Columnist
John Campbell Economics & Business Editor, BBC Northern Ireland
Going For Growth BBC NI’s Economic & Business Editor, John Campbell, discusses the economic effect of the Northern Ireland Protocol six months down the line.
T
he Northern Ireland Protocol has been with us for almost a year and we now have six months of solid data showing how it has affected trade across the land border. The figures from the Republic’s Central Statistics Office (CSO) tell a story which was pretty much predicted by trade economists. Brexit and the Protocol have created new barriers for goods entering the island of Ireland from Great Britain. Therefore it is economically rational for firms in NI and the Republic to substitute, where they can, those GB goods by buying from a nearby market which has fewer barriers to trade ie. from a supplier across the border. That is exactly what has happened, with some firms re-orientating supply chains away from GB to buy more within the island of Ireland. It is perhaps only the speed and intensity of the change that has been surprising. The figures from the CSO are breathtaking, showing unprecedented short term changes in trade flows. The value of goods exported from NI to the Republic has increased 77% year-on-year in the first half of 2021; in cash terms that’s an increase from just under 1bn euro to 1.77bn euro. The value of goods being sold in the other direction has increased by 43% from 1.1bn euro to 1.57bn euro. At this point it’s important to pause and insert a couple of caveats. Firstly, we know that the pandemic has had significant economic impact with generally reduced levels of trade in 2020 followed by a bounce back in 2021. Dr Esmond Birnie of Ulster University has looked instead at the 2019 figures in an attempt to smooth out those pandemic swings.
They still show big increases though not quite so dramatic: NIRepublic trade is up by more than 50% between 2019 and 2021; Republic-NI is up by almost 19%. Secondly, understanding trade figures is not always straightforward due to the different ways trade can be measured. There is, for example, an issue known as trade asymmetry which means the value of measured exports by Country A to Country B don’t match the value of County A imports as measured by Country B. Dr Birnie has also looked at potential measurement issues in the CSO figures. He points out that since the start of this year the CSO has been collecting trade data relating to Republic-NI on a different basis than that relating to Republic-GB. As NI remains effectively remains part of the EU Single Market for goods the trade flows between NI and the Republic continue to be measured through Intrastat surveys and VAT returns while RepublicGB trade flows are now measured through customs declarations. Trading conditions under the Protocol have led to NI firms using their own VAT identifications and in some cases trade which was previously incorrectly recorded by CSO as Republic-GB is now recorded as Republic-NI.
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