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Northern Ireland needs pragmatism, not more political rhetoric, as it faces Brexit

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Welcome back. Do you work in an industry that has been affected by the UK’s departure from the EU single market and customs union? If so, how is the change hurting — or even benefiting — you and your business? Please keep your feedback coming to brexitbrief@ft.com.

It is no surprise that Northern Ireland is the place where the introduction of post-Brexit border controls has caused the most immediate impact. 

Boris Johnson’s decision to agree a trade border down the Irish Sea and consign part of the UK into the regulatory orbit of the EU was always a bigger decision than was widely understood at the time.

It was surely better than a return to a north-south trade border, but despite the best rhetorical efforts of Mr Johnson to downplay what he’d done — matched by the Northern Ireland secretary Brandon Lewis who wrote on Twitter: “There is no ‘Irish Sea Border’” on January 1 — in the real world it has left businesses scrambling to adjust. 

The problem is that the Northern Irish protocol, which requires all goods entering the region to comply with the EU’s customs code, throws a huge amount of bureaucratic grit into distribution chains that have grown up organically in the hitherto frictionless world of the UK’s internal market.

The new rules make staple transport processes, such as picking several loads of animal and plant products from different places in Great Britain and grouping them together on a truck before shipping them to Northern Ireland — “groupage” in the jargon — next to impossible. 

The way the EU’s export health certificates are structured means that Official Veterinarians must “wet stamp” each consignment of animal products and cannot, in good faith, sign off multi-stop loads when they reach the port of loading. 

That problem appears structural — and efforts are being made to fix it — but it is one example of what happens when you apply “rest of world” rules designed for trade between continents to high-speed “neighbourhood” trade models. 

Some of the other reported issues should get better with time as businesses become more adept at filling in the forms. The government has a new £355m trader support service, but users say it is slow and any such service is only as good as the data provided to it. 

The big question is whether — and it is still very early days — the protocol proves to be so structurally flawed as to be unworkable, or whether after some teething problems, businesses trading to and from Northern Ireland will ultimately adapt. 

Some hauliers, such as Peter Summerton, managing director of McCulla Ireland, have been vocal in their belief that the government is underestimating just how technically prohibitive the new regulations are to trade between Great Britain and Northern Ireland. 

Covid-19 has also helped to mask the scale of the problems, he told the FT this week, since restaurants and hospitality are closed. If they were open, he reckons, they would be facing “severe problems” accessing supplies from GB. 

And the hauliers are not alone. This week several of the big supermarkets, including Asda, Tesco and J Sainsbury and the chief executive of the British Retail Consortium wrote to Michael Gove to say that the protocol processes were “unworkable” when applied in such a short timescale. 

They warned of the risk of “significant disruption to food supplies” to Northern Ireland in coming months without the government’s “urgent intervention”, with Brussels to ask for more time to adapt.

Given that many of the processes didn’t become clear until the last weeks of December, this does not feel like an unreasonable request, but there are limitations. 

So while the EU did grant UK businesses a three-month “grace period” on filling in export health certificates, lobbying for an extension to this period overlooks the fact that it was explicitly a one-time offer. Officials on both sides say an extension is unrealistic. 

More realistic, perhaps, are technical fixes — for example, a technical workaround for the “groupage” issue noted above or cutting down the pre-notification times from 24 to eight hours for movement of animal and plant products on the EU’s TRACES-NT system.

But these bloodless technical fixes must compete for air time in a rhetorical and political climate that — not surprisingly when you mix Brexit with Northern Irish politics — is dangerously volatile.

Both sides are guilty of exaggeration. On the one hand Mr Johnson tells MPs that goods are flowing between Great Britain and Northern Ireland in “normal volumes”, which might be true from Scotland, but is clearly not true in the round. 

But on the other, vocal elements of the Democratic Unionist party are already clamouring for the “nuclear option” of Article 16, which allows the UK to take unilateral safeguard measures if the settlement causes “serious economic, societal or environmental difficulties”. 

The truth, as always, lies somewhere in between — a murky middle ground between the apocalyptic predictions of those who would wish the protocol away, and those, like Mr Gove and Mr Johnson, who are very keen that no one should notice too much what the Brexit deal means for Northern Ireland.

The hard truth is that what is done is done. Article 16 doesn’t solve anything, it just temporarily throws all the pieces back into the air again. But if the practical issues are not solved quickly the risk grows that political rhetoric runs ahead of reality.

After four years of grinding uncertainty the focus needs to be on adaptation and making the process work — however galling and unsatisfactory it may be.

Brexit in numbers

UK fishing sector relies on EU market. Charts showing fish imports to UK and fish exports from UK by country

Of course, Northern Ireland is not the only place that is — politically speaking — at the sharp end of Brexit. 

Scottish fishermen have found themselves the first to bear the brunt of EU export controls of food and plant products, since they cannot rely on stockpiling and their product has a very short shelf life.

Mr Johnson’s performance at prime minister’s questions and later in front of the liaison committee, where the PM insisted that the issues were only “temporary” and that compensation would be paid to those affected, did nothing to soothe tempers.

Food and Drink Federation Scotland has estimated the country’s fishing industry is losing up to £1m a day and it remains to be seen whether export processes can be accelerated sufficiently to make the industry work, because while the teething problems might be temporary, the export controls are permanent.

DFDS, the shipping company, stopped taking shipments this week because paperwork on shipments was taking eight to 16 hours, leaving a lot of expensive fish on the docks, or boats tied up at harbour and market prices for some species falling by 50 per cent or more.

The question — a bit like in Northern Ireland — is whether the processes can be sufficiently streamlined to enable an industry that relies on very fast turnaround to continue as it was. If not, a messy fight lies ahead.

“We’ve been made a fool of — the fishing industry — by the Westminster government,” said Jamie Duncan, co-owner of Loch Fyne Langoustines in Argyll in a seething video message posted after the Commons exchanges. “My blood is boiling, there’s boats tied up . . . we can’t get our product to the EU because of red tape.”

Mr Duncan threatened that Scottish fishermen would dump their rotting catch at the doors of Downing Street if the problems are not resolved by next week. How very French.





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EU plans digital vaccine passports to boost travel

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Brussels is to propose a personal electronic coronavirus vaccination certificate in an effort to boost travel around the EU once the bloc’s sluggish immunisation drive gathers pace.

Ursula von der Leyen, European Commission president, said on Monday the planned “Digital Green Pass” would provide proof of inoculation, test results of those not yet jabbed, and information on the holder’s recovery if they had previously had the disease.

“The Digital Green Pass should facilitate Europeans‘ lives,” von der Leyen wrote in a tweet on Monday. “The aim is to gradually enable them to move safely in the European Union or abroad — for work or tourism.”

The plan, expected to be outlined this month, is a response to a push by Greece and some other EU member states to introduce EU “vaccination passports” to help revive the region’s devastated travel industry and wider economy. 

But the commission’s proposed measures will be closely scrutinised over concerns including privacy, the chance that even inoculated people can spread Covid-19, and possible discrimination against those who have not had the opportunity to be immunised.

In an immediate sign of potential opposition, Sophie Wilmès, Belgium’s foreign minister, raised concerns about the plan. She said that while the idea of a standardised European digital document to gather the details outlined by von der Leyen was a good one, the decision to style it a “pass” was “confusing”. 

“For Belgium, there is no question of linking vaccination to the freedom of movement around Europe,” Wilmès wrote in a tweet. “Respect for the principle of non-discrimination is more fundamental than ever since vaccination is not compulsory and access to the vaccine is not yet generalised.”

The travel sector tentatively welcomed the news of Europe-wide vaccine certification as a way to rebuild confidence ahead of the crucial summer season, but warned that regular and rapid testing was a more efficient and immediate way to allow the industry to restart.

Fritz Joussen, chief executive of Tui, Europe’s largest tour operator, said “with a uniform EU certificate, politicians can now create an important basis for summer travel”. But he added that testing remained “the second important building block for safe holidays” while large numbers of Europeans awaited a jab.

Marco Corradino, chief executive of online travel agent Lastminute.com, said he feared the infrastructure needed would not be ready in time for the summer season: “It will not work . . . at EU level because it is too complicated and would not be in place by June.”

He suggested that bilateral deals, such as the one agreed between Greece and Israel in February to allow vaccinated citizens to travel without the need to show a negative test result, had more potential.

Vaccine passport sceptics argue it would be unfair to restrict people’s travel rights simply because they are still waiting for their turn to be jabbed. 

Gloria Guevara, CEO of the World Travel and Tourism Council, said it was important not to discriminate against less advanced countries and younger travellers, or those who simply cannot or choose not to be vaccinated. “Future travel is about a combination of measures such as comprehensive testing, mask-wearing, enhanced health and hygiene protocols as well as digital passes for specific journeys,” she added.

A European Commission target to vaccinate 70 per cent of the bloc’s 446m residents by September means many people are likely to go through summer unimmunised.

While some countries around the world have long required visitors to be vaccinated against infectious diseases such as yellow fever, a crucial difference with coronavirus is that those inoculations are available to travellers on demand. 

Questions also remain about the risk of people who have already been vaccinated passing on coronavirus if they contract the disease.

 





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EU must prepare for ‘era of pandemics’, von der Leyen says

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Europe must prepare its medical sector to cope with an “era of pandemics”, the European Commission president said, as she warned the bloc was still in its most difficult period for Covid-19 vaccine deliveries. 

Ursula von der Leyen told the Financial Times that the EU could not afford to sit still even once Covid-19 has been overcome, as she described her plans for a Europewide fast-reaction system designed to respond more quickly to emerging medical threats. 

“Europe is determined to enlarge its strength in vaccine production,” she said in a telephone interview. “It’s an era of pandemics we are entering. If you look at what has been happening over the past few years, I mean from HIV to Ebola to MERS to SARS, these were all epidemics which could be contained, but we should not think it is all over when we’ve overcome Covid-19. The risk is still there.” 

Von der Leyen last month unveiled plans for a biodefence preparedness plan called the HERA Incubator, which will combine researchers, biotech companies, manufacturers and public authorities to monitor emerging threats and work on adapting vaccines. This will become part of a Health Emergency Preparedness and Response Authority (HERA). 

The concept is an attempt to mirror some of the benefits conferred by America’s Biomedical Advanced Research and Development Authority, which is charged with the job of responding rapidly to new health threats.

“The US has a strong advantage by having BARDA . . . this is an infrastructure Europe did not have,” von der Leyen said. “But Europe has to build up to be prepared for whatever comes, and also for the next possible pandemics. This is the HERA incubator.” 

The EU remains within its “most difficult quarter without any question” for vaccine deliveries, she said, cautioning “many, many problems” could always occur within the production process.

Looking towards the second quarter, she pointed out that a second EU contract with BioNTech/Pfizer for their vaccine would kick in, alongside the new jab from Johnson & Johnson, which is expected to be authorised in March.

In an EU summit on Thursday, von der Leyen addressed vaccine production and the threat of virus mutations after a rocky start to the year, when she was hit by complaints from politicians in member states, including Germany, about supply shortfalls. 

Von der Leyen acknowledged to the European Parliament in early February that mistakes had been made in the EU’s vaccination effort, and the campaign remains behind those of the US and UK. Among the difficulties are continued production problems at AstraZeneca’s European facilities. 

Von der Leyen said she was sticking with the EU’s target for the delivery of 300m doses in the second quarter, saying the challenge will shift from vaccine production to national rollouts. As for AstraZeneca’s shipments, she said: “I need to see the proof of the pudding . . . It’s very good that they also delivered from the rest of the world, but they have to honour their contract and we want our fair share.”

Ursula Von der Leyen says she is sticking with the EU’s target for the delivery of 300m doses of the AstraZeneca vaccine in the second quarter © Remo Casilli/Reuters

The good news for the EU is its access to mRNA technology, which is used in the BioNTech/Pfizer vaccine and which scientists believe can be used to rapidly adapt to mutations, said von der Leyen. 

But she also supported French president Emmanuel Macron’s proposal to share up to 5 per cent of supplies to permit the vaccination of healthcare workers in developing countries.

“We all suffer from the fact that the scaling up was not and is not as rapid as we thought at the beginning. This has a general effect all over the world,” she said. “With production picking up I think we should never forget that only if everybody has access to vaccines will we overcome this virus.”

Von der Leyen added that the EU needed to be particularly concerned about developments in its immediate area. 

“The mutant story is worrying me the most,” she said. “When the virus is still raging in the neighbourhood, the probability that mutants will occur, that will come back, for example, to Europe, is only rising.”



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Did US hiring accelerate in February?

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Did US hiring accelerate in February?

US hiring picked up markedly in February from the previous month, economists have forecast ahead of the monthly employment report that is due to be released on Friday.

After the country lost 227,000 jobs in December, hiring rebounded in January — albeit with a modest gain of 49,000 jobs — as the rise in coronavirus infections abated and vaccinations accelerated.

Economists polled by Bloomberg anticipate that the US will add 145,000 jobs in February, pushing the unemployment rate 1 percentage point to 5.3 per cent. If that forecast holds, it would mark the strongest pace of hiring since November.

The prospect of a resurgence was bolstered by data released last Thursday showing that filings for first-time jobless benefits fell to a three-month low in the week ending February 20.

The labour market stumbled in the final stretch of 2020 under the weight of the pandemic’s upswing in the autumn, which prompted tighter restrictions on businesses and social activity across the US.

The leisure and hospitality sector alone shed 597,000 jobs in December and January, according to labour department figures, whereas the January payroll gains were concentrated in government employment and professional and business services.

However, the outlook is brighter for the coming months, particularly with the expected passing of the Biden administration’s $1.9tn stimulus plan, which last week won the support of a large group of senior Wall Street executives, and further vaccination progress.

“US households appeared quite febrile at the end of 2020 as the cocktail of a worsening health situation, weakening employment and expiring fiscal aid weighed on private sector confidence and restrained mobility,” analysts at Oxford Economics said. “Fortunately, we see hope on all three fronts.” Matthew Rocco

Will eurozone inflation continue to rise?

Eurozone inflation hit its highest level since the start of the coronavirus pandemic in January, after five months of falling prices. On Tuesday the bloc’s statistics body will publish a preliminary estimate of February’s level, which is expected to continue the upward trend.

Many economists are predicting a steady rise over the spring on the back of higher energy costs, continuing supply chain disruptions that have raised costs for retailers and manufacturers, and the reversal of a VAT tax cut in Germany.

“For eurozone inflation, the only way is up,” said Carsten Brzeski, economist at ING, who forecast that headline consumer price inflation in the bloc would reach 1.3 per cent in February, from an 11-month high of 0.9 per cent in January.

Claus Vistesen, chief economist at Pantheon Macroeconomics, said a further increase in the price of oil — international benchmark Brent crude is up more than 30 per cent this year — could be the biggest driver of inflation in coming months.

A change in the inflation basket of goods and services is also at play. The 2021 basket reflects that people are consuming more food, where prices are rising, and less recreation activity, where prices are generally falling.

The European Central Bank has forecast that price growth will rise to 1.5 per cent in the fourth quarter this year before dipping to 1.2 per cent a year later — still under its target of below but close to 2 per cent.

“The ECB will not contemplate raising its policy rates until eurozone inflation expectations and wage inflation have increased substantially and persistently,” said Andrew Kenningham, economist at Capital Economics. “That is probably several years away.” Valentina Romei

Line chart of By date of forecast, % showing Economists revise up their eurozone inflation forecast for 2021

Can the copper bull run continue?

If, as the commodity market adage goes, the cure for high prices is high prices, where does that leave copper?

The world’s most important industrial metal, used in everything from electric vehicles to power cables, has risen more than 100 per cent from its pandemic lows in March last year.

Last week it hit a 10-year high above $9,500 a tonne before falling back as speculators piled in and a Chinese brokerage amassed a $1bn long position on the Shanghai Futures Exchange. 

A growing number of banks and brokers believe the bull run will continue and copper will go on to surpass its all-time high of $10,190 reached in February 2011. 

Citi and Goldman Sachs are both predicting big supply deficits for 2021 that would further drain already-low stockpiles of the metal, citing strong demand from China but also the rest of the world as the economic strain from the coronavirus pandemic eases. 

Unlike previous cycles, a dearth of “shovel-ready” copper projects means a flood of supply is not going to hit the market and send prices tumbling. If anything, even higher prices might be needed to spur production of low-grade ores in far-flung parts of the world where it is difficult to build a mine.

“It takes 15 years from discovery to navigating approvals to ultimately getting a development up and running in our industry,” Anglo American chief executive Mark Cutifani said. “So you can’t just wiggle your nose. It does need high prices, but it also needs time.” Neil Hume



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