Farm Ireland

Sunday 21 January 2018

A post-Brexit Britain could look to New Zealand and Canada for agri imports

IFA chief economist Rowena Dwyer
IFA chief economist Rowena Dwyer

rowena dwyer

Should the UK vote to leave the EU, Irish agriculture would undoubtedly feel negative consequences, both in the short-term and longer term.

Already in 2016, we have seen a weakening of Sterling arising mainly from uncertainty on the referendum outcome. In the event of Brexit, the strong trading relationship between Ireland and the UK would be significantly disrupted.

That's a major concern for the Irish agri-sector - the UK is our most important export market, accounting for over 40pc of output, including half of beef exports, 60pc of cheese, €350m worth of pig meat and almost 100pc of mushroom exports.

It's worth bearing in mind that, regardless of the outcome on Thursday, the UK remains part of the EU for a minimum of two years, as set out in the European Union treaty.

We come back to the uncertainty issue; nobody knows how the negotiation process will go, and for how long, as nobody has ever applied to leave the club.

Special arrangement for a special relationship?

Despite our relationship, Ireland would not be in a position to negotiate any special bilateral trade agreement with the UK in the event of Brexit. We would be bound by whatever trade agreement is reached between the EU and UK.

It has been suggested that the UK would negotiate a trading arrangement with the EU similar to that of Norway, which has access to the Single Market, and makes a financial contribution to the EU.

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Under this arrangement, however, many agricultural products are outside the Single Market agreement, with restrictions in place in the form of tariff quotas and regulatory, non-tariff barriers.

The reintroduction of these barriers would increase costs, reduce the competitiveness of Irish exports and, ultimately, reduce the potential the UK holds as a destination for Irish agri-food exports.

Where will our agri-exports go?

In the event of Brexit, trade to the UK will continue, albeit at a reduced level. Ireland will find other markets but these are unlikely to be as high value as the UK.

The other issue to consider is the opportunity cost - the UK is not only a high-value market but a growing one. Eurostat forecasts that by 2050 the UK will be the largest country in Europe.

In contrast, almost half of European countries are forecast to experience population decreases.

Another risk for Irish agri-exports is the likelihood that the UK would pursue separate trade agreements with third countries, including those with whom they have traditionally strong trade links, such as Canada and New Zealand. This would potentially displace Irish product currently going to the UK market.

How would it affect UK farmers

Ireland remains the main export market for the UK agri-food sector, and seven of the top 10 countries to which UK exports food are in the EU. So for farmers in the UK, the reintroduction of trade barriers could also have negative consequences, as tariff and quota restrictions could undermine their ability to export to the EU.

UK farmers receive €3.9bn annually in CAP funding. It is unknown what domestic support payments would replace the current EU CAP payments but UK Treasury is likely to provide less direct support for its farmers, with a particularly negative impact for Northern Irish, Scottish and Welsh farmers.

What would Brexit mean for the EU Budget?

As a net contributor to the EU budget, UK's withdrawal could mean either a reduction in the overall budget, or a requirement for increased contributions from the remaining States. Any reduction in the overall EU budget would put significant pressure on CAP funding for all EU states.

Another issue to consider is UK's position as an Irish ally in the EU. We entered the EU together and as part of an EU of 28 diverse Member States, our shared strong economic, social and cultural links make the UK a very important partner and ally in Europe.

What other impacts could Brexit have?

With a shared land border between Ireland and the UK, there is good all-island cooperation and coordination on animal health issues. Risks to the health of the animal population would increase, if, over time, different regulatory regimes were pursued between Ireland and the UK.

Ireland imports approximately 90pc of its oil and gas from the UK; a UK exit would potentially increase the costs of connecting to the EU Internal Energy market.

Then there are the issues that will affect all individuals such as the easy movement of people between the two countries.

In the event of Brexit, the days of travelling from the UK to Ireland using the library card as ID (true story) would truly be over!

Rowena Dwyer is chief economist with the IFA

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