Wednesday 21 August 2019

Dan O'Brien: 'We simply can't have our trading cake and eat it too'

The self-congratulation about the country's new-found openness is dangerously delusional, writes Dan O'Brien

Free trade: A farmers' protest over the Mercosur deal outside Leinster House, Dublin, last week. Photo: Gareth Chaney
Free trade: A farmers' protest over the Mercosur deal outside Leinster House, Dublin, last week. Photo: Gareth Chaney

'We've come a long way." These self-admiring words have become something of a slogan. From the darkest, most inward-looking corner of Europe (apparently), Ireland has become a beacon of progressive openness - or so goes the self-congratulatory narrative.

Adding to our wonderment at ourselves is the frequently observed contrast between Irish and British politics. While 'the Brits' are divided and engaged in committing monstrous acts of self-harm, Ireland's political class is supposedly serious and mature.

This narrative is not just wrong, it is dangerous, because self-delusion is always dangerous.

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Last Thursday night, politicians who represent one of the most successful trading nations in the world voted overwhelmingly against more openness. In the Dail there was a two-to-one majority against a partial freeing of trade between the EU's 500 million people and close to 300 million people in South America.

The Dail motion was put forward by Sinn Fein, a party which has opposed every step towards the opening of the Irish economy since independence, including the creation of Europe's single market which led to the abolition of customs posts on the Border on this island.

Not even in France, traditionally among the most protectionist of countries, has the national parliament gone as far as the Dail, which last week called on the Government to "thwart" the EU-Mercosur deal. Nowhere else across the continent have politicians taken against this modest lowering of barriers to transatlantic trade, and all this before the deal between the 28 countries of the EU and the four Mercosur countries has even been fully finalised in all its legal detail.

It is truly remarkable that Ireland has the most anti-globalisation and most protectionist political class in Europe, and that this is so despite the Irish economy being the most globalised.

The reaction of Ireland's political class relative to its counterparts elsewhere across the continent also shows - in stark comparison - how unwilling the system is to face down vested interests. One sub-sector, beef farmers, opposes the Mercosur deal. That sub-sector has shrunk enormously in importance to the prosperity of the country over the decades.

This was illustrated only last week when the State's statisticians published their full tally of Ireland's trade with the rest of the world for 2018. By the widest measure, earnings from exports of goods and services stood at just under €400bn. Export earnings of meat and live animals stood at just over 1pc of that figure, and those earnings come about not because the industry is competitive but because it is heavily subsidised by consumers and taxpayers (Ireland could export wine if it offered farmers enough subsidies to grow grapes in heated greenhouses).

"We export 90pc of our food, we're a major food exporter and that's only possible because of free trade. So Ireland has to be very careful not to become a country that suddenly is against free trade and is blocking free trade deals," said the Taoiseach last Friday, in a somewhat belated defence of Ireland's national interest over narrow vested interests.

It should also be added that despite our new and much-vaunted openness as a society, there have been few voices outside politics pointing out how central economic openness has been in generating the prosperity that has lifted Ireland from being the poor man of north-west Europe to one of the most prosperous countries in the world by many measures.

Much of the media has failed to scrutinise or even question farmers' apocalyptic claims that the Mercosur deal would lead to "the death of rural Ireland". Charities and consumer groups have been absent in pointing out that consumers gain from the increased choice and lower prices that comes with free trade. Even business organisations and the economics profession have been slow to point out how competitive, internationally focused businesses gain from better access to foreign markets and it is competitive companies and sectors which generate current and future prosperity, not heavily subsidised ones.

As a small and relatively powerless state which is massively dependent on free trade, few countries in the world have a greater interest in a rules-based international trading order. That order is now under assault from those who ideologically oppose multi-lateralism. Even this bigger strategic threat cuts little ice with the inward-looking politicians who seem to believe Ireland can have its trading cake and eat it too.

The failings of the political class to think strategically and scrutinise remains much in evidence in relation to Brexit too, ranging from the risks to Ireland's trading relationship with continental Europe in the event of no deal to the wisdom of the Border backstop.

Seeking to carve Northern Ireland out of the UK's market as an insurance policy against a hard border on this island has been one of the biggest calls in the history of Irish foreign policy. It has always had a logic, but it was a dramatic and highly risky gambit.

Whatever one may have thought of it, big policy decisions need scrutiny. The upsides and downsides need consideration. The risks of demanding that there be absolutely no change ever to how the two jurisdictions on this island interact need to be acknowledged.

TDs and senators have not subjected the backstop gambit to any such scrutiny publicly. Even now, when it has brought down a moderate (if incompetent) British prime minister and will propel an anti-backstop leader into 10 Downing Street in 10 days' time, the political class continues with its backstop mantra.

Despite the issue being the only reason a disastrous no-deal Brexit is bearing down on this island in a few months, nobody in the political class is openly urging a concession.

Not only are relationships on these islands being put at risk by the absolutism at the heart of the backstop, Ireland's position with the EU's single market is imperilled by it as well.

Maintaining the integrity of that market is a core obligation of all member countries. The collection of the EU's common external tariff, for instance, must be done by the taxing authorities of member states when goods from non-member countries arrive in the bloc.

Last week there was, finally, some acknowledgement by the Government that there would be some change in the way goods coming across the Border from the North are treated in the event of a no-deal Brexit. But how things will play out is still as clear as mud.

The official position is that discussions with the European Commission on the details are ongoing. That means, in other words, that Ireland has not come up with an agreed plan on how to maintain the integrity of the single market which passes muster with Brussels.

Let's be honest about the seriousness of the situation. If goods from outside the EU start making their way across the Border without tariffs being paid and end up on ships heading to the continent, it won't take long for the French, the Belgians and the Dutch to start crying foul.

They will not tolerate Ireland being used as a back door into the single market. They have shown more solidarity with Ireland on Brexit than many believed possible, but solidarity is a two-way street. They expect Ireland to meet its obligations to them. If those obligations are not, met the country's position in the single market - by far our largest market - will be at risk.

The political class is not facing up to issues such as tariff collection at the Border if there is a no-deal exit. It may take South American beef, imported tariff-free into the UK, then coming over the Border in quantity and ending up on Parisian dinner plates, to bring that home.

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