Trade war 'possible' between UK and EU over NI Protocol: Report

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A possible trade war with the EU over the Northern Ireland Protocol will be one of the dangers facing the new British prime minister according to a new report on the Conservative leadership contest.

UK In A Changing Europe has published a series of articles looking at the candidates’ policies in areas such as the economy, immigration, and health.

On Brexit the research group’s director Anand Menon says virtually all the candidates had promised to ‘seize the opportunities’ of leaving the EU but there had been little by way of detail.

“Specific measures taken so far have been largely symbolic such as the government’s review into permitting greater use of imperial measures”.

The most pressing issue for the new prime minister will be whether to let the Northern Ireland Protocol Bill continue through parliament, he says.

If it does become law the new government will probably face retaliatory legal action which could prompt a trade war.

This would further exacerbate the negative effects of Brexit which the leadership candidates have been reluctant to discuss, he says.

Mr Menon says real choices for the government will come when deciding whether to diverge from EU rules in areas like financial services, gene editing and agricultural standards.

He says there are opportunities in terms of divergence but “these remain uncertain and it remains to be seen whether these can be worth more to the UK economy than close alignment with EU standards”.

Mr Menon cites the issue of data protection, where the UK could lose out on the free flow of data with the EU, if it decides to diverge from EU standards.

Meanwhile the negative effects of Brexit are already apparent in higher food prices and a 4% reduction in GDP predicted by an official government body, the Office for Budget Responsibility.

Negative effects of Brexit are already apparent in higher food prices

Regulatory divergence also threatens to harden the border between Northern Ireland and Great Britain, he says.

And it could mean an increase in the size of the British civil service as it would have to deal with regulatory functions previously carried out by the EU.

The article concludes that the negative impact of Brexit on British national resources will only increase in the event that a legal confrontation over the Protocol leads to retaliation and further disruption to UK-EU trade.