Saturday 22 October 2016

Yes, we should worry - but not about everything

We need a Management Council to negotiate the Brexit nightmare, as we had during the economic crisis, writes Dan O'Brien

Published 03/07/2016 | 02:30

CHANGE: Thousands of protesters gathered in Parliament Square,
London, yesterday for a March for Europe. GETTY
CHANGE: Thousands of protesters gathered in Parliament Square, London, yesterday for a March for Europe. GETTY

What are the most important national interests? How should they be prioritised? When they have been prioritised, how should they be pursued?

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These are the questions that governments never stop asking themselves. Brexit requires that they are all urgently asked again. But such are the complexities of unscrambling the one million egg omelette of British EU membership that even defining Ireland's interests now is an immense and difficult task. Prioritising those interests and developing a strategy to pursue them will take time and great effort given the vast and profound uncertainties surrounding Britain's departure.

Among the very few things that can be said with certainty is that the nightmare that has just begun will be very bad for Irish interests. Unless Brexit ends up not happening - around a one in three chance at this juncture, in my view - the aim will be damage limitation, downside mitigation and exploitation of the solitary (foreign investment) upside.

Given the scale and importance of the challenge, nimble and flexible leadership is essential. Many useful ideas have been mooted over the past week, so let me add one to the list - the Government should establish a 'Brexit Management Council' (BMC) using as a model the Economic Management Council (EMC) which the previous administration put in place in 2011 to handle the severe crisis the country was then facing.

The EMC was one of the most effective initiatives of the Fine Gael-Labour coalition. By bringing together a small group of the most relevant members of the Cabinet, it brought focus and coordination to addressing the multifaceted aspect of the economic crisis and the bailout.

It did a great deal to squeeze inertia out of the political-administrative system, something that is an imperative in Ireland where that system has a tendency to fall asleep at the wheel.

Falling asleep at the wheel causes crashes. Taking your eyes off the road when travelling at speed can too. Events have accelerated over the past 10 days and are now moving at great speed. A huge amount of distance will have to be travelled in the weeks, months and years ahead before Britain actually leaves the EU, something that is very unlikely to happen before 2019. A BMC would help ensure the system never takes its eyes off Britain's long road to the EU exit.

One of the most difficult aspects of the coming Brexit negotiations will be the stance of some countries which have an interest in taking a harder line with Britain than Ireland does.

There has been a great deal of talk of a spurned Europe lashing out to 'punish' Britain. While there is no doubting that some of the more ideological integrationists in Europe feel emotional, they don't make decisions. Countries' positions will be determined by cold, calculated interests, as they always are.

Although that fact makes the stances of countries more predictable, it still doesn't augur well. One of the most difficult dynamics in the difficult times ahead will be the positions of the governments in the EU which are facing the sort of forces that have taken Britain out of Europe. Calls for similar referendums from parties who also want to quit the EU have multiplied over the past week.

An incumbent leader facing such parties cannot but see an advantage in Britain suffering hardship as a result of its decision to leave. When, say, France's president Francois Hollande debates with his EU withdrawalist challenger, Marine Le Pen, in next April's election, being able to point to rising unemployment in Britain and jobs moving across the channel to France would be a godsend. For some leaders, therefore, there is a hard-headed reason to make things tough for the UK. Because there is not (yet) such a withdrawalist movement in Ireland, Enda Kenny does not have that flank to cover.

But this doesn't mean that there are not many squares to circle from an Irish perspective.

Giving Britain the best deal possible would appear to be Ireland's natural position in the talks on how Brexit happens, largely so that the large negative economic effects are contained. But, alas, even this is very far from straightforward.

Giving a detached Britain the benefits of being in the EU single market would be good for the huge trade relationship that exists between our two countries. But there would, for instance, be negative repercussions for Ireland if Britain had the best of being in the EU single market without complying with all the rules.

Take the European rules which put severe limits on governments giving grants and other incentives to companies which come at a cost to taxpayers.

If Britain were able to opt out of this constraint of membership it could offer cash and tailored tax packages to multinationals.

That would place Ireland at a major disadvantage in luring the sort of investment that is the foundation of the Irish economic model. It could also allow Britain lure away companies that are already in Ireland.

Another conundrum is the farming and food industry. The sector does not appear to have fully realised the scale of threat to it of being rendered uncompetitive in its biggest market. That will happen if Britain leaves and then abandons the EU's common external tariff (an import tax) on food from non-EU countries.

That would result in less expensive meat from South America and dairy from New Zealand pricing Irish produce out of its most important market by far.

The hard truth is that there will be little Ireland, or anyone else, will be able to do about this.

That is because most farming in Ireland happens thanks only to the vast amounts of taxpayers' money which subsidises it.

Any industry that depends on handouts to exist is always more vulnerable than competitive industries.

Ireland will have limited influence on the overall shape of the package between the EU and the UK. It is important that the farming lobby is not allowed to take for itself a disproportionate share of that influence, particularly if that involves the interests of other sectors which are more competitive, and therefore more sustainable, being sacrificed.

This is all grim stuff. Britain leaving Europe will cause people in this country to lose their jobs, their livelihoods and their businesses. It will create additional economic insecurity for many more people. In these islands it will make both east-west and north-south relations more difficult. More widely it will reduce Ireland's already limited influence over its external environment.

There is, in short, a lot to worry about. But let me conclude with something that doesn't need to be worried about more now than before the Brexit referendum - corporation tax.

Over the past 10 days there has been talk of it being threatened anew, mainly because London and Dublin have long been allied on the issue. But the two countries are far from alone on tax. Besides, every member state wields a veto on tax issues and that is not going to change, Brexit or no.

Everyone has more than enough things to be worrying about as a result of the Brexit decision. Corporation tax is not one of them.

Sunday Independent

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