PARLIAMENTARY DEBATE
Trade Diversion and Windsor Framework - 4 March 2025 (Commons/Commons Chamber)
Debate Detail
We can get an insight into how things naturally should be and how business wishes them to be by looking at the Northern Ireland Statistics and Research Agency figures of recent years. If we look at the pre-protocol days, we see that in 2018, for example, the volume of goods purchased from the Irish Republic was £2.8 billion, but the amount purchased from GB was five times that—£13.4 billion. There we have a snapshot of the natural inclination of trade in Northern Ireland, particularly for our raw materials.
Before Brexit, there was a similar situation. Indeed, we could say—and some may say—that that is a better reflection of whether there has been trade diversion. Before Brexit, we could as readily buy our goods from the Republic as we could from GB, because we were all in the EU single market. Even then, the predominant trading of choice was from GB. That is no surprise because for decades Northern Ireland has been a particularly integrated part of the UK economy.
However, along came the protocol, which requires Northern Ireland to be subject to a foreign customs code—that of the EU—which of course treats GB as if it is a foreign country. Therefore, when goods come from outside the EU into the EU, and we in Northern Ireland are regarded as being in the EU for these purposes, those goods have to be checked, with customs declarations, documentary checks and physical checks on, for example, all our raw materials. So it is no surprise that that is inevitably bound to cause diversion of trade.
We were told, as part of the spin of selling the protocol, “Oh, there are protections against the diversion of trade, and it wouldn’t be allowed to happen”. Article 16 of the protocol, we were told, was our safety net:
“If the application of this Protocol leads to…diversion of trade…the United Kingdom may unilaterally take appropriate safeguard measures.”
It has led to the diversion of trade, but the United Kingdom Government have not taken unilateral action in that regard.
The fact of the diversion of trade is a challenge to the protocol’s proponents. It is a challenge to those who put this upon us, and it is one that they have to meet, but which I fear they will not meet. Where is the proof, some may ask, of the diversion of trade? Again, it is in the NISRA statistics. Dr Esmond Birnie, a renowned economist in Northern Ireland, has done a succession of studies of the NISRA statistics. He wrote back on 11 December 2024 that the data
“provides further evidence that the NI economy is becoming more trade integrated with the Republic”,
and of
“North-South trade growing at very rapid rates at the expense of what previously was an inflow of goods from GB.”
We also see that in the purchase of goods figures that NISRA reports. It has given us figures from 2020, contrasting them in a table with those for 2023. The year 2023 was only the beginning of things getting difficult, as the Irish sea border did not in effect come into place until October 2023 because of the grace periods. However, those NISRA figures show that Northern Ireland’s purchases of goods increased from 2020 to 2023—of course, it was a period of inflation—by 24% from GB, but by 50% from the Republic of Ireland, meaning twice the growth rate in the buying of goods into Northern Ireland that would previously have come from our integrated United Kingdom economy.
The Office for National Statistics business insights and conditions survey states that 13.1% of currently trading manufacturers based in GB had sent goods to Northern Ireland in the past 12 months. That was at the end of 2024. But in January 2021, 20% of manufacturers in GB were sending goods to Northern Ireland. So, in just those four years there has been a dramatic fall in the number of manufacturers supplying goods to Northern Ireland. It has nearly halved in four years. The ONS data for 2024 tells us more: 11.7% of companies tell us they have stopped trading with Northern Ireland. Why? Because of the bureaucracy, because they have to make customs declarations, because they have to have them checked, and because they have to employ extra staff to do all that. Many companies, particularly in smaller sectors, have simply said that they are not going to do it.
It is beyond doubt, I would respectfully say, that there has been trade diversion. Back in September, the Road Haulage Association gave evidence to a parliamentary Committee of this House. It told the Committee that 30% of haulage lorries that take goods to GB are returning empty. Why? Because GB companies have stopped supplying. Now, that is an incredible thing to contemplate. Trade works on the basis that you take goods out, and then you fill your lorry and bring goods back. That is how you make it viable and how the economy works. That 30% of lorries now returning to Northern Ireland are returning empty is an incredible indictment of the operation of the protocol.
And things are getting worse. The EU regulation on general product safety now puts more burdens on companies selling into Northern Ireland, because they have to meet enhanced EU product safety regulations. I have mentioned the craft sector in this House before. Recently, 11 suppliers in that niche market stopped supplying Northern Ireland. It will get worse, because the partial border is coming and they will have to do more paperwork and make more declarations about sending simple parcels from GB to Northern Ireland. Tesco has slides that it shows to its own suppliers stating that they should now buy from the Republic of Ireland because it is easier to supply from there than from GB. The same is happening in veterinary medicines and in every sector.
Why does that matter? It matters for a very pertinent political reason. The whole idea of trade diversion and the whole purpose of the protocol was and is to build an all-Ireland economy: to dismantle the economic links between Great Britain and Northern Ireland and enhance links with the Irish Republic, thereby creating stepping stones out of the United Kingdom into an all-Ireland for Northern Ireland. That was the determination that lay behind the protocol.
We do not need a protocol to govern trade. It is demonstrable that if we can organise trade through Northern Ireland to GB without border checks in the Irish sea, and if, as the Government now say is possible, we can do it with checks away from the border, then equally we could do it in the other direction, through mutual enforcement. That would mean recognising that if we are going to export from one territory to another, our manufacturers must produce goods to the standards of the other, and we would enforce that by making it a criminal offence to do otherwise. That is the essence of mutual enforcement. It would work, but it is not allowed to work, because the political agenda of the protocol is to ensure this reorientation and realignment.
We are told that we now have Intertrade UK, but it has no staff and no budget, in comparison with InterTradeIreland, which has more than 50 staff and a budget of £6.5 million a year and is active across the whole area. Intertrade UK has been set up as a shadow, but it is not able to compete in any sense.
This Government have allowed the economy of Northern Ireland to drift out of the United Kingdom. I believe those who are protocol enthusiasts want that to happen. Now it is happening, the onus is back on the Government to do something about it.
Does the hon. and learned Gentleman agree that the diversion of trade has not only political but economic implications for Northern Ireland? There are increased transport costs, because lorries do not come both ways with goods in them; there is the fact that many people chose suppliers in England because they are cheaper, better-quality and so on, and now manufacturers in Northern Ireland are having to go to the second-best suppliers; and there is also the additional paperwork that is involved. That all adds to costs and makes the Northern Ireland economy less competitive, which therefore makes it more difficult for it to be viable.
The United Kingdom was built on two pillars, according to the Acts of Union. The first was a political union, with article 3 establishing this House as one sovereign Parliament for the whole United Kingdom; the second was an economic union, through article 6, which established unfettered trade between and within all parts of the United Kingdom. That was what article 6 said—that there should be unfettered trade. But along came the protocol, which fettered trade, leaving the Supreme Court with no choice but to accept that the protocol had therefore subjugated article 6. The very foundation of our economic union, article 6, which says that there shall be unfettered trade, is in suspension. It is no wonder that the consequence of that fettering of trade is a diversion of trade.
I return to the point that the protocol is imbued with a political motivation, and that motivation is not to get Northern Ireland the best of both worlds. My goodness, what a con that idea is. The protocol was supposed to make Northern Ireland a Mecca, a Singapore of the west, but we now know that there has been no uplift whatsoever in foreign direct investment. Why? Because a manufacturer coming to Northern Ireland is interested not just in selling goods out of Northern Ireland, but in where it is getting its raw materials. When a manufacturer is told that its basic supply line has to pass through an international customs border controlled by the EU, the shine soon goes off the prospect of investing in Northern Ireland.
We are in a pretty dire situation, which is getting worse, and which has massive constitutional and economic implications, but I fear that the Government are deaf and blind to the issues, because they do not want to face the consequences. They are hand in glove with the EU, dismantling Northern Ireland’s place in the United Kingdom, and setting us on a course for the economics marrying with the politics, and Northern Ireland ceasing to be.
The Government need to find some dignity and stand up for this United Kingdom, which is not just Great Britain but includes Northern Ireland. It is time to put some mettle into defending that position, and to row back from the disastrous destructive elements that the protocol has brought us.
For the Government’s part, I want to be equally clear. We needed to have a system in place for managing a unique set of circumstances. The system we have is the inevitable result of leaving the European Union. That is where this all began; if that had not happened, we would not be having this discussion. What did that result in? Two trading entities—the United Kingdom and the European Union—with different rules, but an open border between them. That is to be found nowhere else in the world. In other words, all of us together—everyone has to take responsibility for what they argued for, and for the consequence of that—faced the question: how do we deal with the unique situation of two trading entities with different rules having an open border between them?
The first go at trying to find an answer was the Chequers plan, which did not get support. The Northern Ireland protocol was the second go, but that was never going to work—I made that argument as an Opposition Back Bencher—so the Windsor framework was negotiated. There is no denying that the Windsor framework represents a huge improvement on the prospect created by the Northern Ireland protocol.
We are a responsible country. Some may argue that we should be irresponsible and say, “Well, this is not our problem; let us leave it to the EU to sort it out.” In the end, we had to have a negotiated answer to the question created by our departure from the European Union on the goods that cross that non-existent border. The one thing that almost everybody agreed on during the Brexit debates was that the border needed to remain as it was. That open border is important for a whole host of reasons, not least the extraordinary progress that Northern Ireland has made in the 26 years since the signing of the Good Friday agreement. The question, therefore, was: how does the EU ensure that goods that cross that border and come into the Republic, and go on to France, Germany or Greece, meet the rules? In exactly the same way, we would ask: how do we know that goods coming into the United Kingdom meet our laws? The only way to do that was with a negotiation.
The Windsor framework protects the UK internal market, while, as I argued a moment ago, enabling the EU to be confident that its rules will be respected. The Government’s view and my view is that that was the responsible thing to do in the circumstances, because this Government support sustainable arrangements for Northern Ireland that respect its particular circumstances —indeed, they are unique—and its place in the Union, and that uphold the Good Friday agreement. The hon. and learned Member for North Antrim’s central argument this evening is that we should trigger article 16, the unilateral safeguard in the Windsor framework. To do that would be contrary to Northern Ireland having stable arrangements for trade, now and in future. It would disregard the benefits that the Windsor framework offers for businesses—indeed, the benefits that are actively relied upon by businesses, including those that are taking advantage of Northern Ireland’s unique access to the UK and EU markets—[Interruption.] The hon. and learned Member for North Antrim shakes his head, but I have met businesses that have told me how they are taking advantage of that dual market access. I meet businesses in my constituency that can see what Northern Ireland has got out of these unique arrangements.
Those benefits will be enhanced by the UK internal market “facilitations”—that is the phrase—that will come into force in the near future, and that will, on a durable and legally binding basis, support the smooth flow of goods across the whole of the UK when the next phase of the UK internal market system is implemented this year, without, for example, unnecessary international customs paperwork.
We have seen the benefits of negotiating a way forward. There is unilateralism, as the hon. and learned Gentleman argues, and there are the benefits of negotiation. In respect of agrifood and sanitary and phytosanitary measures, we have been able to lift the old ban on the movement of seed potatoes. Not all those problems have been solved—I am the first to acknowledge that—but it is an improvement compared with the situation before. We are now able to apply UK public health and safety standards to agrifoods on the basis of primacy for goods staying in the United Kingdom moving under the Windsor framework schemes. We have reached agreements with the EU on tariff rate quotas, enabling businesses from Northern Ireland to import steel and agrifood products under UK tariff rates.
We also have an active Assembly that is scrutinising the regulations and raising its views—[Laughter.] Well, I will come back to that point later on. Medicines for the whole of the UK are now authorised by the Medicines and Healthcare products Regulatory Agency, and we have ensured that Northern Ireland benefits from the same VAT, alcohol duty and other taxes as the rest of the UK.
All of those are undoubted benefits for Northern Ireland. They are benefits of the framework that supports Northern Ireland’s access to the two markets, and from which this integral part of the United Kingdom, which Northern Ireland is, uniquely benefits. This is possible because we have a lawful and sustainable agreement, in stark contrast to what the hon. and learned Gentleman has proposed as a way forward.
I would be the first to acknowledge from this Dispatch Box that the Windsor framework is not perfect. We all know that. Where problems arise with the practical operation of the framework, this Government and the EU have tried to show that we can work through them in a constructive and pragmatic way, because that is what we have to do. For example, having listened to businesses, we took a pragmatic decision to extend on the timetable for implementing the new arrangements on parcels. One of the consequences of doing that was that the introduction of the new, less onerous customs arrangement was put off, because the EU’s view was that we needed to do the parcels at the same time in order for the new customs arrangements to come in.
Another example is the horticultural sector, where, in the last month the restrictions on the movement of two species of plant were removed. If we are talking about trees, I think that takes it up to 23, including our beloved silver birch and, I am advised, a number of varieties of cherry tree that were sorted out at the end of last year.
On the question of the Stormont brake, we acted on the concerns that the Northern Ireland Assembly raised about the potential implications of the new rules on chemical labels, font sizes and so on by committing to consult on taking forward measures across the UK that will protect the UK internal market. I would just point out—because the hon. Gentleman looks slightly sceptical —that there is a high bar to be met for the Stormont brake. When I received the application as Secretary of State, I was under a legal obligation to consider the application under the rules of the Stormont brake, and I made the decision that I did. In the end, what the Government announced was moving towards the same outcome that those who had raised the concerns in the first place wanted, just by different means than they had sought. In the end, the Stormont brake process actually worked to achieve the outcome that the Assembly wanted.
“So high, you can’t get over it,
So low, you can’t get under it”.
The Stormont brake does not work because it is too high and too low; it is just not functional. In my intervention on the hon. and learned Member for North Antrim (Jim Allister), I referred to the HMRC cost. To give the Secretary of State an example, last week a business said that the HMRC charges have got to the stage where they are even more expensive than the goods the business is bringing in. There has to be something wrong when it gets to the stage where it is not the issue of getting the product across but the cost factor. Could the Secretary of State look at that, because there is something wrong with a system that ends up costing us more, when it did not cost that amount before the Brexit system came in?
On trade, I have a slightly different set of figures from those that the hon. and learned Gentleman used. From 2020 to 2023, purchases in Northern Ireland from GB went from £13.4 billion to £16.2 billion—an increase of 20.7%. Sales to the year ending December 2023 from Northern Ireland to GB rose by 12.4%, to £17.1 billion. He used a phrase at the beginning of his speech—I hope I wrote it down correctly—the “natural inclination of trade”. I would simply observe that the inclination of trade is a consequence of decisions that individuals and firms make, and those patterns change over time depending on what they want to buy or sell and what the market itself looks like.
The point I was making, without seeking gratitude, is that in every one of the examples I have just given, the Government worked to resolve the challenges we faced, working with stakeholders in Northern Ireland and with the EU, in what I think is a constructive and mutually beneficial way. That is what a responsible Government do, including abiding by commitments in international law on the world stage. The hon. and learned Gentleman advocates triggering article 16. That measure refers both to trade and to instances where serious economic, societal or environmental difficulties are liable to persist. Given that most goods are flowing relatively smoothly between Great Britain and Northern Ireland, how can it be argued that we are facing those difficulties?
I would just make the point that if one goes to the port, the lorries come off and most of them go on their way—the goods are moving. That is in contrast to the argument that the hon. and learned Gentleman put towards the end of his speech, when he used the phrase “cripple” in relation to the Northern Ireland economy. I have seen no evidence that the Northern Ireland economy, which, by the way, has the lowest unemployment in the whole of the United Kingdom, is being crippled by the matters that we are discussing.
As I have indicated, the Windsor framework represents a step forward. Although I respect the sincerity with which the hon. and learned Member for North Antrim makes his argument, I do not believe that current circumstances meet the article 16 test. Pulling that lever in the current circumstances would actually throw away the progress secured by the framework and damage the good faith that has been built up in taking the framework forward. We all need to remember that, not long ago, we had a Government who signed an international agreement and then set about showing that they had no intention of honouring it. That did extraordinary damage to the United Kingdom’s international reputation.
In the past, the idea that the UK would be a country that signed an international agreement and then reneged upon it would have been extraordinary to us all in this House, but that is what happened in very recent living memory, and it is why I put this point to the hon. and learned Gentleman.
The last Government negotiated the Windsor framework. I stood up in the House and supported it. The Opposition supported it at that time, and I voted for it because I genuinely believed that it represented a significant step forward. But if we do not honour the most recent agreement that we have signed with the European Union, why would it wish to reach agreement on what this Government are currently seeking, in particular on an SPS veterinary and agrifood agreement? This Government have come in saying that we want to do that, while the last Government appeared to say, “Well, the trade and co-operation agreement is all we want—we don’t want anything else.” This Government have a very different view: we want to negotiate an SPS veterinary and agrifood agreement, and that would help considerably with some of the issues that have been raised during the debate. The Government will continue to listen to the concerns of businesses and respond pragmatically.
I wanted to point out that the independent monitoring panel, which I met for the first time yesterday, has started its work. Establishing the panel was a commitment made in the safeguarding the Union Command Paper. Its job will be on the basis of the evidence and it will be provided with data on the flow of goods between Great Britain and Northern Ireland to say whether the UK internal market guarantee is being met. The first six-month reporting period commenced on 1 January and will conclude on 30 June 2025, following which the IMP will publish its assessment and any recommendations. I commit to the hon. and learned Member for North Antrim, and all those who contributed to the debate, that I shall consider the report with the same attention to detail that he has shown in forwarding his argument today.
To conclude, this Government are committed to Northern Ireland. They are committed to the United Kingdom and to implementing the Windsor framework in a manner that is consistent with protecting Northern Ireland’s place within our internal market.
Question put and agreed to.
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