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We need less self-congratulation and more realism as Brexit looms

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From left, Damien McDonald, director general of the IFA; Rowena Dwyer, IFA chief economist; and Joe Healy, IFA president, at the launch of the farming body’s report on the potential impact of Brexit on Irish agriculture, in Dublin yesterday. Photo: Tom Burke

From left, Damien McDonald, director general of the IFA; Rowena Dwyer, IFA chief economist; and Joe Healy, IFA president, at the launch of the farming body’s report on the potential impact of Brexit on Irish agriculture, in Dublin yesterday. Photo: Tom Burke

From left, Damien McDonald, director general of the IFA; Rowena Dwyer, IFA chief economist; and Joe Healy, IFA president, at the launch of the farming body’s report on the potential impact of Brexit on Irish agriculture, in Dublin yesterday. Photo: Tom Burke

In less than three years' time, supermarkets north of the Border could be selling juicy steaks from the furthest corners of the world at less than half the price of equivalent cuts of Irish meat for sale in the Republic. The same thing could happen to the relative prices of many other food products.

The scenario is possible, if not probable, because Britain is leaving the EU. As farming is more heavily subsidised in the EU than in the rest of the world on average, food prices in Europe are higher than in most other places. Consumers in Europe are prevented from accessing cheaper food by various protectionist measures which favour the bloc's farmers.

A British government seeking to deliver a "Brexit bonus" to consumers could do away with these measures once the UK is out of the EU. If that happens, not only will Irish food products be priced out of the British market, but consumers in the Republic will have every reason to fill their freezers with Argentine steak and other cheaper foodstuffs bought north of the Border.

The utterances of lobby groups must always be taken with a pinch of salt, but the statement from the Irish Farmers' Association (IFA) yesterday that Brexit poses the greatest threat to the industry it represents since the State was founded does not appear exaggerated.

That statement, as it happens, coincided with the publication yesterday morning of the Government's new globalisation strategy, in which trade matters are central.

How the process of economic internationalisation is managed and exploited could hardly be more important for Ireland. Irish levels of prosperity only caught up with those enjoyed by our northern European neighbours when the economy was opened and became a hub in the integrating European and transatlantic economies.

As Ireland has done so well out of globalisation, there is less hostility to it here than in many other places - hardly an election in the Western world is held these days when it is not under assault.

But even though most of this opposition is misguided, embracing globalisation does come with the downside of being left exposed if the internationalisation process comes to a halt or goes into reverse.

There are, worryingly for Ireland, a growing number of signs of that happening. While the new Government strategy does recognise that "we are facing a radically changing global environment", it takes a relatively rosy view of the world economy's long-run future.

Yesterday's report rightly highlights changes in technology and business models that could drive globalisation in the future and benefit Ireland, but it fails to acknowledge that the rate of global trade growth has slowed sharply in recent years. There is little agreement yet among economists on why that has happened, but some increase in protectionism by governments is likely to be part of the explanation. Despite this, the Government's new over-arching globalisation strategy mentions protectionism once, and that solitary mention lists it only as a risk rather than as a phenomenon that is on the rise.

It also talks of the administrative-political system being "even more anticipatory, agile and responsive" as a means of exploiting opportunities and dealing with downsides of changes to the international economic and political environment. While there is a lot of nimbleness (and good team-working) in the Irish system, to claim that it has been good at anticipating future challenges and proactively dealing with them would, to put it politely, be a stretch.

Another stretch in the report is talk of Ireland's "advanced entrepreneurial base". While export growth by home-grown companies supported by the State has been strong in recent years, that growth is from a very low base. As a result, Irish companies still account for only around one tenth of total exports.

Governments and bureaucrats can certainly assist economies to grow overall exports, but success at selling stuff to foreigners is ultimately about the decisions, capacities and wherewithal of companies and individuals.

The truth is that Irish businessfolk have traditionally shown only limited interest in cracking new markets. While that is changing and there have been some wonderful success stories, less self-congratulation and more discussion of why we Irish have preferred the professions, public service and immigration over international commerce might be more fruitful in accelerating positive change.

One of the more impactful things a government in a small economy can do to help businesses take on the world is ensure that costs are kept down at home. While taxes are inevitable and all businesses must be subject to laws and regulations, governments need to do as little damage as possible with their policies. Badly designed tax systems, the acceptance of closed shops and excessive administered prices are killers when it comes to starting and growing businesses.

Despite the importance of competitiveness for how the Irish economy functions in the global economy, it hardly got a mention in yesterday's report, and that on a day when businesses (and consumers) learnt that a Government-owned company is to increase the price of postage stamps by 39pc at a time of zero inflation in the wider economy.

More understandable is the thinness of discussion in the report on the issue we began with here: the impact of Brexit on Irish farming.

While there is mention of penetrating continental markets, where competition from cheaper food from outside the EU will be kept at bay, there are few concrete proposals as to how to achieve this. This is understandable because the hard and worrying truth is there is precious little any Irish government will be able to do to replace the British market if London plumps for a cheap food policy.

The IFA has often cried wolf in the past. The wolf has finally arrived. It is in the guise of Brexit.

Irish Independent