Thursday 19 July 2018

Ireland must tell its story as Brexit alters EU map

'Competition within the EU is anathema to much of the European establishment - especially those of the bigger, central, richer states'
'Competition within the EU is anathema to much of the European establishment - especially those of the bigger, central, richer states'
Brendan Keenan

Brendan Keenan

Maps, says Professor Jerry Brotton in his 'History of the World in Twelve Maps', "offer a proposal about the world, rather than just a reflection of it".

Back in the day when the Republican movement consisted of harmless fantasists rather than dangerous ones, they used to publish maps of Europe with Great Britain (the island which contains England, Scotland and Wales) missing.

It may have been the dream of some - to be surrounded by lots and lots of water - but the island of Ireland looked very isolated, far from the European mainland. The colours on the real map are set to change next year, with the great blue swathe of the EU across western Europe interrupted by the, presumably red, of the UK.

The best we can hope for is a separate colour for Northern Ireland. In that choice of shade, as Dr Brotton would recognise, lies the whole debate about hard borders, watery borders and no borders, along with the potential damage which may ensue.

It is already clear that re-drawing the map has fired imaginations well beyond this island. The sense of new possibilities is palpable. While there may be nothing as grand as the creation of the single market in the offing, it would be naïve to assume that things will stay the same.

As well as dealing with its own situation, small and remote Ireland - now more of a geographical outlier than Estonia - will have to rearrange and enhance its relationships with the rest of the EU.

The rest are already doing some thinking about us, as the Brexit negotiations showed. What are they to make of this English-speaking country with a distinct Anglo-American twang, now that they won't have to worry over what to make of Britain?

Our diplomats are busy recalibrating their efforts to tell them but the country as a whole will have to answer the same question, which we have signally failed to do until now: how do we see ourselves?

Irish economic politics consist largely of ideological arguments based on little or no hard evidence, accompanied by near permanent policies based on a curious mixture of light regulation, cosy relations between government and business, and a generous redistribution of income.

No theory underpins these unique arrangements, which are quite different from those of the UK, never mind the US. There is not even agreement on how to describe them; certainly not on that description of mine. But without more of a consensus on what we are, and what we would like to be, we will not have much to say for ourselves in the new Europe.

There will be much discussion of great political matters and new structures, but fiscal, financial and economic issues are likely to dominate. Unless we can give a better account of ourselves than in the past, we will lose out.

In that vital area, the Taoiseach's speech to the European Parliament contained two critical paragraphs, which were a bit overlooked among the excitements of Brexit and EU institution-building. They are, however, the cornerstones of what must be Ireland's stance.

When Mr Varadkar said "whatever the future holds, Europe needs to be competitive economically", it sounded like the usual clichés were on the way. Instead, he said: "One of the ways to ensure this is by having competition among member states. This is particularly important for peripheral and less-developed countries whose domestic markets are small and need inward investment."

Competition within the EU is anathema to much of the European establishment - especially those of the bigger, central, richer states. The ideas of French President Emmanuel Macron can be interpreted only as a demand for more harmonisation of wages, labour conditions and social security. Nice for France and Germany; trouble for Latvia and Portugal. If that was fighting talk from the Taoiseach, what followed was right between the eyes. Another cliché about support for the 'Subsidiarity and Proportionality Taskforce' was followed by: "It is interesting that, on many matters, US states and Canadian provinces, even counties and municipalities, have greater autonomy and greater variation among them than EU member states currently have. Do we have the balance right? And does everything have to be harmonised and standardised?"

Critics will see this as another defence of the Irish corporation tax system, but it is more fundamental than that. The argument, which Ireland is in a better position than most to make, is that, if EU and eurozone integration is not accompanied by greater internal freedom for member states, the enterprise will eventually collapse through the impoverishment of the less-developed countries.

The EU cannot be like the USA or Canada. It will never be a transfer union of the kind seen in those federal states. German policy is officially opposed to any transfers, or even risk-sharing. The EU's limited political homogeneity limits subsidiarity. There can be no Detroits.

Not least of the consequences is that the euro will always be a problematic currency for the less-productive states. Yet the EU response has been, not to reduce this risk by giving as much leeway as possible to member states, but to increase the danger in the belief that harmonisation (not to be confused with harmony) adds to strength.

The reason Ireland could carry some weight on these matters, and needs to do so, is precisely because of its economic success. This is rightly attributed in no small measure to membership of the EU but some key details tend to be glossed over.

The central question is whether the inherent advantages of membership, mainly market access, would have been enough to achieve that success without the other policies, particularly on inward investment, which the commission and some member states tried so hard to outlaw.

Ireland will have to acknowledge that its undercover corporation tax policies of recent years, even if legal, were reckless and irresponsible. It will have to concede that it is not one of the less-developed states and that its reliance on tax planning is excessive

As the Revenue suggested last week, Ireland will probably pay a heavy price for that recklessness as the system is cleaned up.

But we can help the whole EU, especially the poorer members of the eurozone, by using our experience to argue that less-developed, and therefore less-productive, countries need freedom to compete with the richer ones in order to close the gap.

For which read doing it cheaper, whether on wages, hours or taxes. The question to be asked is not what such things will do to the growth of France and Germany, but what they will do for the growth of Lithuania or Greece. The last thing they need is more financial transfers - an idea which will at least go down well in Germany, if not in the potential recipients themselves.

The French thinker Alexis de Tocqueville wrote that the most dangerous moment for a bad government is when it begins to reform, but he may have been too optimistic. Even without bad government, reform is always dangerous but the post-Brexit EU cannot avoid it. It would be foolish of any individual member state - particularly this one - to try.

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