How the Northern Ireland protocol divides Britain and the EU

Britain said on Tuesday it would push ahead with a new law to effectively override parts of a post-Brexit trade deal for Northern Ireland, inflaming tensions with Europe.

Below are details on how trade rules work in Northern Ireland, the impact it has had on the province's politics and what the new dispute could mean for UK-EU ties.

WHAT IS THE NORTHERN IRELAND PROTOCOL

As part of Britain's departure from the EU, Prime Minister Boris Johnson's government agreed to effectively leave Northern Ireland within the EU's single market for goods and customs union given its open border with EU member Ireland.

That created a customs border in the sea between the rest of the United Kingdom and the province, which pro-British communities say erodes their place within the UK.

London says the attendant bureaucracy created by the Northern Ireland Protocol is intolerable and that it is now threatening the 1998 peace agreement that mostly ended three decades of sectarian violence in the province.

CHECKS AND PAPERWORK

Many of the checks on goods coming from Britain have not been implemented after London applied grace periods. Where changes have come into force, paperwork, costs and staffing- needs have risen.

Britain says a "green lane" should be introduced for products destined for Northern Ireland, avoiding the full checks needed for the EU. Additional labelling would increase costs for producers however.

British retailer Marks & Spencer says it takes around eight hours to complete post-Brexit paperwork to move goods into its stores in the Republic of Ireland, and around an hour for Northern Ireland currently, due to the grace periods.

During the first year of the protocol trade between the Republic of Ireland and Northern Ireland jumped, with imports up 65% and exports to the province 54% higher, suggesting stronger ties between Northern Ireland and the Republic.

WHAT BRITAIN WANTS, WHAT BRUSSELS SAYS

Britain has tried to force a change over Northern Ireland trade before, through an Internal Markets Bill that several British officials described to Reuters as a "shock tactic".

After an initial backlash, trade talks resumed. The EU offered to ease the rules in October, 2021 but Britain said they did not go far enough, and were actually worse than the current operation in some regards.

Government officials say when the protocol was signed, both sides agreed that some parts might need to change if the treaty produced problems for the province.

Under the new plans, legislation would ease the movement of goods, apply Britain's tax regime in Northern Ireland and hand London more say over the laws governing the province.

The EU says the protocol is a legally binding treaty that was freely entered into by the UK government, and is frustrated by 'Groundhog Day' cycles of repeat crisis over the issue.

Brussels says any unilateral action is unacceptable but has repeatedly said it is willing to look for practical solutions within the existing framework.

WHAT COULD EUROPE DO?

The Commission could relaunch "infringements proceedings" that were originally triggered by a British move to extend grace periods. They were halted in favour of more talks.

The Commission could immediately restart those proceedings, concerning alleged breaches of EU law, although it could take two years before any European Court of Justice ruling and fine. It could also just retaliate over a broken treaty.

The Commission could also look at a separate dispute settlement system which was included as part of the Brexit divorce and trade deal. That could lead to the suspension of parts of the EU-UK trade agreement and result in the imposition of tariffs.

THE ROLE OF THE UNIONISTS

Elections to Northern Ireland's regional assembly this month reaffirmed that a majority of lawmakers favour retaining the protocol and that it should be refined in talks with the EU. All pro-British unionist politicians are opposed to it.

The Democratic Unionist Party, the largest pro-British party, has refused to enter a power-sharing administration until the protocol has been replaced, preventing the assembly from sitting.

The DUP, which fears a loosening of ties with the British mainland, wants the removal of all checks or planned post-Brexit checks on goods moving from Britain to Northern Ireland. It said the UK threat of unilateral action was not sufficient.

The Irish nationalist Sinn Fein, the province's biggest party following the assembly elections, accepts the protocol given the party's goal of Irish unification and wish to remain in the EU.

With small militant groups still behind some sporadic violence in the region, analysts say a political vacuum is never good in Northern Ireland. However there was no major impact when a disagreement between the major parties meant the regional assembly did not sit between 2017 and 2020.

The Northern Irish Assembly is due to vote for the first time in 2024 on whether to retain the protocol. If a simple majority votes against, it would cease to apply after a further two years. However, if, as expected, lawmakers vote to retain it, the next vote will be held four years later.

CAN BRITAIN AND EUROPE AFFORD A TRADE WAR?

With inflation surging in Britain and the EU, a trade war would be damaging to both sides. Johnson's government has ramped up the rhetoric on multiple occasions, before softening its tone. But the issue remains unresolved.

Philip Shaw, chief economist at Investec, said the pound remained potentially liable to a further sell off if it looked like Europe could impose tariffs.