Relationships with bloc to remain uncertain as future government likely to be more antagonistic to Brussels and could pull out of agreement.
The combination of Vladimir Putin and Donald Trump as globally powerful leaders has had a seismic impact on European politics. Suddenly security is a major concern across the continent — including for the United Kingdom and Ireland. While it doesn’t make Brexit irrelevant, it does help to place it in context. Our European neighbours are also our most reliable partners.
While security co-operation has provided the immediate impetus for a rapprochement in UK-EU relations, the outcome of the recent summit goes far beyond this and creates an environment in which to reset trading relations.
In doing so, it potentially resolves many of the complications left over from the Windsor Framework and the Irish Sea border.
The new security and defence pact confirms that both the UK’s and the EU’s budgets will be geared towards increased expenditure on the armed forces and arms supplies, leaving less for social spending. It will also lead to new orders for UK armament suppliers, including in Northern Ireland. UK access to EU funding for security measures may follow.
While defence contractors here will be happy with these moves, it is businesses engaged in the food, drinks and horticulture sectors that may be most pleased. North-South trade in Ireland has increased significantly following Brexit, but UK-wide agri-food exports to the EU as a whole have fallen by 21%. UK businesses were keen for a reset on foods sector rules.
The Ulster Farmers’ Union says the new UK-EU Sanitary and Phytosanitary (SPS) agreement has provided most of what it has lobbied for in terms of potentially providing improved access and reduced trade barriers.
However, it is important to note that the new agreement is to “work towards” a deal, based on “dynamic alignment”.
So the deal is not yet finalised and has already upset some politicians by agreeing in principle that the EU will set the rules on food, drink and horticulture, with the UK accepting them. In this regard, the whole of the UK will become more like Northern Ireland — which is already a rule taker under the Windsor Framework.
There has been a general welcome across business organisations here for the initial outcomes of the UK-EU discussions, though recognising that this is the beginning of a new process, not a final destination.
CBI Northern Ireland said it welcomed the progress towards an SPS agreement. It stressed that easing trade barriers for local firms and supporting supply chains operating across the island of Ireland must remain priorities for continuing discussions.
A similar tone came from the NI Chamber of Commerce, pointing out that what has been announced, while only an outline agreement, could remove trade barriers with our nearest neighbours — which is a “step in the right direction”.
It added that this should be seen in the context not only of reducing the cost of doing business and improving access to markets, but also the reality of rising geo-political uncertainty.
“We want to see a deal that delivers meaningful change to drive growth and address common challenges like food security, energy, and healthcare,” commented Chamber CEO Suzanne Wylie.
It is understandable that business organisations are cautious in their responses. Both they and academic commentators are stressing that most of the agreement is around principles, not details. It remains possible, if unlikely, that difficult problems could yet emerge.
More concerning, for some, is that the Labour government has become highly unpopular and may be a single term administration.
A replacement incoming government is more likely to be antagonistic to the EU, perhaps withdrawing from agreements now being entered into.
There has been less focus on the commitment to align the UK with the EU Emissions Trading Scheme and avoid the impact of the Carbon Border Adjustment Mechanism (CBAM).
Yet these issues are particularly important for Northern Ireland.
There had been predictions the impact from next January when the CBAM becomes fully activated could have been £200m of additional costs on trade between GB and Northern Ireland, as well as higher energy bills.
The priority for the current British government is to inject growth into a largely stagnant UK economy. Brexit damaged trade and has been a factor in that weak economy.
The Office for Budget Responsibility — the independent body tasked with providing economic and fiscal evidence for the Treasury — calculated that Brexit had various negative impacts on the UK.
Both exports and imports were predicted to be about 15% lower over the long term as a result of Brexit, while long term productivity would have been about 4% lower.
Those negative impacts should be significantly mitigated by the United Kingdom-European Union reset, though some of the damage will be permanent.
Ironically, Brexit has also seemingly led to increased immigration, with European nationals leaving the UK being replaced by non-EU nationals who are more likely to be accompanied by dependents.
The response from some newspapers and politicians to the UK-EU reset has not been universally positive and there is no political consensus behind it.
Although the British government would like Brexit to be consigned to the past, it seems as if relations with the EU, including cross-border in Ireland, will remain an irritating sore.
The controversy around this latest agreement underlines the reality that even with this agreement in principle, there will be continued uncertainty around future relationships.