Wednesday 20 November 2019

Brexit outcomes for Ireland range from dismal to full-blown disaster

With so many actors, issues and moving parts, predicting how the UK's departure from the EU will affect Ireland is hard - but it will be bad

British Prime Minister Theresa May Photo: AP
British Prime Minister Theresa May Photo: AP
Dan O'Brien

Dan O'Brien

Understanding Brexit and its myriad implications is beyond any one individual. With so many factors at play, accurately predicting how things will turn out two years from today, when Britain is very likely to be in its first week outside the EU, is impossible.

On the EU side the moving parts include: the different positions the remaining 27 members of the EU will take on the tens of thousands of issues involved; what sort of compromises they collectively make on those issues; and how unified they remain in the years to come as they sit across the table from the British.

Along with "the 27", the role of the European Commission and the European Parliament will also be important in the Brexit talks, although not as important as the member countries.

On the British side, crucial factors in determining London's position in the talks will include the internal politics of the Conservative party, the Scottish independence issue, the state of the economy (and the public's perception of the state of the economy), the degree to which investment shifts out of the UK as a result of Brexit, the role of the media and how public opinion on European issues evolves.

Given the sheer number of relevant factors, along with the utterly unprecedented nature of exiting the EU and the risk of unexpected events - such as the election of Marine Le Pen or an intervention by the Trump administration - the range of outcomes is extremely wide. On the one hand, sense could prevail, with all sides coldly calculating that damage limitation is in their best interests. At the other extreme, destructive dynamics could take hold, resulting in matters spinning beyond the control of any of the multiple actors.

Despite the inherent difficulty of predicting how things will be two years from now, it may be a useful exercise to sketch out a better-case scenario and a car-crash scenario, written from the vantage point of Saturday, March 30, 2019.

A relatively benign Brexit

Although the first months of exit talks went surprisingly well, it had become clear by the autumn of 2017 that an agreement on Britain's terms of departure would not be reached within the two-year time limit set down in The Lisbon Treaty. As only a small group of the most extreme Brexiters in London were still demanding that the departure go ahead on March 29, 2019, the British Prime Minister Theresa May was in a position to seek an extension without triggering a revolt in her own party. Among the 27, there was unanimous agreement that it was in everyone's interests to grant a one-year extension.

More importantly, and despite opposition initially from some on the EU side, towards the end of 2017 it was decided to negotiate Britain's new economic relationship with the bloc in parallel with the divorce talks, rather than insisting that the divorce deal be finalised before talks start on the new EU-UK relationship. That position shifted relatively early on, something Ireland had been pushing hard for to reduce uncertainty and to avoid two large-scale changes to the trade regime (one on exit and the other when the new deal came into force).

The decision by the British to row back on leaving the EU's customs union, as the scale of the disruption it would cause became clear even to most Brexiters, was the most important factor in the change of position by the 27 on sequential versus parallel talks. Not only did London's decision to remain within the customs union improve the general mood, it also made negotiating a new deal a lot less complicated and more achievable in the extended three- year time frame (while leaving the single market will be disruptive, imposing customs regimes and hard borders would have been much more difficult logistically and damaging economically).

From an Irish perspective, there is little doubt that Britain's departure from the EU and the single market in a year's time will be negative in many ways, not least for east-west commerce. But the comprehensive EU-UK trade and investment deal that is now moving towards finalisation will lead to much less economic damage than was feared when Article 50 was triggered two years ago. It also means that, apart from some spot passport checks on the northern side of the border on this island (announced to placate anti-immigration sections of the British press) free movement of goods on the island will remain unhindered and customs checks will not materialise. That has contributed greatly to calming passions in Northern Ireland sparked by Brexit.

Car-crash Brexit

Following the complete breakdown of Brexit talks in September 2018, after many months of increasingly rancorous negotiations, the prospect of the hardest imaginable Brexit has been looming. It is now upon us.

The collapse of sterling, which went below parity with the euro in January, along with intense uncertainty, has brought growth in the Irish economy to a halt. Even Ireland's continued success in attracting more than its fair share of the accelerating exodus of businesses from Britain in recent months has not offset the damage. It has done little at all to mitigate the slowdown outside Dublin as most of the new investment is going into the capital.

And things are about to get worse. Once it became clear that no exit deal would be agreed, London moved quickly to announce unilateral cuts to tariffs and quotas on a range of food products from non-EU countries. Theresa May's government took the decision as one of the few ways it could bring inflation down from 5pc (at a time of rising unemployment and falling wages) and demonstrate tangible gains from Brexit to the 63pc of Britons who told pollsters last week that they opposed crashing out of the EU.

With cheap meat and dairy produce already warehoused in UK ports before last night's exit, Southern Hemisphere produce is at this very moment being stacked on supermarket shelves across the UK. The British food sector is about to undergo its biggest change since the 19th Century.

Along with new tariffs on EU food products, the Irish agri-food sector is in crisis and now facing collapse as the change in relative prices in Britain renders the sector largely uncompetitive in its most important foreign market. For once, farmers and their lobbyists are not exaggerating when they foretell doom. With rural Ireland's other economic mainstay - tourism - likely to have a bad summer, as British tourist numbers are hit by a chronically weak pound, rural Ireland is facing grim times.

If a real urban-rural chasm is opening up, the reinstalled border will further widen the gap between the two polities and economies on the island. The hastily built customs posts on the main north-south road connections opened for business at midnight last night. The immediate effects of Britain's departure from the EU, exactly two years after the triggering of Article 50, will only be fully felt tomorrow when the working week starts, but for all the talk from all sides about avoiding a hard border, that is now what we have. With the Scottish independence referendum looming and growing calls for a border poll on this side of the water, there is a distinct feeling that the tectonic plates are in motion.

Sunday Independent

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