Agriculture, taxes and Northern Ireland: the Brexit talks’ echoes of times past

Today our attention is focused on the Brexit negotiations with the UK. Some of the issues surfacing in them echo those that featured in the last big commercial negotiations between the UK and the Republic of Ireland, the Anglo-Irish Free Trade Agreement of 1965.

A new Labour government had come to power in the UK in 1964, and its proposed changes to the country’s trading relationships threatened Irish agriculture. With the UK as our main export outlet, and agricultural produce our biggest export item, access for Irish beef and butter to the UK market was a vital national interest for us.

So, from the end of 1964, the Irish government began an intensive programme of meetings with their UK counterparts, with the objective of securing a trade agreement that would give Irish agricultural exports better access to the crucial UK market.

Looking at the many files on the trade negotiations, one is immediately struck by the mind-boggling detail any such talks entail

Already, from the end of the 1950s, Ireland had unilaterally begun to dismantle its very high tariff barriers as the economy began to open to the wider world, preparing for eventual membership of what is now the European Union. Given that the protection against imports was already being gradually wound down, the government were prepared to speed up this process for imports from the UK, in return for better access to the UK for agricultural produce.

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Looking at the many files on the negotiations, one is immediately struck by the mind-boggling detail any such negotiation entails. Trying to establish how long Irish cattle would have to reside in the UK before being considered British cattle might seem arcane today, but settling such details is central to any trade negotiation, as the EU and UK Brexit negotiators are soon to discover.

A key issue in 1965, which took many months of discussions to resolve, was what exactly constituted an “Irish” or a “British” good, in other words what proportion of a good’s value had to originate in Ireland before it was Irish. Previously the rule set it at 25 per cent, but the UK wanted a higher threshold for certain purposes, to protect some of their textile industry. Resolving this problem took quite a number of high-level meetings. This issue will also be crucial in the Brexit negotiations – but defining a good’s “nationality” could now be a lot more difficult, given much more complex supply chains.

A second issue in 1965, which sounds familiar today, was corporation tax. In 1965 all profits on exports from Ireland were exempt from corporation tax. The UK objected that this was state aid and would have to stop. The debate continued for months. The eventual agreement was that the exemption from corporation tax could continue until 1979, by when Dublin expected Ireland to have joined the EU.

More than 50 years since the Anglo-Irish Free Trade Agreement, Irish corporation tax remains a bone of contention with many of our neighbours

Today, more than 50 years since the Anglo-Irish Free Trade Agreement, the rate of Irish corporation tax remains a serious bone of contention with many of our neighbours. Fortunately the UK has moved on from its fixation with the issue, and it is one that will not surface in the Brexit negotiations.

A third familiar issue was “special status” for Northern Ireland. Early in 1965, as taoiseach, Seán Lemass had held a historic set of meetings with the Northern Ireland prime minister, Terence O’Neill. Coming more than 40 years after partition, these encounters were felt to presage stronger relations on the island. Building a better relationship with the North also featured in the trade talks. In a bilateral meeting with the UK prime minister, Harold Wilson, in July 1965, Lemass proposed that, under the free-trade agreement, Ireland would be allowed to cut tariffs on Northern Ireland goods more rapidly than for British goods. This “special status” for Northern Ireland took the UK side by surprise, but they eventually agreed to this provision. In today’s Brexit negotiations avoiding a customs border with Northern Ireland represents a much more intractable issue.

The free-trade agreement was finally signed in December 1965. At the time it was heavily criticised in Ireland as being a diversion off the route to EU membership. Although it provided better opportunities for agriculture, it provided very limited benefits for the rest of the economy. With the benefit of hindsight, however, it formed a useful staging post on the path to EU membership. Unfortunately, today’s Brexit negotiations are about reversing the course of free trade between our countries, begun in 1965 and cemented by our joint membership of the European Union.