The House of Commons committee has set out how this potential scenario could arise as the result of a World Trade Organization (WTO) dispute resolution mechanism currently being blocked.
In its 39th Report of Session 2019-21, published this week, the committee explains how the WTO body, known as ‘the Appellate Body’, cannot function because the term of office of one of its members has expired and the US is blocking the appointment of new members. This makes it difficult for WTO members such as the EU to resolve a breach of WTO rules. Therefore, the EU passed new rules, the Trade Enforcement Regulation, in December to get round this difficulty, and the rules came into force in February.
Under the regulation, the EU can take immediate ‘countermeasures’ such as quotas, increased customs duties or restrictions on services, if there has been a ruling in its favour by a WTO panel of independent trade exports. The EU and 23 other WTO members have also reached an arbitration agreement, which could provide an alternative means to resolving any dispute. However, the UK is not party to this agreement.
The upshot of the new EU rules, combined with the Northern Ireland Protocol is, according to the committee, that EU retaliatory tariffs would be payable on most, if not all, goods entering Northern Ireland from the rest of the UK because they would be considered at risk of onward movement to the EU even if they remained in Northern Ireland.
Separately, the EU launched legal action against the UK this week, alleging the UK decision to delay checks on goods shipped across the Irish Sea breaches the Brexit withdrawal agreement.
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