by Brian Monteith, CityAM, 22nd March 2017
Despite the fact that Theresa May said she would trigger Article 50 before the end of March many months ago, the reality of it happening a week today will be a final wake-up call to governments across Europe – and no more so than in Dublin. The pressure for Ireland to reconsider its future in the European Union is about to become irresistible.
Since the UK’s Brexit vote nine months ago, Irish politicians have sought to deflect attention away from how Ireland’s economy will be impacted, by talking up the potential problems for Northern Ireland from a return to violence or an EU trade war.
The Republic of Ireland and Denmark joined the European Economic Community at the same time as the UK in 1973. This was no coincidence for both had strong economic interests in exporting to the UK, especially in agriculture and processed foods.
To be outside the EEC customs barrier would have resulted in tariffs and quotas being imposed on their exports to the UK. Unlike New Zealand, which faced the same seismic shock, the good fortune of being European nations meant they could become members too.
There were other anticipated benefits for Ireland, such as re-orientating its foreign policy away from Anglo-Irish domination and towards Europe – and becoming a net recipient of EEC/EU funds, be they for agricultural support or economic development of infrastructure.
Now, with the UK’s departure moving towards reality, discussion has at last begun on where Ireland’s real interests lie. Newspapers, blogs and think tanks are beginning to think the unthinkable.
Unfortunately for Ireland’s political establishment, the attraction of the EU is not as cut and dried as they would wish. Irish trade figures make for sobering reading once the locus of the UK is changed to it being outside the EU Single Market and Customs Union.
Ireland depends on the US and UK markets so much that, after Brexit, almost two-thirds of Irish goods and services exports will be destined to reach markets outside the 26 other remaining EU members.
Some industries are particularly dependent on the UK market. According to the Irish Department of Foreign Affairs and Trade, in 2013, 55 per cent of Irish exports in the timber and construction sectors, 50 per cent of Irish beef exports, almost half of Irish clean technology and electronics exports, and 42 per cent of food and drink exports went to the UK.
Ireland’s location on the periphery of the western side of the European continent is another significant problem. A large majority of its goods are transported through British ports on the west coast, then across Britain’s motorway network before leaving British ports on the south and east coasts for EU destinations. With the UK electing to be outside the Single Market and Customs Union, there could suddenly be a huge administrative and financial obstacle to getting these goods to market without obvious alternatives that would be quicker and cheaper.
An EU-UK trade war would hit more than just the economy. The real threat of a hard border comes not from migration controls but from putting the Irish-UK border on a par with that between Poland and Russia, a prospect that could also face an independent Scotland.
To add salt to the wound, in 2014, Ireland became, for the first time ever, a net contributor to the EU by some €168m. Ireland contributed €1.69bn and received €1.52bn in return – a gap that is expected to now increase year-on-year. When the UK leaves the EU, Ireland will be expected to become a bigger contributor to a budget that always demands more.
Add this to the recent EU decision against the Irish government’s tax arrangement with Apple, which could destroy its tax competitiveness while preventing multinationals from being able to ship their UK revenues across the Irish Sea to be taxed at a far lower Irish rate, and the economic impact looks horrendous.
The EU can now be seen as an institution limiting Ireland’s independence on business taxes; provoking a trade war with its second largest market after the US; and delivering a hard border – and the Irish are to pay for that arrangement?
When Article 50 is triggered next week, Ireland will become one voice among the 27 EU members looking for an agreement. If there is no trade agreement that keeps tariffs and regulations at bay, like they are now, then Ireland will need dispensations that recognise its particular difficulties in traversing the UK to reach EU markets and allow for the scale of its exports to the UK.
Its importance to the rest of the EU will be sorely tested. Should Ireland bank on finding a sympathetic ear in Brussels?
Brian Monteith is a director at Global Britain.
City AM 22nd March 2017