers for the CER caution that the current push to impose stricter regulations on cloud services providers is at risk of backfiring, leaving European businesses more exposed to cybersecurity risks, and lagging behind in the digital transition.
In a report for the EUISS—the EU’s own foreign affairs think thank—Jan Joel Andersson explores ways to enhance Europe’s alliances and to bring more efficiency to the complex architecture of defence cooperation between member states.
This week’s newsletter is brought to you by Marine Sevilla, Ysabel Chen, Augustin Bourleaud, and Maxence de La Rochère. See you next Monday!