Sunday 4 December 2016

A Brexit would be a real disaster for the border economy - except the smugglers

Published 31/03/2016 | 02:30

A file photograph from 2011 of interaction between the PSNI and gardai on the border. Photo: Mark Condren
A file photograph from 2011 of interaction between the PSNI and gardai on the border. Photo: Mark Condren

There is always money to be made along a border, some legitimate and some not so legitimate. Life along either side of the border with Northern Ireland for many decades was full of stories, rumours and even myths about smuggling.

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There were stories of cattle swimming across lakes and rivers to the other side of the border, pigs being sedated with Guinness while crossing by boat, coffins filled with contraband, false floors in vans and trucks.

State subsidies on livestock brought stories of people moving animals across the border at night for inspection, only to be brought back again the next day in an international merry-go-round spread over a few fields.

Back before large criminal gangs figured out how to wash the dye out of agricultural diesel using toxic acids, guys would even build a new hidden fuel tank in their car which was filled from inside the boot.

This left the original fuel tank disconnected from the engine and carrying the same pint of ordinary diesel for years in case they were ever dipped by customs.

The principles behind making money from a border are similar almost anywhere in the world. Put people in close proximity to each other but in different states and ingenuity will capture opportunity.

Different jurisdictions have different levels of tax and excise, creating a price differential. Different currencies operated in towns beside each other but on either side of a border, also create price differences that can be exploited.

Different jurisdictions have different subsidies or rules, which create a market on the other side of the border, because a product is not available on one side or is subsidised more heavily.

In the case of partition and the border in Ireland, the opportunities have changed over the decades. In his book, '29 Main Street - Living with Partition', historian Dermot McMonagle chronicles life growing up in his native border town of Ballyconnell in Co Cavan.

In the 1950s Britain introduced the Agricultural Deficiency Payment System, which provided a wonderful opportunity for smuggling. "Ballyconnell became a resting station for cattle and pigs moving northwards as the new market conditions dictated. For cattle to qualify for payments or subsidies, heifers and steers were ear punched with a sharpened half-inch copper pipe to make them bona fide northern animals, and left to heal for a time."

He describes how pigs from different litters were all thrown in together, but sprinkled with Jeyes fluid to give them a common scent, to stop them fighting. "It rarely worked".

New Zealand butter was available in Fermanagh for as little as 1/3d, while Killeshandra butter was available in Ballyconnell for 3/6d, McMonagle points out. There was very good money to be made. With Ireland and Britain's entry to the EEC in the early 1970s, opportunities for smuggling began to decrease. Animals might be smuggled to benefit from subsidies but the list of goods on which duty had to be paid dwindled.

Allowances on goods purchased for personal use were increased and many Southerners have stories about hiding goods bought across the border that they may have been allowed to bring across anyway.

The arrival of the single European market in 1993 effectively ended the border as a custom barrier to trade. But it hasn't done away with smuggling.

There may be a single market but different rules still create smuggling opportunities. The industrial scale criminal operations behind diesel laundering are costing the exchequer hundreds of millions of euro per year in lost excise and environmental clean-up. Many of those involved also make millions from cigarette smuggling.

But there are other tax differences to be exploited. The tax treatment of solid fuel has become the latest big money whizz. A carbon tax in the South creates an opportunity to smuggle across from the North. Vat in the South on solid fuel is 13.5pc. In Northern Ireland it is 5pc. Carbon tax adds €2.11 to a bag of coal in the South. In the North it is £0. The Irish Hardware Association, whose members have seen solid fuel sales fall, reported last year that a smuggler bringing in a 20-tonne truck of coal from Northern Ireland saves €1,195 in Carbon Tax alone. The Vat differential increases the evasion rewards to €2,005.

If so much illicit activity continues when both sides of the border are in a single European market, what will it be like if the UK decides to leave the EU?

One of the great benefits of the peace process has been the free movement of people, as well as goods, cross the border. As a result regional economies in border areas can benefit from people moving to the other side, commuting to the other side or simply just passing through the other side as part of their work routine.

Back in the 1940s Southern citizens had to apply to the RUC for a "Document of Identity" to travel within the North. So much has improved since then.

Brexit advocates argue that Ireland and the UK can continue with a freedom of movement treaty after a Brexit, just as they had before joining the EEC. After a Brexit, both will still be sovereign independent states, but one will be subject to the rules, directives and wishes of its European counterparts.

The border in Louth, Monaghan, Cavan, Leitrim and Donegal will be the border with the EU.

It would be ironic to think that if customs posts and queues returned to the border, that so too would smuggling. Yet the history of the border shows that it is not fully "policeable".

New tariffs would increase the opportunities and therefore smuggling is likely to increase, not to mention the creation of new barriers it would present to the movement of people through possible delays.

It is also ironic that the First Minister in Northern Ireland, DUP leader Arlene Foster, is advocating a Brexit, given the likely impact it could have on agriculture and food, which employ 6pc of the working population in Northern Ireland.

The Republic accounts for a third of Northern Ireland services exports. Total exports to the South are around €1.8bn annually compared to €1.2bn in the other direction.

A Brexit could represent an enormous social and economic step backwards for the idea of the island economy.

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