Newton Emerson: London seeks to push North away to try to keep EU rules at bay

It is obvious now even to the DUP that Boris Johnson’s government will always choose its vision of Brexit over Northern Ireland’s place in the union.

Hence the unionist party's cool response to the latest Conservative onslaught against the Withdrawal Agreement and its protocol on Ireland and Northern Ireland.

At the start of this week, when the British government was still presenting its unilateral changes as a tidying-up exercise, the three matters it claimed to be addressing were exit paperwork for goods leaving Northern Ireland for Britain, “at risk” assessments for goods heading the other way and – mentioned last as if least – EU state aid rules in Northern Ireland impacting businesses in Britain.

No unionists were fooled by this posture of tearing up the Withdrawal Agreement to reduce the sea border.

Political cowardice in Stormont adding to Republic’s electricity bills

---

Newton Emerson: Ireland, North and South, will miss Phil Hogan’s voice on Brexit

---

Newton Emerson: North’s grading mess shows pointlessness of GCSEs

---

Newton Emerson: The North’s attitude to university fees is causing a brain drain

---

There is a strong case that exit paperwork can be waived within the terms of the agreement, as the government knows, having made that case itself since May. Besides, firms in Northern Ireland say it is not a major concern.

Talks were reportedly going well on removing barriers in the opposite direction, such as for supermarket shipments, again within the terms of the agreement.

So state aid is the government’s real priority and the sea border is its attempted distraction.

While this has been widely realised, the extent of the issue has not. The state aid problem has been described across the media this week as affecting firms in Britain with operations in Northern Ireland but that is only the simplest example of how EU rules wash back into the rest of UK under the protocol, as the business press has been warning since last year.

Any British manufacturer merely selling into Northern Ireland will be affected: subsidising a car factory in England will count if its cars end up on forecourts in Belfast.

Subsidy programmes

Beneath the level of consumer goods, this becomes increasingly difficult to assess on a regional basis. If a steel plant in Wales is subsidised, its output will certainly cross the Irish Sea in a myriad of ways.

Businesses not selling into Northern Ireland will be caught as well. If subsidising an English car factory makes the entire UK automotive market more challenging for EU competitors, a complaint can be made via the impact in Northern Ireland.

EU case law permits this and the Withdrawal Agreement is specific that where a matter relates to trade between the EU and Northern Ireland, the EU’s state aid rules must be applied across the UK.

This obviously also catches any UK-wide subsidy programmes. It bleeds into the tax system if grants are delivered via tax breaks and into the financial system if banks are used to provide cheap credit.

As a final headache, EU state aid is a "standstill" regime, meaning new subsidy schemes must be notified to the European Commission for approval in advance. The Withdrawal Agreement presumes the UK will report all state aid decisions to Europe to judge their impact on Northern Ireland. The British government now indicates it will not do so.

There had been debate about how much any of this would matter.

All trade deals impose state aid restrictions, as does the World Trade Organisation. EU law has ample exemptions and the UK has a long history of ideological opposition to subsidy.

Frustrated plans

However, it has become clear Johnson and his immediate circle see massive state aid as essential to giving the UK the world-class firms it will need to survive outside the EU. The subsidised English car factories of the 1970s are not seen as a bad omen.

The government also believes, rightly or wrongly, that EU rules would frustrate its plans.

To control this key new policy, London intends to recentralise state aid powers currently devolved around the UK, much to the annoyance of Scottish and Welsh nationalists. Whatever it says in public, the logic of the British government’s position is to push Northern Ireland as far away from all this as possible, to try keep EU rules at bay.

It is easy to imagine a “state aid sea border” emerging, either by agreement with Brussels or by court cases brought against the UK. This might consist of surcharges and restrictions applied to subsidised goods entering Northern Ireland from Britain, enforced by declarations and inspections.

The North would be largely locked out of the UK’s new industrial policy and might find the logic of this pointed to co-ordination with the Republic.

Stormont has ambitions to develop a post-Brexit industrial policy of its own but it will struggle to do so given its track record and the challenges it is about to face. Ironically, DUP leader Arlene Foster was Northern Ireland's minister for business support for seven years up to 2015, as EU rules were progressively tightened against Stormont's subsidy model. No clear alternative was put in place.

If Foster ever hoped Brexit might undo that oversight, she has been cruelly disappointed.