Monday 24 October 2016

Could a Brexit be Ireland's opportunity?

Published 14/05/2015 | 02:30

British Prime Minister David Cameron and Taoiseach Enda Kenny in Downing Street, meeting beneath a portrait of Margaret Thatcher
British Prime Minister David Cameron and Taoiseach Enda Kenny in Downing Street, meeting beneath a portrait of Margaret Thatcher

There is an acute sensitivity in Ireland to how we behave towards powerful foreigners. "Tugging the forelock" is an expression that is often used in this regard. That charge is made when there is a perception that an Irish person (or government) is insufficiently assertive towards a foreigner (or a foreign government), or - worse still - appears to be behaving subserviently.

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In recent years, in the context of the crisis in Europe, the charge has been made frequently in relations to burning bank bondholders, the EU-IMF bailout and other related matters. Those making the charge have often advocated aggressive unilateral responses.

More often than not, tough-talking advocates of such courses of action grossly overestimate the power a small country such as Ireland wields in the world. They understate the dangers of overplaying one's hand, which can easily result in things turning out worse than a more restrained approach. And they fail to see that recognising one's own weakness is not in itself a sign of weakness, but is, on the contrary, a sign that one understands the hard realities of power relationships.

Much of the sensitivity to any appearance of subservience, and a desire to talk tough to powerful foreigners almost certainly has its origins in the historical relationship between this island and its neighbour. Thankfully, that history has largely been transcended. Anglo-Irish relations are better than they have ever been since we exited the UK almost a century ago.

But since the British people decided seven days ago to elect a government which could preside over an exit from the European Union, Ireland has been placed in an invidious position.

Anyone who thinks seriously about Irish interests can only come to the conclusion that a British departure from the EU would be very bad for this island. It would, among other things, take a toll on our prosperity by eroding east-west economic links, it would destabilise the North by accentuating the border and it would further increase Germany's already excessive influence within the EU.

The only upside to a British departure is that Ireland will become a relatively more attractive place for businesses seeking guaranteed and unfettered access to the EU single market, still the biggest market in the world. That is because there is very considerable uncertainty over the kind of economic relationship Britain would have with the EU as a non-member. Many members already ask why they should give one country all the benefits of membership (ie full access to the single market) without having the costs of playing by the rules.

And here we come to the hard choice: to what extent should Ireland exploit this opportunity to attract the many British companies which trade with Europe, and who are rightly concerned about the consequences of Brexit for the business, as well as the huge number of foreign companies servicing the European market from the UK? In deciding on any potentially risky course of action, assessing what is to be gained is an essential starting point. By any calculation, it is clear that Ireland stands to gain considerably if business in Britain sees the risk of Brexit rising and if uncertainty about the post-exit relationship increases. The size of potential gain can be seen if one considers the number of foreign companies based across the water. Because Britain has historically been a good place to do business, it has attracted a great deal of foreign direct investment. The stock of FDI in the UK stands at well over $1.5 trillion, more than another EU country and 50pc more than either Germany or France. A good proportion of that investment is focused on the wider European market and is likely to consider relocating if the probability of Brexit rises. If even a tiny proportion of that $1.5 trillion-plus investment were to come to Ireland, it would have a huge positive impact and help offset the many costs of Brexit.

But if the gain is potentially large, what are the costs? There are those in officialdom in Dublin who are concerned that London would retaliate if Ireland played up the risks of Brexit and was seen as poaching British jobs.

There is no doubt that if London decided to play hardball, there are things it could do to retaliate. But options for sanctions-type measures are limited, in large part because of the EU itself (an irony that will surely infuriate English Eurosceptic types). That is because the EU is ruled by laws, particularly in relation to cross-border economic matters. Most forms of discriminatory practices are outlawed.

For Ireland to strongly but subtly stress to hard-headed businessfolk based in Britain that they would be better off relocating is hardly illegitimate. Nor is it the case that everyone in Britain would take badly to an Irish invitation to investors in Britain.

Those advocating a vote to stay in the EU in the forthcoming referendum face many challenges. One will be winning the economic argument. That will be much harder than it has been in Irish EU referendums, when business was almost universally pro-Europe. Many British bosses, particularly in small and medium-sized companies, believe that they would be better off out than in. If pro-EU Britons can point to investment and jobs leaking westwards as a direct response to the rising risk of Brexit, they will have hard proof of the damage leaving would do.

This can only help win the economic argument about the costs of exit.

So, in a nutshell, the next time Enda Kenny meets David Cameron, he would not go far wrong saying the following: "We really want you to stay in with us and we will help you to do so, but if you leave it will cost us dearly. We need to do everything possible to mitigate these costs.

"As such, you can hardly blame us if we put out the welcome mat for companies who, for perfectly legitimate reasons, want to remain in Europe."

Taking such a posture is not without risks, but it is the least bad option now available.

Irish Independent

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