Thursday 30 October 2014

Novenas won’t save us if UK decides to exit

A UK departure would pose more hard questions for Ireland than for any 
other member state

Published 29/06/2014 | 02:30

David Cameron

The external border of the European Union could be located a few miles north of Dundalk inside a short few years. The row over the presidency of the European Commission matters, not because the choice of Jean-Claude Juncker is hugely important in itself, but because it raises the stakes: the United Kingdom could be on the way out of the European Union.

The Conservative party may fail to secure a majority at the general election next year, in which case a referendum on EU membership is unlikely. But if the Tories win, there is an irrevocable commitment to an in-or-out referendum in 2017. Recent opinion polls suggest that the British public is unhappy about the current relationship with Europe and the referendum vote could go either way.  

Friday's decision to ignore the reservations of a large member state about a key appointment is unusual. There had been an understanding that the four big countries - France, Germany, Britain and Italy - would always find a compromise on filling the top posts, hence the fears that the snub to Cameron increases the likelihood of Britain leaving the EU. A British departure, coming on top of the common currency debacle, would be a damaging blow to the prestige of the European project. For Ireland, there would be some severe challenges.

The response of the Irish Government to date appears to have two components. The first element is the familiar sleepwalking routine: a British exit is not likely to happen, so there is no need to worry. There is seen to be no urgency about preparing for a contingency deemed to be unlikely - the approach to policy which brought you, for example, the bank guarantee. The second is the unspoken presumption that, if Britain pulls out, Ireland will continue as an EU member.

So what are the odds on a British exit? Unless the British Labour party changes tack, a Labour victory solves the problem for Ireland, at least for now, since Labour does not favour a referendum. But Labour is doing less well in the polls than an opposition party should be doing at this stage in the UK electoral cycle. An average of recent polls puts Labour at 37pc with the Tories at 33pc. There is a long-established pattern in UK opinion polls that sees the government recover in the year before an election. So the opinion polls are showing that the result could be close and a Tory victory by no means impossible. Labour could also switch horses, promising to match the Tory commitment to a referendum, in which case there would be a referendum regardless of the election result.

Even if Labour sticks to the no-referendum position, they could lose the election. Some party strategists worry that sticking with the no-referendum pledge makes an election defeat more likely. It was, they argue, Labour that arranged the last referendum on Europe in 1975.

If a referendum is held in 2017, there is a strong chance that voters will give the thumbs down to the EU, not least because the row over Juncker's appointment will feed voter disaffection with Brussels. A recent poll for The Observer posed two questions: how would you vote on the current terms of UK membership, and how would you vote on re-negotiated terms? On current terms, 48pc would vote to quit and just 37pc to stay in the EU. If better terms could be negotiated, an unavoidably vague notion at this stage, 42pc would stay and 36pc would quit regardless.

The best summary goes something like this: it is perhaps slight odds against that there will be a referendum at all and maybe even money that the result would be a vote for EU exit. Even if you judge the probabilities now to be rather higher odds-against in both cases, the chances of an EU exit by the United Kingdom inside the next few years have been rising steadily.

Ireland withdrew its application to join the (then) Common Market, the EU's predecessor, back in the 1960s when UK entry was stymied by France. The French president Charles de Gaulle apparently offered the Irish the possibility of membership without the UK, an offer which was declined. Ireland eventually joined, alongside the UK, in 1973. Thus Ireland has never been in membership of the EU without the UK, and a UK exit would pose more difficult questions for this country than for any other current 
EU member.

Should the British choose exit in 2017, the vote will be followed, under a procedure laid out in the Lisbon treaty, by detailed negotiations on the terms of departure. These will focus inevitably on the trading relationship for goods and services and also on freedom of movement for capital and labour. Britain remains Ireland's most important trading partner, even though that dependence has diminished over the years.

A continuing free trade relationship will readily be agreed, but the UK will want safeguards against non-tariff barriers to its exports to Europe. At present, any foul play is refereed by the European Commission and the UK will doubtless seek assurances of an effective successor 
arrangement.

A contentious issue will be the free movement of capital and the oversight of the financial markets, important to the long-term prosperity of the city of London, the capital of European finance. Competing financial centres, including Paris and Frankfurt, have failed to divert business away from London despite Britain's non-membership of the eurozone and there has long been resentment of London's pre-eminence.

Immigration has become an election issue in several countries and the free movement of labour will also prove to be contentious. UK business will wish to retain an open door, and UK citizens to retain access without work permits if they plan a spell on the continent. This is a particularly difficult issue for Ireland, since the two islands have always functioned as a common labour market. If Britain leaves the EU but Ireland chooses to remain inside, the Ireland/UK common labour market could be a casualty.

Most of the continental European countries are joined in a common travel zone, called the Schengen area. Twenty-two of the EU's 28 members adhere to the Schengen agreement, which permits passport-free travel without border checks of any kind. Four of the six non-members will join in due course, which leaves just two with negotiated opt-outs. These happen to be Ireland and the United Kingdom, which have operated their own common travel area without passports or border checks since the foundation of the Irish state in 1921. It would be disruptive if this arrangement did not survive a UK exit from the EU.

A British exit could have particularly troublesome consequences for Irish agriculture and the food industry since the UK would cease to be governed by the rules of the Common Agricultural Policy. It would no longer enforce import quotas and a common external tariff against non-EU producers. Britain has never been keen on these policies, and opposition to the Cap is one of the motive forces behind the push to depart the EU. This could see a return of the traditional cheap food policy in Irish agriculture's biggest export market.

The EU has discouraged the spread of genetically modified food products and there are import restrictions. UK farmers would seek to relax the rules should the UK exit the union, which could result in greater competition from North American producers in Ireland's key UK markets.

If the UK does eventually depart the EU it will become a very different, and quite likely less attractive, economic and political construct from Ireland's standpoint. Just three large countries would remain, two of which, France and Italy, have seen their influence decline in recent years. The dominance of Germany will become more pronounced and there are fears that 'ever closer union' will, in practice, take the form of a Bundesrepublik Europa.

Friday's events in Brussels mean that the odds have shortened on British exit. It is no longer adequate for the Irish political system to offer up novenas that no referendum will be held or that it will be defeated on the day. Sometimes your prayers get ignored and it is time to start some serious contingency planning.

Colm McCarthy

Sunday Independent

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