The Northern Ireland Protocol, which was agreed to avoid a ‘hard’ border on the island of Ireland while allowing Northern Ireland to remain part of the UK customs regime, has led to significant friction between the UK and Unionists on one side and the EU and Ireland on the other. In the debate about the protocol the focus has been on the impact on Northern Ireland and of course the symbolic implications of checks on trade within the UK.

Indeed the Protocol has become the central battleground in the debate about the Union and the potential for a border poll. While these immediate impacts may seem significant, it is likely that the longer term effects on trade patterns are rarely going to be bigger.

The immediate effect of the implementation of the Protocol has been to disrupt goods imports from Great Britain (GB) into Northern Ireland, but at least some of this can be dealt with through some fine tuning of its application. However, some trade frictions will inevitably have to remain. This arises out of the obligation that Ireland as a member of the EU has to safeguard the EU Single Market and Customs Union and to adhere to EU regulations in respect to trade. These are the same obligations that other Member States that have a border with a non-EU Member, a so called third country, have. Brexit allows the UK to depart from the common tariff and regulatory regime that is applied by the EU. Importantly, the EU regulations require that sanitary and phytosanitary checks be carried. These are important as the risk of importing animal and plant diseases and parasite as well as invasive species is ever increasing and goods imported into the EU can circulate freely. Furthermore, the UK is free to sign free trade agreements with other countries or blocks that have terms that differ from those that the EU has agreed with these.

Data for 2018 shows that Northern Ireland imported about 23% of total purchases from GB, which could be potentially affected by these trade frictions. However, the Northern Ireland Protocol also provides significant potential for Northern Ireland. While sourcing in the UK is likely to be more expensive, sourcing in the EU including Ireland will be unaffected by Brexit. The data shows that the share of goods imports from GB into Northern Ireland has already been declining. In contrast the data on imports into Northern Ireland show that the share of goods imported from Ireland and the rest of the EU has been increasing steadily.

Data on goods exports from Ireland to Northern Ireland also shows that this is increasing.

Analysis has shown that it is possible to replace UK imports into Ireland and the rest of the EU with EU sourced products. In many cases these substitutes will be cheaper than those from the UK that will be subject to non-tariff barriers. Importantly, Northern Ireland is able to import goods from Ireland and the EU without incurring the extra costs that will be incurred by GB based firms for the same imports from the EU. This gives firms in Northern Ireland a unique advantage over their GB counterparts, particularly as they will be free access to both the UK and the EU market. This advantage should not only help firms that are already operating in Northern Ireland, but should also attract firms both from GB and elsewhere to Northern Ireland.

GB now only accounted for less than 8% of Irish merchandise exports in 2020, which is less than half of what it accounted for at the turn of the century. Of course there are significant sectoral differences. While GB is not a major destination for pharmaceuticals produced in Ireland with just 3% of exports going to the GB, it is the biggest market for agri-food products, where GB still accounts for more than 50% of exports. Likewise, the share of imports from the GB into Ireland has declined by more than 10% in the last decade, but still accounts for about 21%, which shows that Ireland is more dependent on the UK for imports than exports.

So far Irish exports to GB have not faced the full trade frictions as some aspects are still covered by a grace period. However, the trade barriers due to Brexit will accelerate the trend of decreasing dependence on the GB market for exports as well as the dependence on imports from GB. Nevertheless, data for January 2021 shows that Irish exports to GB are down 14% compared to January 2020 and 35% below the value in December 2020. Even more striking is the decline in imports to Ireland from GB which is 65% lower than in January 2020 and 73% lower than in the previous month. These numbers may get revised and are also likely to reflect both the effects of Covid and precautions taken by traders to stockpile goods before Brexit. However they indicate that Brexit will have a significant impact on trade patterns.

Apart from reorientation trade flows, transport routes are also re-orientating. Pre-Brexit the so called landbridge – the route between Ireland and France, Belgium and the Netherlands via GB – was the by far the most frequented route for trade between Ireland and the non-UK EU member states. This is due to the fact that travel times via the landbridge were typically less than 20 hours compared to up to 40 hours via direct shipping routes from Ireland. As travel times via the landbridge have become less predictable due to Brexit, firms that require guaranteed time of arrival are increasingly switching to the direct route. This trend started before Christmas 2020 as some firms were worried about getting trucks stuck in Calais or Dover. The shipping industry has been quick to react to this, so much so that direct sailings from Ireland to France, Spain and Belgium have already increased from 12 per week to 42. One implication of the shift towards the direct routes is that opportunity for hauliers to pick up or drop off part loads in GB is reduced. This will reduce trade between Ireland and GB further.

Brexit and the operation of the Northern Ireland Protocol, while inconvenient in the short run, provides significant positive potential for Northern Ireland. This includes increasing all-island trade. For Ireland, Brexit is accelerating the decupling from GB both in terms of exports and imports.