EU raises spectre of trade war if UK rewrites Northern Ireland protocol

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The European Commission has raised the spectre of an economically damaging trade war with the UK, pledging to respond with “all measures at its disposal” if Liz Truss presses ahead with a plan to rewrite the Northern Ireland protocol.

The foreign secretary set out plans on Tuesday to table a bill that would make key changes to the protocol, including waiving all checks on goods flowing from Great Britain to Northern Ireland where they are not destined for the Republic of Ireland.

She said the UK government still hoped to agree the changes it believes are necessary, calling these “comprehensive and reasonable”. “Our preference is to reach a negotiated outcome with the EU. We have worked tirelessly to that end and will continue to do so,” she said.

But she claimed the protocol in its current form jeopardised the stability of the Good Friday agreement, which she said was “under strain”, and the government would act unilaterally if necessary.

“To respond to the very grave and serious situation in Northern Ireland we are clear that there is a necessity to act to ensure the institutions can be restored as soon as possible,” Truss said.

Part of the government’s motivation is to placate the Democratic Unionist party, which is refusing to enter a power-sharing government with Sinn F?in at Stormont unless the protocol is altered.

The DUP’s Westminster leader, Jeffrey Donaldson, said Truss’s statement was “a welcome if overdue step that is a significant move towards addressing the problems created by the protocol, and getting power-sharing, based upon a cross-community consensus, up and running again.”

His party would like to see progress on the legislation “in days and weeks, not months,” he said.

On Tuesday night, Germany expressed shock that the UK was tabling laws to disapply a treaty at a time when the west is accusing Vladimir Putin of international crimes. Berlin’s representative in Brussels, Sebastian Fischer, tweeted: “Let’s just all threaten each other with breaking international law. Makes for really good partnerships”.

Meanwhile the former taoiseach Leo Varadkar, a co-architect of the protocol, told a Co-operation Ireland business dinner in Dublin that the move was “breeding mistrust in EU capitals”.

Truss called for the EU’s top official in charge of UK relations, Maro? ?ef?ovi?, to be given a rewritten negotiating mandate that would allow the protocol to be revised. However, ?ef?ovi? responded to Truss’s statement by issuing a veiled warning that the UK could lose its free trade arrangements with the EU if it went ahead.

?ef?ovi?, a European Commission vice-president who has been leading talks on changes to the protocol, said Truss’s proposals raised “significant concerns”, adding: “Unilateral actions contradicting an international agreement are not acceptable.”

“Should the UK decide to move ahead with a bill disapplying constitutive elements of the protocol as announced today by the UK government, the EU will need to respond with all measures at its disposal,” he said in a statement.

The EU could hit UK goods with tariffs within seven days of legal action or freeze the entire trade deal agreed with Boris Johnson in 2020, two of three immediate weapons at its disposal, according to Catherine Barnard, an EU law professor at the University of Cambridge. Legal action against the UK that was frozen as a goodwill gesture last year would probably be restarted.

Truss said the new legislation would be published within weeks, including plans to create a “green channel” allowing goods to be exported from Great Britain to Northern Ireland without checks as long as they are not destined for the Republic of Ireland.

She said this would create a “dual regulatory system that encompasses either EU or UK regulation as those businesses choose; that reflects its unique status of having a close relationship with the EU, while being part of the UK single market”.

The legislation would also let the UK determine tax and spending in Northern Ireland. Truss pointed to the chancellor’s recent decision to cut VAT on green energy installations, which she said he was unable to implement in Northern Ireland.

Brussels sources say no decisions have been taken about how to respond if Truss does legislate and expressed hope the UK would return to the negotiating table to discuss changes proposed by the EU. It was suggested that if the government tabled a bill, Brussels would issue a formal warning and launch a process to decide on retaliatory measures.

EU insiders believe the UK has never seriously engaged with what they see as far-reaching proposals to lighten customs and administrative checks made by ?ef?ovi? last October.

However, Truss dismissed these in the Commons. “Their current proposals are not able to address the fundamental concerns. In fact it is our assessment that they would go backward from the situation we have today with the standstill,” she said.

EU sources also point out that a change in mandate would require unanimous signoff by all member states. They said there was no desire to change ?ef?ovi?’s mandate to enable wholesale changes to the protocol, a matter Truss described as a “fundamental issue”. The senior EU diplomat poured cold water on this idea, saying: “The EU doesn’t have a mandate, the protocol is the mandate.”

Richard Neal, the influential chair of a US congressional committee who is heading to London and Brussels in the coming days in an attempt to head off further deterioration of Anglo-Irish relations, said: “Northern Ireland shouldn’t be held hostage in the political process, rather all parties must stay the course and continue to work together to find durable solutions.”

Neal is leading a delegation of at least half a dozen US congressional representatives to Europe amid rising tension over the Northern Ireland protocol. His trip will take in London, Brussels, Dublin and Belfast.