The Triggering of Article 16

by

Jim Stewart09/02/2021

The word ‘shitstorm’ ("shitschturm")  meaning a real mess, is widely used in Germany,  for example by the German Chancellor (https://www.theguardian.com/books/booksblog/2013/jul/04/shitstorm).

The triggering of Article 16 by the EU on Friday  the 29th  certainly qualifies as a ‘shitstorm’.

(1).  It is unlikely to have made any contribution to the immediate issue – the failure of AstraZeneca (AZ)  to deliver sufficient vaccines to the EU;

(2). The basis for triggering Article 16 did not exist. That is that  the application of the Protocol  would lead “to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade”;

(3). It required immediate notification “without delay”  to the UK  “through the Joint Committee [established under the Protocol] and shall provide all relevant information” (annex 7). This did not happen.

(4). It has reopened negotiations about the Northern Ireland Protocol, merely weeks after it was laboriously agreed between the UK and 27 Member States.

(5). According to Daniel Boffey and Michael Savage (Guardian Newspaper January 31st) at some stage when the news of the triggering of Article 16 broke, the Taoiseach “scheduled” a call with the EU President (Ursula Von Der Leyen).  The same source states “Von der Leyen took Martin’s call”. A time gap between “scheduling” and “taking the call” from the head of a Member State reveals a certain management style  incompatible with  crisis management at the top of the EU.

Triggering Article 16 has the potential to create immense difficulties for the future relationship between Great Britain, Northern Ireland, and Ireland. Some of these difficulties are already clear from a letter from Michael Gove: and from statements from the UK Prime Minister that  the  UK would itself instigate Article 16 (https://www.ft.com/content/8d330d1d-8b4e-46b8-9333-28b37be3f0a8). 

Limiting the damage will be time consuming and difficult.

Who is to Blame ?

The cause of this disaster has been placed on a very limited number of individuals (or individual). For example Daniel Boffey and Michael Savage (Guardian Newspaper  31st January), report that Article 16 was triggered by the realisation that a statement issued by the Commission in relation to export controls could be circumvented by the Northern Irish protocol. They state the relevant paragraph “emerged via officials in the commission’s Health and Safety Department” (DG Sante). The Financial Times (Sam Fleming, Mehreen Khan and Michael Peel, 31st January) report that the text, was drafted “by a tightly knit group comprising the president’s team and other senior officials”

Some days later Naomi O’Leary (Irish Times 3 Feb ) reports attempts “to shift blame for the error on to the team of .. .. trade chief Valdis Dombrovskis”.  Politico (Feb 3, 2021) report that  “The Commission has refused to identify who inserted the provision into the regulation, apparently just minutes before it was approved and published on Friday afternoon, and has said only that the regulation was the result of a collaborative effort among different teams and cabinets including von der Leyen's own”.  

Apart from those who had direct knowledge of the disaster, it would  also be interesting to know who had the opportunity to read the draft proposal and failed to do so. In particular as Boffey and Savage report that the proposals had also been passed by “the cabinets of the relevant commissioners, and Von der Leyen’s most senior aides”.

More generally there is growing criticism of the Commission President and her management of vaccine procurement, for example from Politico, (https://www.politico.eu/article/blame-ursula-von-der-leyen-eu-vaccine-debacle/’, Der Spiegel (https://www.spiegel.de/international/europe/europe-s-vaccine-disaster-commission-president-ursula); and the German Minister for Finance (https://www.theguardian.com/world/2021/feb/04/german-minister-criticises-von-der-leyen-over-covid-vaccines-disgrace).

The problem is viewing  vaccine procurement and distribution as one of contract specification emphasising price and supply rather than speed and flexibility in certification.

What has Triggering Article 16 got to do with Covid Vaccines ?

The Commission had sought to impose control of exports of Covid vaccine from the EU following  a dispute with AZ relating to a shortfall in vaccine delivery. This move was supported in particular by Germany and other Member States who were reported as being “deeply involved in the vaccine strategy overseen by the Commission” (https://www.ft.com/content/417e089b-31af-4950-949e-3ee1986f47ce.) The German Health Minister is quoted as stating :- “This is not a matter of ‘Europe first’, but of Europe’s fair share”.

The Financial Times reported on Friday 29th January that the UK had been omitted from a list of countries that may receive exports of vaccine produced within the EU.  The Commission had argued that reduced delivery of Vaccine  was a breech of the contract signed with AZ (https://ec.europa.eu/commission/presscorner/detail/en/ip). The EU Commissioner for Health and Food Safety had earlier stated “we want our contract to be fully fulfilled” (Guardian 25th January).  This was repeated on 27th January by the President of the EU who informed AZ “we want our contract fulfilled” (https://www.euronews.com/2021/01/25/covid-19-vaccine-eu-puts-pressure-on-astrazeneca-over-delivery-delays).

The belief that a solution to increased supplies of vaccine between the EU and AZ could be analysed as a breech on contract was a major error. The contract as published was not as claimed by the President of the EU “watertight” but ambiguous in a number of respects (https://www.ft.com/content/5a8a87b4-0ea8-4db3-acc4-8a72d3b8b64c).

But it led to the next major error of  attempting to ensure supplies by limiting the export of  vaccines produced in the EU to the UK.

Northern Ireland is unique in having open trading borders with a Member State and a non-Member State. An EU official is quoted as stating [triggering Article 16] was “being considered as merely a technical way of ensuring that we wouldn’t get a leak of vaccines through Northern Ireland to other countries,” (Boffey and Savage, Guardian Newspaper 31st January).

The Protocol

The UK Withdrawal Agreement contained a Protocol whose main function was to avoid a hard border on the island of Ireland (https://ec.europa.eu/info/relations-united-kingdom/eu-uk-withdrawal-agreement/protocol-ireland-and-northern-ireland_en). This protocol agreed that N. I. would be subject to:-

  1. “.. . a limited set of EU rules related to the single market and customs union”.
  2. “Necessary checks and controls must take place on certain goods entering the North of Ireland from the UK or any other third country”

These controls  are extremely detailed for example relating to importing sanitary and phyto-sanitary (“SPS”) products. (https://ec.europa.eu/info/sites/info/files/brexit_files/info_site/travelling_en_3.pdf).

Michael Gove and Arlene Foster have in particularly singled out  rules about importing pets  from GB to N.I. as an example of inappropriate rules as these products will never be exported via Ireland to the EU. 

However the reason for these controls is not because as  First Minister, Arlene Foster, maintains’pets’ could be exported to the EU. Rather they are designed to prevent the importation of disease from N.I. to Ireland and other Member States.  This is why the UK Government agreed these rules in the Protocol, and why it has its own detailed post Brexit rules relating to importing pets (https://www.gov.uk/guidance/importing-or-moving-live-animals-animal-products-and-high-risk-food-and-feed-not-of-animal-origin#import-live-animals-and-germinal-products).

What is the Real Problem ?

The real problem is not a legal issue. It is the unique situation of N.I. as part of the UK and at the same time treated in many ways as part of the EU. Triggering Article 16 was designed to prevent the flow of controlled products (vaccine from the EU to GB).  A much greater issue is the flow of products from GB to NI.  Even though tariff free trade is part of the withdrawal agreement, there are major obstacles compared with free trade.  These may be collectively summarised as ‘non-tarif barriers’ (certification, sanitation checks, etc.). Further problems are likely to arise  in relation ‘to rules  of origin’. Tarif  free access from the UK to the EU requires a minimum level of UK based content (parts or value added). The minimum may vary by sector and must be certified.

This means for example, imports to the UK which originated in China, will be subject to extra costs and tariffs if ‘re-exported’ to  N.I. Assembly type manufacturing in N.I. may be particularly affected by ‘rules of origin’.  The motor trade will also be affected as  China is a major source of components used in the motor industry.  Many British retailers have stopped selling into Ireland as Asia is their supply source (Politico Jan. 8 2021).  Solutions may emerge in time, for example sourcing from within the EU (post Brexit many UK firms have set up distribution centres in the EU) or local production. The latter solution is most likely in relation large scale manufacturing for example Nissan in Sunderland (https://www.ft.com/content/d2489ca9-0327-4a85-88c8-d6e7ca4eca55).

Many EU countries and EU officials are aware of these risks and will pay close attention to flows from GB to NI and potentially on to EU Member States. What other countries see as unfair  exploitation of  the unique position of NI could result in future difficulties  in Ireland/EU trade flows.

 

Some Effects

More generally the Covid pandemic has led to an increased role of the State in all countries.  This will shrink post pandemic but is unlikely to fall to pre-pandemic levels, if only due to ‘pandemic awareness’ and associated safeguards in relation to public health and travel. 

The role and power of the European Commission has also increased. However one likely result of the ‘Article 16’ fiasco is that there will be relative shifts in power within the Commission. For example will like minded Commissioners coalesce to form ‘influence groups’ ?

Member States may also seek more formal procedures for interaction with the Commission, other than through meetings of the Council. In Hirschmans typology of ‘exit voice and loyalty’, voice will become more prominent.

Prof Jim Stewart

James Stewart

Dr Jim Stewart is Adjunct Associate Professor at Trinity College Dublin. His research interests include Corporate Finance and Taxation, Pension Funds and financial products, Financial Systems and Economic Development.

He is widely published and his titles include Mutuals and Alternative Banking: A Solution to the Financial and Economic Crisis in Ireland (2013), Choosing Your Future: How to Reform Ireland's Pension System (co-author, 2007) and For Richer, For Poorer: An Investigation of the Irish pension system (2005).


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