(Bloomberg) --
Brexit was supposed to be over. But with tensions over Northern Ireland flaring, the European Union is preparing a package of retaliatory measures in case the U.K. decides to suspend parts of the post-Brexit trade accord.
The scope of any EU counter-move would depend on just how far the U.K. goes in abandoning the rules, and whether it scraps part or all of the accord, according to officials familiar with the bloc’s preparations. The EU’s Brexit negotiator, Maros Sefcovic, will brief European ambassadors Wednesday on the status of the negotiations with London.
The stakes couldn’t be higher. If the conflict is mishandled, it could stoke sectarian tensions in Northern Ireland and demolish the hard-fought trade agreement the EU and U.K. signed last year, putting Prime Minister Boris Johnson’s government back on track for what would effectively be a “no-deal” Brexit.
Options for the EU stretch from resorting to legal arbitration, which could take years, to increasing border checks and even suspending the post-Brexit Trade and Cooperation Agreement, said the officials, who asked not to be identified because the discussions are private.
Northern Ireland
At issue is the so-called Northern Ireland protocol, the agreement that allowed the U.K. to leave the EU’s single market without creating a hard border on the island of Ireland. Under the deal, goods moving into Northern Ireland from the rest of the U.K. are subject to customs checks if they are at risk of being later moved into the EU.
Britain is demanding changes to the accord, which the government says has inhibited trade between different parts of the U.K.’s own single market.
U.K. Brexit minister David Frost has said that if a satisfactory resolution isn’t reached, he’s willing to trigger Article 16 of the protocol, which allows either side to introduce safeguard measures in case of “economic, societal or environmental difficulties.” Frost will discuss the issue in London on Friday with Sefcovic, who has said this week would be “an important one.”
If the U.K. were to trigger Article 16 in a limited way -- using specific safeguard measures on some goods crossing into Northern Ireland -- then the EU will likely challenge the move in court, according to one of the officials.
This type of infringement procedure could take years to resolve and would likely end up in the European Court of Justice. Some member states are pushing for stronger action from the EU side that would send a firmer message to London, the officials said.
Nuclear Option
Officials in Brussels are very reluctant to discuss how they would respond to the U.K. invoking Article 16, in part because they still aim to avoid that outcome. Ministers have yet to be presented with a formal set of possible responses.
For the EU, the strongest retaliation would be to terminate the wider Trade and Cooperation Agreement, the deal struck in December that provides for the free trade of goods between the U.K. and the bloc.
Brussels would be required to give a year’s notice -- allowing for a repeat of last year’s frantic trade negotiations. Unless it’s defused, that move would lead to tariffs being reimposed on goods as well as traffic-snarling customs controls at ferry terminals. The option is seen by some officials as the simplest one for EU countries, since the tariff hikes would happen automatically and spare governments from having to agree on specific sectors to target for punishment.
Divisions are already emerging among EU countries, with some like France pushing for a tough reaction and others, including Germany, taking a more cautious line, according to officials. But EU capitals remain concerned about the effect any action would have on the stability in Northern Ireland.
The British government hasn’t indicated to the commission if it intends to trigger Article 16, but has said it’s still engaged in the protocol process, one official said.
Irish Foreign Minister Simon Coveney confirmed this week that the post-Brexit trade deal was in jeopardy, adding that the U.K. was “deliberately asking for what they know they can’t get.”
“It’s possible that we’ll end up with tariffs being imposed, but I don’t think either side particularly wants that,” said Anand Menon, director of the think tank The U.K. in a Changing Europe, and professor of European politics and foreign affairs at King’s College London. “If the U.K. is found to be in breach of its treaty obligations, the EU can retaliate and that can mean suspending the TCA.”
The EU has offered compromises that it says would reduce customs checks on goods arriving in Northern Ireland by half, and inspections on many food products by 80%. But the U.K. shot the proposal down, saying it “did not currently deal effectively with the fundamental difficulties.”
Frost has also made clear that he wants to see the removal of the role of the European Court of Justice in overseeing the Northern Ireland protocol. The EU has said this isn’t possible.
Frost has declined to give details about the U.K.’s next move, but told reporters next week that “Article 16 is very much on the table.”
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