Brexit has hit the UK economy hard. The new deal with Northern Ireland gives hope | CNN affairs



The groundbreaking deal on Northern Ireland’s trade arrangements heralds a reset of the often thorny relationship between the UK and the European Union – and could be the first step in mitigating some of the damage Brexit will do to the UK economy caused to restore.

Unveiled Monday by British Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen, the “Windsor Framework” addresses issues with the Northern Ireland Protocol, a source of bitter dispute between Britain and the European Union since they have finalized their divorce settlement for three years ago.

The protocol was designed to allow Northern Ireland, which is part of the United Kingdom, to remain within Europe’s huge market so that it could trade goods freely across its land border with the Republic of Ireland, an EU member state. Its effect, however, was to disrupt trade between Britain and Northern Ireland and to enrage trade union politicians in Belfast.

Trade experts say the new deal ends the threat of a trade war between the UK and the EU and boosts goodwill between the two sides, boosting business confidence. It also paves the way for more cooperation in other areas, which could unlock much-needed investment in the UK.

“I think this is an important moment,” said David Henig, UK director at the European Center for International Political Economy, a think tank. While not immediately meaningful for trade, it marks “a new phase” in the relationship, “to say, ‘we’re back in the UK and the EU and trying to do more together,'” he told CNN.

The deal means a “stronger relationship between the EU and the UK, standing shoulder to shoulder as close partners, now and in the future,” von der Leyen said on Monday. It delivers “long-term solutions” that will work for the people and businesses of Northern Ireland, she added.

To avoid a politically sensitive hard border on the island of Ireland and risk the return of sectarian violence, the Northern Ireland Protocol created a de facto customs border in the Irish Sea between the island and mainland Britain.

But new controls on goods moving between mainland Britain and Northern Ireland have upended supply chains, increased costs for businesses and angered the pro-British Democratic Unionist Party, leading the devolved government of Northern Ireland collapsed last year.

Sunak and von der Leyen are confident that the new agreement has been reached changes will resolve these tensions.

For example, the deal creates a “green” lane allowing goods from Britain destined for Northern Ireland to pass through ports with a minimum of paperwork, checks and duties, while those transiting to the Republic of Ireland must use a “red” lane. Roadway.

It also allows the UK government to set sales tax rates for businesses in Northern Ireland and gives the Northern Ireland government emergency powers to oppose new EU rules on some goods.

“Today’s agreement ensures smooth trade throughout the United Kingdom, protects Northern Ireland’s place in our union and safeguards the sovereignty of the people of Northern Ireland,” Sunak said.

Aside from its importance to Northern Ireland, the deal eases the uncertainty Brexit has created for Britain.

According to Kallum Pickering, a senior economist at Berenberg, it removes the threat of a “tit-for-tat trade war with the UK’s largest market”, which has “badly held back business investment”.

“While the UK will have a lasting impact on its growth potential following its decision to increase trade barriers with the EU, the main factor holding back the UK economy since the referendum has been uncertainty,” he wrote in a note Monday.

“If this comes to an end, we expect the UK’s sound fundamentals – well-capitalised banks, cash flush households and companies and well-regulated markets – to reassert themselves.”

The UK needs all the help it can get. It is the only major economy expected to contract this year, according to the International Monetary Fund, and has yet to regain its pre-pandemic size.

The new Northern Ireland deal opens the door to a closer UK-EU cooperation in financial services, energy, immigration and scientific research, according to experts.

In an instant victory for UK universities, the UK may now join Horizon Europe, a major EU research and innovation funding program with a budget of €95.5 billion ($101 billion).

This is a “very clear price,” and not just for researchers and academics, said L. Alan Winters, co-director of the Center for Inclusive Trade Policy at the University of Sussex.

It “locks Britain back into the scientific research community in Europe … Research and development is a huge part of the modern economy,” he told CNN.

The deal could also help Britain forge closer ties with the United States, which has taken a keen interest in the Northern Ireland issue under President Joe Biden.

Biden, who is of Irish descent, has done so in the past warned against making the Northern Ireland peace deal – the Good Friday Agreement – ​​a “victim of Brexit”. Democratic legislators in the United States have, too criticized attempts by the British government under former Prime Minister Boris Johnson to rewrite and even override the protocol.

Biden welcomed the agreement Monday.

“I am confident that the people and businesses of Northern Ireland will be able to take full advantage of the economic opportunities this stability and security provide, and the United States stands ready to support the region’s tremendous economic potential,” he said in a statement.

Marjorie A. Chorlins, senior vice president for Europe at the US Chamber of Commerce, added that the deal has created a “solid foundation for a more effective partnership” between the United States and Europe.

For any British government, by far the greatest economic victory for Britain would be a free trade deal with the United States. While that still seems a long way off, given that Biden has little appetite for international trade deals, the Northern Ireland deal removes at least one obstacle.

“It will really improve the tone of relations with the US,” said Henig of the European Center for International Political Economy, adding that it could revive regular dialogue between the two sides on their future trade relationship.

In many ways, the Northern Ireland deal is just the first step towards repairing the damage Brexit has done to the UK economy and its international reputation.

“You have to deal with the protocol before you do anything else,” says Anna Jerzewska, the founder of international trade consultancy Trade & Borders.

Although the new deal does not change the cumbersome trade arrangements between the UK and the EU, but provides a stronger and more stable base from which the UK can navigate its post-Brexit future, even if the road ahead still looks dangerous.

“There is still a lot of uncertainty about what the eventual stable relationship between the UK and the EU will be, particularly how much the UK will deviate from EU regulations,” said John Springford, deputy director of the Center for European Reform, a think tank.

That could spark new conflicts in the future, but a resolution for Northern Ireland increases the likelihood of these being resolved in a way that involves “more compromise and less confrontation,” he said. said.

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