With Brexit, British Prime Minister Boris Johnson gave his country a very special border. It runs between Northern Ireland and the rest of the UK, in the middle of the Irish Sea. The border is invisible, if you will, but British companies can sometimes feel it clearly. Steelmakers from England, Scotland and Wales are hit the hardest: they now have to pay 25 percent duty if they deliver certain steel products to Northern Ireland.
25 percent duty on deliveries in your own country? The outcry was not long in coming after the British tax authorities informed companies of this fact this week. “It is beyond absurd that UK manufacturers are now being prevented from selling goods to customers at home by these tariffs,” said Gareth Stace, director general of industry association UK Steel. He called on the government to suspend tariffs immediately and find a solution with the EU.
However, it should not be that easy, because the cause of the tariffs is a problem that London and Brussels have been arguing about for a long time: the so-called Northern Ireland Protocol. It is part of the withdrawal agreement that the British government signed with the European Union after the Brexit vote. The primary goal was to prevent goods controls at the barely perceptible border between the Republic of Ireland and British Northern Ireland so as not to burden the peace process. And so it was agreed that the former troubled province would continue to comply with EU product and customs regulations despite Brexit.
Northern Ireland is therefore part of the customs territory of the European Union. And so, in principle, EU tariffs are due on products from Great Britain that are at risk of being transported from Northern Ireland to Ireland – and thus into the EU internal market. When the Northern Ireland Protocol came into force, London and Brussels agreed on an initially temporary exemption that provided British companies with a certain quota of duty-free exports to the province.
An exception for London? Relations with Brussels are currently too bad for that
However, this changed in July after Brussels decided to combine the individual duty-free quotas for steel deliveries from third countries. In Brussels it is said that this so-called global quota is redetermined every quarter, but in this quarter the duty-free quota has already been exhausted. Apparently, this happened earlier than expected. And so the EU tariff of 25 percent applies not only to imports of certain steel products from Turkey, but also to those from Great Britain.
Sam Lowe, a trading expert at the consulting firm Flint Global, had already pointed out this problem in early August. In his blog he wrote that the strained relationship between London and Brussels has resulted in the EU Commission refusing to make an exception for the UK. The problem with the steel tariffs is “something that could be solved relatively easily if relations between the EU and Great Britain were better”. But that is not the case.
From the looks of it, that’s not going to change anytime soon. Because regardless of whether Liz Truss or Rishi Sunak succeeds Boris Johnson as prime minister, one thing is already clear: the British government’s Brexit policy will essentially remain the same. Both Truss and Sunak reiterated this week that they want to continue Johnson’s tough line on Brussels. This includes a law that allows the government to overturn parts of the Northern Ireland Protocol. The legislation has already been introduced in the House of Commons, but it will take some time before it can come into force. In any case, government circles are convinced that this law is necessary. The problem with the steel tariffs is the best argument for this, according to London.