Tuesday 18 June 2019

Dan O'Brien: 'If there's no deal over Brexit, our choice is stark - build a hard Border or pay an enormous price'

EU Commissioner Margaritis Schinas delivered a blunt warning over Brexit
EU Commissioner Margaritis Schinas delivered a blunt warning over Brexit
Dan O'Brien

Dan O'Brien

Some choices in life can be finessed and fudged. Others cannot. When faced with an either/or choice, you can't have the best of both worlds. You must choose one or the other. So it is with countries' choices about markets.

Because the mechanics of markets are complex and often not intuitively understandable, most busy people with lives to lead don't delve into the detail of how they work. This is one reason why the seemingly endless discussion of Brexit has been a fog for many people.

The words of a eurocrat in Brussels this week seemed - however briefly - to clear some of the fog hanging over this island about Brexit.

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If Britain exits acrimoniously from Europe's market mechanisms - the customs union and the single market - in just two months' time, European Commission spokesman Margaritis Schinas said bluntly on Tuesday that the Border on this island would have to change.

There has, in fact, never been any doubt about this. The EU treaties could not be clearer about the obligations of members to police the bloc's borders with the rest of the world. The European Commission is the guardian of those EU treaties. Any failure of Ireland to police the external frontier of the EU would not be tolerated for long.

In the event of a no-deal Brexit, goods coming into the EU from British territory would immediately be subject to checks and new taxes, known as "tariffs" in the jargon of international trade. In some cases, these tariffs would be a substantial percentage of the value of the imported product.

Most of the revenue from tariffs on all non-EU goods goes straight to Brussels. These revenues, which are known in EU jargon as "own resources", are used to pay for the Common Agricultural Policy's farm payments, regional funds and other things.

The European Commission would not only be treaty-bound to take Ireland to task if the Government here flatly refused to collect the tariffs for anything other than a short period after a crash-out Brexit, it would also have a financial incentive to do so.

It is likely that some or all of the near €50bn Britain owes to the EU would not be paid in the event of a no-deal. Collecting tariffs on British goods coming into the EU would be one way to make up some of the shortfall.

But it is not only the Brussels bureaucrats who would not tolerate a large and permanent tear in the membrane around the EU's market.

The member countries have been unified in Brexit talks because they all refuse to give Britain a better deal from the EU than they themselves have as paying members subject to its constraints as well as its benefits.

They have also shown no little solidarity by standing behind Ireland on the Border backstop issue. But solidarity is a two-way street. Ireland would have few allies if it refused to play by the rules and other countries believe they stood to suffer as a result.

France is the country to watch most closely in this regard. It is the EU's second most powerful member state. It is not known for being timid in exercising that power in pursuit of its interests. There are many direct shipping routes between Ireland and France.

If there were to be a no-deal and Ireland did not make good on its obligations to the rest of the EU, France, along with other countries, would start to change how they treat ships arriving from Ireland. If Ireland were not to comply with the terms of customs union and single market, sooner or later it would cease to be a full member of both those market mechanisms.

It needs to be clear in the national debate that the Government's long-standing and unwavering position on the Border would lead to this outcome in the event of a no-deal. While it is to be hoped that a no-deal Brexit can be avoided, there also needs to be clarity about the huge costs and risks of taking this position.

Being part of the world's largest market is the foundation of Ireland's success in creating jobs in the internationally traded sectors that really matter for a small, peripheral economy. At the beginning of January, the body tasked with luring foreign multinationals to Ireland announced yet another record year in 2018. The companies the IDA has helped to attract directly employed almost 230,000 people as of the end of the year. That amounts to one in eight people at work in the private sector. If those employed indirectly as a result of the multinationals were included, it would be closer to one in four.

Any uncertainty about Ireland's position in, and commitment to, full and complete EU market integration imperils tens of thousands of current and future jobs and poses a threat to Ireland's tried and tested economic model. It is as stark as that.

If the economic vista of all this is awful, the political one is little better. The Government stated this week there would be "very difficult discussions with our EU partners" about the Border if an acrimonious Brexit happens. At a time when Ireland-Britain relations are at a three-decade low point, and poised to get a lot worse if no-deal happens, talk of simultaneously taking on Brussels and Paris is unwise if not reckless.

Ireland faces some potentially momentous choices within weeks. It is imperative that everyone has a full and clear understanding of what is at stake.

Irish Independent

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