LONDON — Northern Irish businesses will be on the hook for millions if the European Union retaliates against U.S. President Donald Trump’s trade war.
While the EU is finalizing its battle plan, Keir Starmer insists his government will take a “cool” and “calm-headed” approach to Trump.
But fears are mounting over a system allowing firms in Northern Ireland — which is part of both the U.K.’s and EU’s markets — to claim back EU tariffs imposed on U.S. imports.
The system simply “doesn’t work effectively and quickly enough,” a senior U.K. business representative told POLITICO.
Last year Northern Ireland imported £753 million in U.S. goods. Firms in the region will need to stump up potentially millions in extra costs if EU retaliatory tariffs kick in, thanks to Northern Ireland’s post-Brexit status.
“Are there going to be special measures to protect Northern Irish businesses from those tariffs? And how quickly will reimbursement measures be put in place?” asked the senior U.K. business representative, who was granted anonymity to speak candidly.
Even before Trump’s trade war, firms were having a hard time getting their money back, with some paying millions out of pocket, they said.
“The volume of evidence that’s required costs a lot of money and time and effort,” said Stephen Kelly, CEO of industry group Manufacturing NI. “Multiply that by thousands of product lines, which is what the EU is proposing, and we start to run into the real problems here.”
Post-Brexit headache
Northern Ireland has featured in a flurry of diplomacy between London and Brussels this week.
Chancellor Rachel Reeves spoke with EU Trade Commissioner Valdis Dombrovskis the morning of Trump’s announcement about what “the appropriate response” to the president’s moves would be. The U.K.’s trade chief spoke to Northern Ireland’s leadership the same day.
Starmer has said his Labour government is “looking carefully at the details of any retaliatory tariffs announced by the EU … and what impact they might have on businesses.”
But while Trump imposed 10 percent tariffs on the U.K., only half the rate levied on the EU, “no one is celebrating,” Manufacturing NI’s Kelly said.
He wants London and Brussels to go further.
The two capitals need to trigger the Brexit trade deal’s committees, he urged. “We need them to come together under their joint committee to fully explore” the impact on Northern Ireland and “mitigations” for its firms.
In Brussels “we need [EU Commissioner for Trade and Economic Security] Maroš Šefčovič to be standing up in those meetings and saying ‘we have a treaty responsibility alongside the United Kingdom Government to Northern Ireland,’” Kelly said. “How can we compensate traders there that doesn’t undermine their financial viability?”
‘Unable to recover the tariff’
Northern Ireland’s unionist Deputy First Minister Emma Little-Pengelly has also warned that the duty reimbursement scheme isn’t up to scratch. It is “not fit for purpose for businesses,” she said Thursday.
One of Manufacturing NI’s members, Kelly said, sought what would have been a small amount of money, a few hundred pounds, from the scheme, he said. “It took three days to capture the information and go and find it.”
Data required to make a claim includes details about the supply chain and where the product comes from, as well as shipping information, product codes, value, weight, names of people involved in the shipping, confirmation that it left and arrived and more.
The firm’s application was eventually rejected. “There wasn’t enough information that was available,” Kelly said, explaining that the burden of evidence to prove goods won’t travel on to the EU’s Single Market is “exceptionally high.”
This means that “lots of people have been unable to actually recover a tariff that’s due to them,” he said. “And even more businesses have not even attempted even going there.”
Anger in Northern Ireland
Northern Ireland’s singular predicament in Trump’s trade war has angered unionist politicians.
“Northern Ireland’s response to the actions of the United States is decided for us by a foreign government, the European Commission, in which we are not represented,” Traditional Unionist Voice MP Jim Allister told POLITICO.
“Conversations about the response are going on within the EU right now, but they do not involve us. In this we have to face the fact that Northern Ireland is now effectively the largest colony in the world because the biggest manifestation of U.K. democracy, in which over 17 million people voted for the U.K. to leave the EU, still has not been honored.”
He added: “The [U.K.] government will no doubt seek to minimize the difficulty arising from the resulting import tariff differential between Great Britain and Northern Ireland … by means of the duty reimbursement scheme. However, Northern Irish businesses tell me that the administrative cost of accessing the scheme are such that they have so far concluded that it is not worth their while.
“They have instead decided not to grow their businesses as they would have had Northern Ireland been a full and proper part of the U.K. single market for goods, able to rely on the U.K. imports regime.”
‘Alert to the situation’
Speaking in the U.K. parliament on Thursday morning, Democratic Unionist Party MP Jim Shannon said Northern Ireland “remains exposed to potential EU retaliation,” and warned that “local businesses must not become collateral damage.”
Responding to the DUP’s concerns Thursday, Trade Secretary Jonathan Reynolds said: “We’ve got to be alert to the particular situation that would occur in the occurrence of a different retaliatory stance from ourselves and the EU.”
He added that the Duty Reimbursement Scheme was “key” to addressing this. “We need to work together particularly in relation to Northern Ireland to make sure that specific voice, that specific question, is a key part of how we look at this and respond.”
A U.K. government spokesperson said it would “work closely with business on this issue, to help ensure they get as much support as possible in navigating these challenges, as we move to the next phase of our plan, and continue negotiations with the U.S. on an economic prosperity deal.”
A Commission spokesman confirmed that the U.K. government and the European Commission were in contact on the issue.