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Brian Mahon, Research Consultant

An Irish Economic and Social Research Institute report suggests that five years after a full Brexit, Irish GDP could be 3.5 per cent lower under a “hard Brexit” scenario than would otherwise be the case, rising to close to 4 per cent lower after 10 years. A hard Brexit could therefore be a big hit on an economy still recovering from the effects of the 2008 economic crash and subsequent austerity measures, with construction and food sectors particularly concerned about the impact of disrupted trade.

In addition to economics, there are important political and security considerations. In Dublin, Belfast and London, there is unanimous agreement that there should be no return to a ‘hard’ border, which could reignite divisions that have not gone away. Brussels is alive to that danger and both Guy Verhoferstadt (the EU Parliament lead negotiator) and Michel Barnier (who will lead the negotiations as a whole), have expressed their firm desire to resolve the UK-Irish question.

However, despite the genuine goodwill, substantial hurdles need to be overcome and it is significant that the Irish Government is, for the time being, is standing firm with the rest of the EU27 in holding to a hard negotiating line.

The customs union question

Perhaps the central issue for UK-Irish relations is how Britain’s exit from the customs union would affect the border between the Republic and Northern Ireland.  A House of Lords committee recently noted that “Retaining customs-free trade between the UK and Ireland will be essential if the current soft border arrangements are to be maintained.” It pointed out that while technological solutions can help to reduce the intrusiveness of customs checks, they cannot eradicate the need for physical inspections at the border.

As a result the Lords Committee concluded that “The only way to retain the current open border in its entirety would be either for the UK to remain in the customs union, or for EU partners to agree to a bilateral UK-Irish agreement on trade and customs. Yet given the EU’s exclusive competence to negotiate trade agreements with third countries, the latter option is not currently available.”

Brexit supporters within Government believe the difficulties are not insurmountable. Exiting the European Union Secretary David Davis recently suggested that the frontier between Norway and Sweden could offer a model, which would see customs officials from both countries on either side of the border. But as John Bruton, the former Taoiseach noted, Norway and Sweden are not the same as Britain and Ireland, where past history means such a solution is “unlikely to be acceptable”.

The customs question is therefore a serious dilemma. A decision to leave the customs union would pose significant economic and political risks. But so too would a decision to remain inside it. Many ardent Brexiteers including the International Trade Secretary, Liam Fox, believe that Britain can only become an independent global free trading nation outside that union. A failure to leave would create significant political problems for Theresa May.

The difficulties on either side of the argument point some observers back towards the idea of a bilateral arrangement that involves a carve-out for UK-Irish trade and customs arrangements. But even if that could be delivered, new problems would arise with Ireland potentially serving as an unofficial back door for UK goods to enter the single market, circumventing possible tariffs. Whatever course the government attempts to follow, political problems seem unavoidable.

Could Brexit lead to ‘Irexit’ or a united Ireland?

The short answer to this is no on both fronts. There is no political appetite amongst the vast majority of parties (bar Sinn Fein) in the South for reunification, and no polling in the North which indicates that there is a majority in favour of a united Ireland. In any event, without the explicit consent of both the DUP and the UUP the issue is not on the table for discussion.

Nor is there any desire in Ireland to follow the UK out the door from the EU. All major parties are Europhile in disposition and there is no populist politician leading the charge. Despite the imposition of austerity following the financial crisis, most anger has been directed at the domestic politicians and their implementation of EU backed policies.

In summary, though there seems to be considerable political will from all parties directly affected to retain as close a relationship as possible between the UK and Ireland, reconciling the UK’s desire to control its own borders and dictate its future trading relationships with a desire to maintain existing arrangements either side of the Irish border will be one of the most difficult challenges for politicians to solve.

 

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