Official Report: Minutes of Evidence

The Chairperson (Mr McAleer): From DAERA, I welcome, via StarLeaf, Seamus McErlean, chief economist; Mark McLean, principal agricultural economist; and Tommy McNamara, staff officer in the environmental farm branch. I ask the officials to brief the Committee.

Mr Seamus McErlean (Department of Agriculture, Environment and Rural Affairs): Good afternoon, Chair.

The Chairperson (Mr McAleer): Good afternoon.

Mr McErlean: With me, I have Mark McLean and Tommy McNamara, as you have already said, Chair. Mark and I lead on trade policy issues in the Department. Tommy has responsibility for regulations in the area of environment and plant health. We provided the Committee with quite a long written briefing. I suppose that, if I tried to go through it all in detail, we could be here for quite some time. My plan is to give you a very brief summary.

I will begin with the Northern Ireland protocol, which sets out Northern Ireland's trading relationship with the EU for goods. The protocol allows Northern Ireland to continue to trade with the EU without the need for tariffs, rules of origin, customs procedures or sanitary and phytosanitary (SPS) checks. Effectively, therefore, it leaves us in a very similar position to where we were before the UK left the EU. It means that we have unfettered access to EU markets.

The UK-EU free trade agreement (FTA) that was agreed on 24 December 2020 is known as the trade and cooperation agreement (TCA). It has minimal impact on the operation and provisions of the Northern Ireland protocol. In other words, it does not alter Northern Ireland's trading relationship with the EU for goods as provided for by the protocol.

The protocol gives us unfettered access to the EU for goods, while the UK Government (UKG) guarantee Northern Ireland unfettered access to the GB market. However, a downside to the protocol is the fact that it introduces some friction to the trade of goods that come from GB into Northern Ireland. The TCA does not remove the regulatory checks on goods that move from GB to Northern Ireland that exist under the protocol, and nor does it impact on the UK Government's ability to provide unfettered access for Northern Ireland goods that are traded into GB. The TCA provides another route in addition to those that are in the protocol to avoid tariffs on goods that move from GB to Northern Ireland.

At this point, some people who are listening to me might say, "Surely there are no tariffs under a zero-tariff deal such as the TCA". However, it is important that we remember that, in order to be eligible for zero tariffs, goods that move from GB to the EU must satisfy rules-of-origin requirements. In the case of Northern Ireland, the protocol includes some additional routes or ways by which goods can move, tariff-free, from GB to Northern Ireland. The Northern Ireland protocol means that EU state aid rules apply in Northern Ireland for goods, and the TCA does not alter that situation.

As regards legislation requirements that might come out of the TCA, we have not identified the need for any secondary legislation as yet. To be fair, we are really not expecting that any will be needed, but we are still exploring that. Work to explore that has not finished yet, so we just cannot be 100% sure at this stage. I will leave it there, if that is OK.

The Chairperson (Mr McAleer): Thank you very much for that, Seamus. Your briefing came through in tabled papers yesterday. We are working our way through this. I note from the correspondence in our packs that, during January and February, almost 300,000 poultry and 272 livestock were imported into the North. Do you believe that any of the challenges that were being experienced at the beginning of January are being overcome now and that things are moving more freely?

haulage people as well. What is your assessment of that?

Mr McErlean: To be fair, I have not got data on those issues, but I am aware that, at the beginning, there was a lot unpreparedness among firms. I suppose that that is not surprising, given that there was so little time to prepare. There definitely have been issues with paperwork not being correct and so on, and, obviously, you would expect that to improve over time.

The Chairperson (Mr McAleer): When we heard evidence from businesses and haulage people in January, we found that a lot of the businesses, particularly those in Britain, were not very well prepared for the new requirements. We have highlighted that. Have any steps been taken to better equip businesses in Britain to work within the new arrangements? I am aware from listening to evidence that a lot of pressure was put on the hauliers in particular, who are important in assisting small businesses to get their paperwork and to familiarise them with TRACES NT. We also heard evidence that, again in Britain, there were businesses that were informed only on 31 December about what was required, with the new arrangements coming in on 1 January.

Mr McErlean: We were raising that quite a bit with our colleagues in UKG because we knew that firms would be faced with some friction and that they would need time to prepare for that. We certainly raised the issue frequently with them, and the frustration on their part was that it was difficult to know what to say to firms in order to prepare them when an agreement had not been reached on what exactly the new trading arrangements would be like. From their point of view, it was always difficult that the trade deal was done at the very last minute.

The Chairperson (Mr McAleer): Another issue that was highlighted to us was the need for better communication, particularly at a local level, with the Trader Support Service (TSS). Has that ever been ironed out or reconsidered?

Mr McErlean: Again, I do not have information on that specifically. My understanding is that TSS has evidence that it is addressing all the queries very quickly, but I think that there is feedback from stakeholders that, although the queries are being addressed, they are not being addressed satisfactorily. There are still issues, but, again, with new systems, there will always be issues. Time will undoubtedly be needed to solve some of those problems.

The Chairperson (Mr McAleer): That is great.

Ms Bailey: Thanks, Seamus. I am looking at the paragraph on climate change in your briefing paper, and I note that:

"A strong principle of non-regression" is included in the agreement, and you specify that carbon pricing is included in the agreement. Last week, we heard about problems getting trees imported from GB to NI, and that is because of the soil on the trees' root ball. If there is a strong principle of non-regression, is that just focusing on carbon pricing, and are we understanding that, in the agreement, climate change is really focused on carbon? Why, then, does non-regression not apply to other standards — for example, to allow us to bring trees in?

Mr McErlean: They are different issues. The issue with soil on the roots of plants is very much about trying to control the spread of disease, so it is a different issue. The commitment on climate change is very much about regulations and measures that support addressing climate change issues. There is agreement to try to avoid reducing those regulations and standards so that both sides do not regress from where they are now. That relates mostly to issues that affect trade, so you might be able to make changes to climate change measures that do not affect trade without causing the other side to bring a dispute.

Ms Bailey: Just a quick follow-up question on trade and future trading agreements. The UK Government are seeking to enter a trading bloc with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Have you been involved in any discussions on that?

Mr McErlean: We are in regular contact with our UKG colleagues. Obviously, trade is not a devolved issue, so they very much take the lead on that, but they give us feedback on the discussions that they are having with trade partners and negotiations that are ongoing. We are able to ask questions and provide them with information on things that we are interested in and offensive and defensive issues that we may have. We get feedback on how discussions are going.

Ms Bailey: Can you provide any feedback to the Committee on what has been discussed and where our interests lie within that trading bloc?

Mr McErlean: The TPCPP is going — sorry, I got that wrong.

Ms Bailey: The CPTPP [Laughter.]

Mr McErlean: I will have to keep practising. We are in the very early stages with that, but I will ask Mark to comment.

Mr Mark McLean (Department of Agriculture, Environment and Rural Affairs): Thanks, Seamus. The main points that we put across on the CPTPP and the trade negotiations with Australia, New Zealand and the United States are that we do not want any lowering of standards for food imports and that we want to keep tariff protection as we do not want a big surge of agricultural imports into GB, because both those things could create difficulty for our competitive position in the GB market. If there is an increase in goods in GB that do not conform to EU standards, that clearly has implications for trade between GB and Northern Ireland.

Ms Bailey: Potentially, there is a rocky road ahead. Thank you.

Mrs Barton: Thank you, gentlemen, for the presentation. My query is about trade between GB and Northern Ireland. Time is too short to relate the various issues with SPS, but a lot of the trade that is coming into Northern Ireland is staying here and is not moving on to a European country. Is there any movement on that or on highlighting that fact to try to get special status for those goods that are not moving on?

Mr McErlean: The issue is very much about plant health. Even if the goods are not moving on, if a disease were to be brought in, it could spread far and wide by various means, so the rules reflect that. Mark might want to add to that.

Mr McLean: There is provision in the protocol on tariffs for goods that stay in Northern Ireland, and a trader scheme is up and running to provide for zero tariffs under certain conditions if it can be shown that the goods stay in Northern Ireland. However, there is nothing in the protocol about different rules applying on regulatory checks or SPS requirements for goods that move into Northern Ireland and stay in Northern Ireland. From the EU perspective, the issue is how you prove that they stay in Northern Ireland. As Seamus mentioned, diseases can spread. Goods could get into Northern Ireland that do not comply with EU regulations and then appear somewhere else in the EU, and that would clearly present problems. There are no customs checks or whatever between Northern Ireland and the EU. That is what is in the protocol. There is no provision on goods staying in Northern Ireland in relation to regulatory checks but there is in relation to tariffs.

Mrs Barton: Basically, you are not accepting GB goods into Northern Ireland simply because you think that the standards have gone down or that the standards may vary in comparison with those in Europe.

Mr McErlean: We are not saying that there is any difference in standards. It is more the case that that is what the rules say we should do on checks. It is really as simple as that.

Mrs Barton: I find that difficult to understand, because goods in Great Britain are also moving into France under the same rules and regulations, and I cannot see any benefit for goods in Great Britain being of a lower standard than what the EU expects. They are moving both ways. They are moving into France and moving to Northern Ireland.

Mr McErlean: The rules are the same. If the goods can move into France, they will certainly be allowed to move into Northern Ireland.

Mr McGlone: Thanks very much indeed. All the issues that we are discussing were signed off by the British Government at a very late stage in coming to the agreement into which they entered. The principal organisation here that deals with and supports business is Invest NI. I am talking about the Department. The Department has a very big role to play in the agri-food sector and the likes of that. What liaison or coordination is there between Invest NI and the Department to establish what, first, the issues and problems are and, secondly, the opportunities? We are reading different reports, but I want to deal in facts and make sure that there is joined-up government about the place. I also want to make sure that we in the North and those of us who are public representatives see everything being done well and see every opportunity being availed of for our people. What liaison or harmonisation is going on between DAERA, Invest NI and the likes of those bodies to exchange information so that opportunities can be availed of?

Mr McErlean: Over the last three or four years, the cooperation between the Departments in the Northern Ireland Civil Service has been amazing. There has been a lot of good cooperation, especially on EU exit issues, and that continues. We regularly meet Invest NI, although Invest NI is more under the umbrella of the Department for the Economy. There is constant collaboration and discussion. As industry and stakeholders bring forward issues, steps are taken to do what we can to address those issues.

Mr McGlone: Are you aware of any direct meetings with Invest NI since 1 January?

Mr McErlean: I do not know about all the meetings that happen. I have been in a meeting with Invest NI and veterinary colleagues after 1 January.

Mr McGlone: Was that meeting specifically about Brexit and the protocol, and any issues that need to be resolved and taken as opportunities?

Mr McErlean: It was a general meeting that covered a range of issues, including that one.

coming forward and being updated as needs be as well.

Mr McGlone: Chair, it would be helpful if we had — I do not want to bounce you, Seamus — a résumé, written or oral, on the issues that are being dealt with at an interdepartmental level.

The Chairperson (Mr McAleer): Patsy, I agree with you that that would be helpful. Witnesses from the haulage and business communities have raised a number of issues. That would definitely be helpful.

Mr Irwin: In relation to the protocol and the disruption to the internal UK market, extra costs to businesses are being passed on to consumers, who have less choice. Somebody mentioned that goods coming into Northern Ireland are possibly going into the Republic of Ireland or the EU and that that is an issue. Consumers want seeds and materials for their gardens. Garden centres are going to seed suppliers in England such as Suttons, only to find that they no longer supply to Northern Ireland. That is a major issue. Can you see any way to address that issue?
There are issues that need to be addressed. Work is ongoing on a number of them. I will ask Mark to comment.

Mr McLean: I do not have much more to add to that. Work is under way to see, as much as possible, how those problems can be eased. Fundamentally, it comes down to the fact that there is no agreement between the EU and the UK to align regulations in any area. Therefore, the EU will treat GB as a third country and will apply the same rules as they do to all third countries that do not enter into arrangements with the EU to align regulations. However, I know that the UK Government are doing the best that they can on some of the prohibitions and restrictions, where possible, to seek an agreement with the EU to get those lifted or to get some easement whereby it is possible. However, the EU will not allow anything into its trading bloc that it does not allow in from any other third country that does not have regulatory alignment.

Mr Irwin: For me, the protocol is unworkable. I get daily calls from businesspeople and hauliers. Clare raised the issue that tens if not hundreds of thousands of trees ordered for Northern Ireland can no longer come into Northern Ireland. That is a major issue, and it does not look as if it will be resolved.

Mr McErlean: As Mark said, there is a fundamental issue. From the EU's point of view, it would want an alignment of rules before it got rid of some of those checks and allow some of those movements.

Mr Irwin: I cannot see the protocol working as it stands.

The Chairperson (Mr McAleer): Seamus, it was mentioned that 20% of our goods are transited through Dublin. Has there been any progress on the transit agreement of which you are aware?

Mr McErlean: There is a commitment to ensure that all qualifying goods from Northern Ireland going to GB will get unfettered access. There is a recognition that a proportion goes through Dublin. I am not quite sure where things are on that, unless Mark has an update.

Mr McLean: No, sorry, I do not have anything further on that.

The Chairperson (Mr McAleer): Is there any update on the movement assistance scheme? Some stakeholders were concerned when it came in about the cost to them.

Mr McErlean: The movement assistance scheme provides people with up to £150 to cover the cost of an export health certificate if they are moving food products from GB into Northern Ireland. Sorry, what was your question?

The Chairperson (Mr McAleer): The scheme is scheduled to come to an end. Is there any indication of its being continued? A stakeholder asked that at one of our evidence sessions.

Mr McErlean: It is under review, for sure. They may want to continue it or perhaps do it in a slightly different way, but we do not have an update on that as far as I am aware.

Ms Bailey: I saw a report on the news last night about a beekeeper in England who wants to import honeybees from Italy, bring them via Dublin Port up into Northern Ireland and then across to England. What are your thoughts on that type of transport route? Does it flag up any potential threats for us in Northern Ireland?

Mr McErlean: Anyone in GB trying to import goods will be subject to the UK's SPS checks. I imagine that UKG will carry out those checks on arriving products. I am sure that they have plans for dealing with products coming through Northern Ireland into GB, but they want to ensure that Northern Ireland goods have unfettered access. There is a phase 1 and phase 2 approach to that. Phase 1 is very much that anything circulating in Northern Ireland can move into GB. That might work for that beekeeper now, but I do not think that it will work in phase 2. There will, I think, be procedures in place to carry out checks on goods that are not deemed to meet the qualifying status.

Ms Bailey: It will be interesting to see how the bees get on.

The Chairperson (Mr McAleer): Seamus, Mark and Tommy, thanks very much for attending. We will see you again. Thank you, and take care.