Business Brexit

Sunday 4 December 2016

Irish ways and laws may not be a good fit in post-Brexit EU

Published 25/08/2016 | 02:30

St Patrick’s Day in London’s Trafalgar Square: ‘Time and again, the free labour movement has saved us – and has also created a bland insouciance among the elites here’
St Patrick’s Day in London’s Trafalgar Square: ‘Time and again, the free labour movement has saved us – and has also created a bland insouciance among the elites here’

SO Brexit will, or possibly won't, happen. And if it happens we might ,or might not, see a significant change in how the UK interacts with the remaining EU - that is if there is a UK and it has not splintered.

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Post-Brexit, we are likely to see a devalued sterling, and certainly will see a more volatile sterling, compared to the euro. We are going to see a disruption to the UK labour market, if Brexit is to mean anything and if prime minister May is to avoid being eaten alive by the eurosceptics that still exist in the Tory party.

A Brexited UK is likely to become a stronger competitor on FDI than it is as present, as those pesky labour and environmental safeguards are scrapped, allowing polluting and exploitative firms free reign.

And we are probably going to see dislocation to the all-Ireland energy market; not good news in an already hyper expensive Irish energy market.

But in all the discussions around the economic and business fallout we rarely see commentators noting one crucial fact, well known to students, practical and academic, of international business. Culture eats strategy.

In this regard we need to think hard about our place post-Brexit (assuming, as noted, that it ever happens). Business scholars have for decades been developing research on how to measure aspects of national culture, and this allows us some possibility of assessing brexit effects.

These studies show that national cultural differences are powerful explicators of cross-border trade and investment. Of course we cannot reduce something as sprawling as national culture to a number without losing a lot of nuance, but the reduction throws some concepts into stark relief.

On one measure, we are quite far away from the European norms. These look at how "flat" a society we are, how we deal with ambiguity, how long term is our orientation, among others. We are closer by a fair degree to the UK than to any other EU nation. In fact, we are even closer to New Zealand, the USA and Australia, in culture terms. This means that dealing with other EU countries without Britain runs a risk - perhaps a certainty - of greater friction than before with other states and the institutions.

The UK and ourselves ran on broadly parallel tracks in terms of how we thought, how we acted and how we interacted. Disengaged and half-hearted they may have been, but the UK was too big to ignore. We, on the other hand, are not. We will find the councils of power chillier, and the strictures of the EU more chafing.

What this means in practice is hard to assess clearly. But we can be sure of some things. One is that we will have to adjust our way of doing business as a nation. Looking at two elements - toleration for uncertainty and long-term vs short-term orientation - we are very far from the Franco-German axis.

Compared with us, these countries set more store by predictability and place greater emphasis on the long over the short-term We also place less emphasis on restraint. So when it comes to things like the existence of the Euro and its many many failings, these nations will "keep calm and carry on" while we have a greater - perhaps justified, perhaps not - tendency to flap and fluster.

This is not about the rights and wrongs of such attitudes - it is just how we do business. The UK was more or less like us, but with a higher, sometimes almost Germanic, degree of preference for avoiding chaos. So we can expect greater pressure for a more rules based approach, rather than a preference for national discretion.

This will impact on all sorts of things. From the application of directives, to the future direction of migration policy, we will find a more pragmatic but also a more rules-bound Europe. A further issue that needs to be brought into the open is how we deal with the other countries post-Brexit. This is of particular sensitivity when it comes to the labour market. A key plank of the Single Market is freedom of movement of labour. Much of the talk in Ireland has been around the common travel area (CTA). That is really missing the point.

The CTA is not, except by convention, a common labour market. It is in fact a visa-free travel area, such as Schengen. It has never been a free movement area. Try getting into or out of a port or airport in these islands without ID.

Post-Brexit the UK will, for political, if no other reasons, clamp down on the number of EU citizens working there. The ability of the poor and dislocated of the Irish labour market to go and work unrestricted in the much larger market next door has, in my view, been the saviour of the State.

Imagine in the 1980s when things were much, much grimmer, with a failed economy and a low-grade civil war threatening to engulf the island, if people had not been able to move to London or Edinburgh or Doncaster to work.

Imagine what would have happened in the bleak years of the 1950s, or the 1970s. The pot would have boiled over. Time and again, the free labour movement has saved us - and has also created a bland insouciance among the elites here.

They didn't need to create a working economy or society when, if we don't like what we have here we can, to put it bluntly, feck off to England. We cannot assume that this will remain the case.

There are many more - seven times as many - non-Irish EU migrants in the UK than Irish. We cannot expect to co-exist in an EU with Poland or Latvia where we have cut a special deal with the UK on our citizens as British immigration officers shuffle their citizens to the Dover mail boat.

Not that we have any problem with hypocrisy. Just see our treatment of undocumented economic migrants here and compare it with the ritualised outrage whenever one of our undocumented economic migrants is caught in Australia or the USA.

But we don't have to keep onside with states such as Nigeria. We do with Poland - a country which, compared to us, is a more hierarchical, longer-term orientated and less individualist society. Special deals are not the norm.

Then there is the North. Why are we not in Schengen? We are not in Schengen because of the CTA. But the CTA and a free labour market are not the same. If we cannot have free labour movement, do we need the CTA?

Would the EU, post-Brexit, countenance a special deal on migration and sharing of intelligence with a non-EU state? That is by no means clear. Post-Brexit, Schengen will cover the whole EU, bar Ireland. The pressure will be on for us to join, whether that is publicly articulated or not.

Of course, there is always a compromise. Last week we saw something that is bound to set the Elysee Palace alight - an "inversion" of a French company into Ireland. I'm sure that France would be amenable to allowing us to remain outside Schengen, in return for a chat on issues around corporation tax.

In a hubristic hysterical display of small dog syndrome, Brian Hayes has declared that he wants us all to die in a ditch to save our corporation tax regime. I doubt many will follow him.

On the contrary, a discussion on Schengen which develops into one on how we have managed to create an economy that is now swelling up like a puffer fish on tax-based corporate restructurings, might not be a bad tradeoff. Brian Hayes can munch on the liver of the Celtic Puffer Fish while the rest of us carve out the good bits.

Prof Brian Lucey is director of research, School of Business, TCD

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