Brexit Institute News

Brexit and Ireland

Gavin Barrett (UCD Sutherland Law School)

31 January 2020 will go down in history as the date on which Brexit took place. Its economic effects, however (because it has been followed by a transition period under Article 126 of the Withdrawal Agreement) will not be felt before the end of 2020  – and potentially not for another two years after that, notwithstanding UK premier Boris Johnson’s adamant refusal to countenance this, since the transition period can be extended.[1]

From early on, the serious economic and political risks that Brexit posed for Ireland – the only state with a land border with the UK – were evident. Economically, as a small trading nation (even if  one that trades far more with other EU states than with the UK) Ireland is, on many analyses, even more at risk from Brexit than the UK itself (which is less vulnerable by its greater size and considerable volume of non-EU trade).[2] In particular, a no-deal Brexit – or more accurately now a no-trade-deal Brexit (since the UK and EU already have a Withdrawal Agreement) could be expected to have severe implications: the Irish Central Bank warned in 2019 that a so-called no-deal Brexit would have “an immediate and severe impact on almost all areas of economic activity”.[3]

Politically, the Irish Government feared that Brexit making the Northern Irish border a new single market and customs union frontier would endanger peace on the island. The implication of this concern was that either the UK or Northern Ireland should stay in the customs union and (in large part) the single market for goods (or enter some equivalent relationships) in order to keep border controls suppressed. Remarkably, this Irish interest – boldly articulated by then Taoiseach Leo Varadkar as a sine qua non for a Withdrawal Agreement – ended up  prevailing – not because of any legal veto, but simply because EU political solidarity held, making the bargaining power of a small Member State like Ireland greater than that of a far larger non-EU Member State. In the end came Boris Johnson’s reluctant effective agreement that Northern Ireland remain in the single market in many respects for goods and in effect if not in name in the customs union as well, something sold (astonishingly) domestically as a tactical triumph.

Somewhat unbelievably, the threat now arises that defeat may nonetheless be snatched from the jaws of victory: most of the gains achieved by Ireland with the hard-won Withdrawal Agreement concerning both peace and economic prosperity may now be lost: the economic arrangements envisaged in the Agreement and associated political declaration rely for their execution on a trade agreement being reached during the transition period. There is no guarantee such an agreement can be reached. Ireland, in the words of its erstwhile Tánaiste Simon Coveney faces a fresh Brexit cliff edge.[4] Moreover because of the limited nature of the trade relationship the UK wants, even a best-case scenario can be expected to see serious economic disruption for a state that counts the UK as a major export/import partner both of goods and services and  as a transit route for imports and exports of goods to other EU member states.[5]

The risks to Ireland can be categorised as (i) economic challenges (ii) risks to the Northern Irish peace process and (iii) more general dangers.

Economic challenges

Brexit involves will involve major economic challenges for Ireland. The greatest risk of all is that no deal at all will be agreed during the transition period. The stated UK objective of reaching a comprehensive trade deal by the end of 2020 is almost certainly impossible to achieve. Moreover, by recklessly legislating domestically to prevent any extension to this period to the end of 2022,[6] Johnson has made matters pointlessly difficult. Such domestic UK legislation can be repealed. But adopting it has probably rendered politically impossible compliance with the legal requirement that the UK agree to extend the extension period before 1 July of this year. All that has been guaranteed is that if any agreement is reached it will be a ‘bare bones’ trade agreement, covering only free trade in goods and little else.

Even such an agreement faces considerable difficulties, however. It is likely to be linked to the difficult issue of access to fisheries (continental access to UK fisheries grounds and UK access to continental markets), financial services (in which the UK needs to protect the City of London), and the issue of enforcement, with the UK hostile to a role for the Court of Justice seen as necessary by the EU. Moreover, a quick free trade agreement ensuring tariff-free trade will only be granted by an EU fearful of being undermined competitively by the UK if the latter agrees to level playing field terms. Put another way, zero tariffs and quotas will only be agreed for the UK if zero dumping is also agreed (parelleling – but going beyond – similar provisions in free trade agreements with Canada and Japan). Theresa May committed herself at least to so-called ‘dynamic alignment’ with the EU (which was probably not enough), but the present UK government seems strongly hostile to any alignment.[7]

It seems doubtful such matters can be resolved by the end of 2020, particularly given that there will only be four or five negotiating rounds if the UK is to decide to to extend the transition. Options will probably be desperately perused by anxious negotiators on both sides for some possible route for the transition period somehow to be extended but escape routes are not obvious.[8]

A no-deal scenario would involve a cliff-edge Brexit, and controls and tariffs being imposed not just on goods originating wholly or partly outside the UK but goods produced inside the UK as well as Irish goods being exported there. Such controls and checks would create an immediate danger of major blockages at air and sea exits from the UK – with the added challenge for Ireland that such blockages would also interfere with goods transiting from elsewhere in the EU across the UK to Ireland.  Shortages of consumer goods in both the UK and Ireland can be anticipated.

Even with a trade agreement, a UK backsliding towards a Singapore-on-the-Thames type approach would create real pressure not just on Ireland but on the EU as a whole not to raise social standards, and even to regress in relation to them. A UK lowering tariffs on agricultural imports from elsewhere in the world to compensate for raised prices deriving from tariffs on agricultural imports from the EU could have devastating consequences for the Irish agriculture and food industries.

Dangers to Peace in Northern Ireland.

It is to be hoped that dangers to peace in Northern Ireland have been averted thanks to the Withdrawal Agreement provisions pertaining to Northern Ireland. Yet although that Agreement is a stand-alone treaty binding even in the absence of any future trade agreement, this guarantees little. Repeated denials by Boris Johnson of the (legally inevitable) need for increased checks on goods travelling from the British mainland to Northern Ireland already raise questions of how committed the UK is to the Agreement. Furthermore, implementing this Agreement alone, without more, will bring real challenges in terms of setting up new structures and committees and even physical infrastructure at ports and airports, which Unionist members of the Northern Ireland government (opposed to any trade restrictions with the mainland) have little interest in assisting. Finally, unless a zero-tariff regime is agreed, the restrictions on trade with the mainland envisaged under the agreement (in particular in the east-west direction) could be considerable.

Even the absence of border controls between Northern Ireland and the Republic – the key gain of the Withdrawal Agreement and a key element of maintaining the fragile political stability in the region – seems far from guaranteed. The EU has always insisted that the Single Market must be protected. A radically competitive low-tax Singapore-on-the-Thames type UK, competing unfairly with state aids pouring its goods into Northern Ireland would clearly create pressures in this respect.

Other More General Challenges

Brexit will leave Ireland with other challenges over and above the above-mentioned issues. One of them will be the difficulty of Ireland being pulled in two different directions economically and politically. The overriding importance of retention of single market membership will for the first time have costs attached to it in terms of trade with Ireland’s closer and far bigger neighbour. Within the EU, Ireland will now face a range of challenges. Coping alone, and learning to stand on its own two feet both institutionally and intellectually with the challenges of integration is one, where before reliance on a neighbour with far greater resources was possible. Coping in a Union with far less amplified voice for common law countries in a Union which integrates through law (including in the sensitive JHA field) is another. Finding new allies within the Union is another – and one which has led Ireland to join, arguably incongruously, the new Hanseatic league of fiscally conservative EU states. To this may be added the dangers of regional instability. Given the unhappiness of the non-English nations of the United Kingdom, it seems far from assured that this Union can actually survive Brexit unscathed, and Brexit has added at least some economic incentivisation to the nonetheless politically complex prospect of a united Ireland.

Nor is Brexit without its paradoxes. In terms of trade, Ireland’s interests lie in the UK securing a close trading relationship with the EU. Yet Ireland also faces the danger of being competitively undermined by a new ‘Singapore on the Thames’ and shares with the EU as a whole the need to demonstrate that EU membership comes with advantages which can not be secured by non-Member States. An economically unsuccessful Brexit UK risks inflicting collateral damage on Ireland.  An economically successful one risks amplifying the voice of EU opposition currently the preserve of far-right extremists: Ireland like most other EU countries is now beginning to face the emergence of as yet marginal anti-immigrant groupings. It should not be forgotten that Ireland, unlike most other EU countries faces the near-legal certainty of referendums should as seems likely current reflections on the future of the EU lead ultimately to treaty reform. The Brexit referendum may have cured the Irish electorate of its occasional and highly risky predilection to vote no to major European treaties, but this cannot be taken for granted.

The views expressed in this article reflect the position of the author and not necessarily the one of the Brexit Institute Blog

Gavin Barrett is a Professor in UCD Sutherland School of Law

Photo credit: “Exit” under a Pixabay license

References:

[1] See Article 132 of the Withdrawal Agreement.

[2] See e.g., F. Kelly, Classified report shows Brexit will hit Ireland worse than UK”, Irish Times, 24 February 2018. See also regarding the economic consequences for Ireland, the Copenhagen Economics Reports, Ireland & the Impacts Of Brexit – Strategic Implications for Ireland Arising from Changing EU-UK Trading Relations (2018) and An Assessment Of The Economic Impacts Arising For Ireland From The Potential Future Trading Relationship Between The EU and UK (2020); A. Barrett, A. Bergin, J. FitzGerald, D. Lambert, D. McCoy, E. Morgenroth, I. Siedschlag and Z. Studnicka Scoping the Possible Economic Implications of Brexit on Ireland, (ESRI Research Series, No. 48 (2015); A. Bergin, P. Economides, A. Garcia-Rodriguez and G. Murphy, Ireland and Brexit: modelling the impact of deal and no-deal scenarios (ESRI Spec

[3] E. Burke-Kennedy,“No-deal Brexit will have ‘severe impact’ on Irish economy”, Irish Times, 28 August 2019.

[4] Memorandum circulated to the Irish Government and reported in D. McConnell, “State Facing Brexit ‘Cliff Edge’”, Irish Examiner, 30 January 2020.

[5] See P. Leahy, Ministers to be Warned UK Trade Faces ‘Considerable Disruption’” Irish Times, 29 January 2020.

[6] See now s. 15A of the European Union (Withdrawal) Act 2018 as inserted by s. 33 of the European Union (Withdrawal Agreement) Act 2020

[7] See R. Khalaf, G. Parker and C. Giles “Forget Staying Close to EU after Brexit, Chancellor Tells Business”, Financial Times, 17 January 2020.

[8] D. Boffey, EU looks at extending Brexit transition period beyond 2020”, The Guardian, 14 December 2019.

 

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