Dan O'Brien: Don't stay calm and relax, this result is a massive threat to Ireland
It’s important to note the extreme complexity of negotiating trade deals. The current World Trade Organisation negotiations, the Doha round, have been going around for 15 years. Now it’s not going anywhere but that just gives an indication of how long these things can take.
The EU-Canada free trade agreement that has recently been concluded took many years and that is considered as a potential model for EU-UK relations.
So these things take a lot of time and there is huge uncertainty around them.
It is worth repeating. We can have no special deal. There is no such thing as a bilateral trade deal between a member of the EU and a third country. So there won’t be special deals and you still hear people say that it will be alright, we’ll work something out that there’ll be a special deal between Ireland and the UK. That can only happen if we leave the European Union – so no bilateral agreement.
There will be, almost certainly, additional barriers to trade between the EU and the UK. The only question is will they be big ones or will they be small.
It is fair to say that economists, while we don’t agree on much, one of the things that is universally agreed on is the higher the barriers, the more barriers you have to commercial activity, the less commercial activity you get. That’s a very clear longer-term downside.
There is also the issue, in terms of those negotiations, that there will be no desire to give Britain the best of both worlds, or appear to do so, whereby it is out of the EU but retains all of the upsides in terms of market access.
It has been said that Ireland has always traded with the UK – of course it has – and there’s nothing to worry about.
That’s a little like saying there’s always been climate change and there is nothing to worry about climate change. It is a very significant risk to Ireland.
The issue of foreign direct investment (FDI) is the solitary upside to Britain leaving, in terms of FDI being attracted and coming to Ireland – both British companies that serve the European market from the UK, with the potential that they could move the EU part of their operations to Ireland, as well as non-British companies.
Britain has the largest stock of Foreign Direct Investment in Europe, by a considerable distance.
Only a small proportion of that moving to Ireland would have a major impact on our economy.
But also, it hasn’t been said as much that equally, if there are high barriers to trade between Ireland and the UK, that will also create an incentive for companies based here who service the UK market to jump those barriers to shift their operations or part of their operations to the UK.
So there is a downside FDI threat as well, in terms of existing FDI here moving to the UK to make sure they are behind whatever tariff barriers or trade barriers that come into existence.
Whenever we think about risk, we always think about the probability and the impact. Now, even if the probability of risk to the single market and the euro were to disappear, although that probability is low, the impact is extremely high.
In terms of the euro, we know from the 2010-2012 period that where there was a risk that the currency would cease to exist, the impact on the real economy in Europe was disastrous and led to a protracted recession, which came after the recession of 2008-2009.
The integrity of the single market can’t be stressed enough for this country. Our economic model, more than any other member state, is based upon having access to the single market.
There is no other member state, or indeed OECD country, whose economy, whose employment depends as much on foreign companies as ours does.
So our model is very much based on having full access to the European single market and any threat to that would be much more significant than whatever deterioration of the relationship takes place between Ireland and the UK and the UK and European Union.
If this is to trigger a disintegration of the EU, that would be an enormous risk for this country and this economy.
Extract from Dan O’Brien’s address at the Institute of International and European Affairs on ‘The UK Referendum Result: What it Means for Ireland’