The macroeconomic impacts of the new protocol on Northern Ireland and how they can be mitigated

Duparc-Portier, Geoffroy and Figus, Gioele (2021) The macroeconomic impacts of the new protocol on Northern Ireland and how they can be mitigated. London School of Economics, London. (https://blogs.lse.ac.uk/politicsandpolicy/macroeco...)

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Abstract

In 2018, before the UK had withdrawn from the EU, almost 30% of Northern Ireland’s goods purchases came from Great Britain and over 13% from the EU. Goods could circulate free of checks and paperwork as all the regions were part of the EU single market. Since the UK has withdrawn from the EU, such purchases are now subject to new regulations. These regulations are the New Protocol on Northern Ireland and the Trade and Cooperation Agreement (TCA). The Protocol allows Northern Ireland to stay in the EU’s customs union for goods. This avoids a hard border with the Republic of Ireland and safeguards the Good Friday Agreement. However, since Great Britain is no longer part of the EU’s customs union, the new protocol has led to the introduction of customs checks for goods entering Northern Ireland from Great Britain. These checks were introduced to ensure that these goods align with EU customs rules. The other regulation, the TCA, is an agreement between the UK and the EU allowing for goods to be traded without tariffs or quotas if the products traded meet specific rules of origin. Combined with the UK Internal Market act, which allows Northern Ireland to have unfettered access to the UK single market, these rules now dictate trade in Northern Ireland. Due to the introduction of these regulations, Northern Ireland finds itself in an unprecedented position: it follows UK rules for services and many of the EU’s customs rules for goods (e.g. animal, dairy products and medicines). Thus, the region now faces non-tariff barriers for goods purchases entering from Great Britain and for service imports and exports to the EU. We investigate the potential long-term economic impacts of the Protocol on Northern Ireland by using a multi-sectoral economic simulation model. We consider Northern Ireland in isolation, that is eventual spill-overs from other regions, especially Great Britain, are not accounted for.

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