EconomyUK plans for Northern Ireland stoke Treasury fears of...

UK plans for Northern Ireland stoke Treasury fears of EU trade war

Boris Johnson’s tough new stance on the post-Brexit status of Northern Ireland has set off alarm bells in the Treasury, where officials fear it could provoke the EU into starting a trade war, which would worsen the cost of living crisis.

Johnson has been secretly drawing up legislation that would give ministers sweeping powers to tear up the post-Brexit deal governing trade in Northern Ireland, the NI protocol.

But senior officials have told the FT that the move has worried the Treasury, which fears that if Johnson used the powers it could lead to a damaging retaliation from Brussels.

“If you have a trade war that will have an impact on the economy, especially when you have an actual war going on in Europe,” said one. Another confirmed the policy was causing concern at the Treasury.

Johnson told ministers this week to come up with ways to cut the cost of living, but Treasury officials fear a trade war would push up prices further.

So far Rishi Sunak, chancellor, has not been involved in the detail of the policy, drawn up in conditions of secrecy by Johnson with Liz Truss, foreign secretary, and Brandon Lewis, Northern Ireland secretary.

Johnson has confirmed he is prepared to legislate to allow ministers to revoke parts of the protocol, which keeps Northern Ireland in the EU single market for goods, thereby creating a trade border in the Irish Sea.

The proposed Northern Ireland bill, whose existence was disclosed by the FT this month, has yet to be approved by the cabinet. Last year Sunak warned about the economic risks of unilaterally scrapping parts of the protocol.

On Wednesday Johnson told MPs: “There is clearly an economic cost to the protocol. That is also now turning into a political problem.” The pro-UK Democratic Unionist party opposes the protocol and the border in the Irish Sea. The region is holding elections on May 5.

Last autumn the EU discussed possible retaliatory measures as Johnson flirted with the idea of suspending parts of the protocol. Since then Emmanuel Macron, who takes the hardest line on the issue, has been re-elected as president of France.

Many diplomats are furious with Johnson for raising the dispute when the west is struggling to maintain unity on sanctions on Moscow. “We are sick of hearing of Boris’ emotional difficulties [with the EU],” said one diplomat. “There are bigger things to worry about.”

However European diplomats insisted this week the EU will not be provoked into a trade war with the UK, and that the bloc would be patient. They did not want a fight with Johnson that would boost his popularity with pro-Brexit Tory MPs.

“We don’t want to become part of a Tory leadership contest,” said one diplomat, referring to the possibility that Johnson could be challenged by his own MPs.

The diplomat noted that any legislation would be opposed in the House of Lords and it could be months before the UK could use it. “We don’t want to make life impossible for a future Tory leader,” he added.

“Why should we react?” said one official, adding that the plan was to hope Johnson was ousted and the bloc could build a more pragmatic relationship with his successor.

Another senior official said the Ukraine crisis was absorbing all the EU’s time and attention. “Those conversations [about retaliation] have not happened. Nobody is focused on the UK. Since February 24 the only big thing on our plate has been Ukraine and Russia.”

EU countries are wary of inflicting further pain on their own companies and consumers already struggling with rising prices partly caused by Russia’s invasion of Ukraine.

They are also relying on the US to restrain Johnson. Washington reacted to the FT’s report on the UK’s plans to legislate by reiterating the importance of the Northern Ireland protocol to peace on the island.

Lord David Frost, former Brexit secretary who negotiated the protocol, said on Wednesday it would be “entirely reasonable” for the government to act unilaterally to override elements of the deal in domestic law.

He said the protocol was not intended to be “a permanent feature” of Britain’s relationship with the EU. “It would be entirely wrong and unwarranted to draw any conclusions about our wider attitude to international law,” he said, in a speech at the Policy Exchange think-tank.

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