Friday 23 March 2018

Brexit talks will force us to make some difficult choices

Ireland has more to lose than any of the remaining member states in the coming Brexit negotiations, writes Colm McCarthy

GO SLOW: A mock customs post at Ravensdale, Co Louth, last week where campaigners
highlighted concerns about Brexit’s impact on cross-border trade. Photo: Niall Carson
GO SLOW: A mock customs post at Ravensdale, Co Louth, last week where campaigners highlighted concerns about Brexit’s impact on cross-border trade. Photo: Niall Carson
Colm McCarthy

Colm McCarthy

Concerns about the Border with Northern Ireland are consuming much of the political attention being devoted to Brexit. But Great Britain is also leaving the European Union. For the Republic's economy, the Great Britain bit is much more important than the Northern Ireland bit.

To take merchandise trade alone, imports from Great Britain are eight times the Northern Ireland figure; exports are 15 times greater. Special status for Northern Ireland in trade access or customs procedures would be fine if there were no costs involved, but if purchased at the cost of worsened access in Great Britain, it could be a bad deal.

More generally, the British government will have bigger fish to fry in its relations with European Commission negotiators and it is important to use limited political influence wisely. At the moment, one could be forgiven for believing that the land Border with the North was the dominant issue arising.

The threat to Irish agri-business from the UK's EU departure is well understood. Both primary producers and food processors, and the many thousands they employ around the country, should fear the UK's likely exit from the framework of the Common Agricultural Policy. But with every week that passes, a new set of Brexit concerns is raised by people from business and industry.

Two examples: Ireland is a world-leading producer of thoroughbred racehorses - Europe has just three main breeding locations, the others being Britain and France. These three countries have agreements which permit the free commerce of bloodstock between them and they dominate sales into all of the other European countries. Depending on the form which Brexit takes, these arrangements, and particularly Ireland's strong export sales in Britain, could be under threat.

Last Thursday, Ryanair chief marketing officer Kenny Jacobs expressed concern about the survival of the UK in the common aviation market, which has delivered open skies throughout Europe, as well as access for new carriers and fare competition on the North Atlantic.

The result has been a better deal for consumers. Ryanair has had its share of spats with European regulators but the airline's extraordinary success, and that of Europe's other low-fare carriers like EasyJet and Norwegian, would have been impossible without the European Commission's dogged 30-year pursuit of open skies.

If protectionist flag-carriers in France and Germany (they haven't gone away you know) succeed in restricting access to the UK-EU aviation market, there will be fare increases on routes to the UK from Ireland. Fancy a night on the Holyhead ferry and the train to Euston?

Irish politicians and officials have identified and logged dozens of other examples of sector-specific contingencies deriving from Brexit, a list which lengthened considerably as it emerged that the UK is almost certain to end up outside both the single market and the customs union.

The Brexit negotiation will centre, it would appear, around a UK attempt to secure a sector-by-sector free trade agreement with the EU as well as some form of external association with the customs union.

It is not yet clear that these negotiations can even commence until well after the notification under Article 50, due in March. They may have to await progress on the divorce proceedings, likely to be contentious given the size of the exit fee of €60bn being sought from the British. The two-year clock starts ticking on the date of notification and trade experts are sceptical that any detailed agreement can be concluded in time to avoid a high-cost departure.

Ireland got lucky back in 1972 when agreement was reached on British entry to the European Economic Community. It became possible for Ireland to have it both ways - an essential close relationship with the British neighbour and the opportunity to build a new one with continental Europe.

As the Taoiseach acknowledged in his important speech in the Mansion House on February 15: "The foundation of Ireland's prosperity and the bedrock of our modern society is our membership of the European Union. It has been central to the success of our open, competitive economy."

The first occasion when a choice had to be made was in the period leading up to the launch of the euro in 1999. In retrospect, the British decision, under both Labour and Tory governments, to stay out of the common currency was the critical act of detachment from the core European project and the key step on the road to Brexit.

Whether the common currency was a good idea for Europe, and the decision to join without the British a good one for Ireland, is not relevant to a consideration of practical policy. The verdict of history may well be no to both questions but it would be an enormous and reckless gamble in today's circumstances to contemplate unilateral withdrawal from the common currency.

Equally, the Taoiseach is prudent to combine continued EU membership with Irish support for as painless a British departure as possible. This is in everyone's interests and his speech has been welcomed in Brussels and under-reported here.

But there has been far too much happy talk about the upsides from Brexit. There may well be some additional opportunities for inward investment, and not just in financial services - but there could also be a permanent loss of access to the UK market, as well as hindrances to businesses in just about every major economic sector.

If Donald Trump were describing the Brexit shock for Ireland, he would call it 'a disasta folks, believe me, it's a disasta'.

Brexit is a strategic reverse because Ireland can no longer have it both ways in foreign policy, and has had reluctantly to choose. The choice is to stick with the EU and to accept that membership in an ill-designed and poorly-managed common currency is inescapable, at least for now.

While these look like the best choices in unwelcome circumstances, nobody should be under any illusions. Brexit could work out really badly for Ireland.

If the negotiations go slowly and poorly, there is no EU member state with more to lose. Whatever bargaining power Ireland can muster as one of the remaining 27 needs to be deployed with great care.

Last Thursday, several TDs and senators, at a meeting with the visiting House of Commons Brexit committee, raised the question of establishing a new EU border between the island of Ireland and Great Britain, in effect keeping Northern Ireland in both the single market and the customs union.

This might appeal to those anxious to exploit Brexit in accelerating a border poll and the early return of the Fourth Green Field. But it is not at all clear that it is in the interest of the Northern Ireland economy, which does far more trade with Great Britain than it does with the Republic.

Do these TDs and senators expect Northern Ireland to welcome the prospect of passport and customs barriers at Stranraer?

This must look like coat-trailing to unionists and it would be a waste of scarce political capital in Brussels were the Government unwise enough to attach any priority to the notion.

A soft border with Northern Ireland will be difficult to achieve without the introduction of such an impractical and divisive demand.

Sunday Independent

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