Irish anxieties over Brexit risk are warranted
ESRI has drawn picture of the worst that could happen if UK departs
Former taoiseach Bertie Ahern at a recent Brexit conference in Belfast. The ESRI finds on Brexit: “Trade is very concentrated in a few product types implying that increased trade barriers ... would have a more pronounced impact on trade volumes”
With one exception, Irish debate typically casts a “Brexit” – British departure from the EU – as overwhelmingly negative. That exception is the possibility of spin-off benefits for the State if foreign direct investment were to move here from Britain. Not even that assumption survives an urgent Economic & Social Research Institute (ESRI) tome which warns of numerous risks if Britain severs its EU membership. The ESRI study foresees only minor benefit for Ireland’s foreign direct investment sector if multinationals flee the UK following a Brexit.
That’s not the half of it. As he pinpointed a serious threat to Ireland’s abundant trade with Britain, ESRI research professor Edgar Morgenroth said it would be wrong to assume new arrangements with London along the lines of Norway’s with the EU would eliminate the danger. There would be a significant impact in discrete sectors of the economy.
Ireland’s top 10 exports to Britain from 3,200 product types account for 31 per cent of the total. “Trade is very concentrated in a few product types implying that increased trade barriers ... would have a more pronounced impact on trade volumes,” the ESRI finds. That points to a big threat to exports of such goods as packaged medicines, the powders used to make Coca-Cola and Pepsi (listed in ESRI data as “aromas for food and drink”), boneless beef, cheese, computer disks, chemical products and processed chicken dishes.
New tariffs could drive up the cost here of imported diesel, gas, medicines, milk, soft drinks and animal feeds.
The ESRI study examines the Brexit impact on the Irish economy as a whole but Prof Morgenroth said the impact was assumed to be greatest in the Border regions.
In relation to trade between the Republic and Northern Ireland, the ESRI said the impact of a Brexit was likely to be more significant for northern exporters. As noted elsewhere, a Brexit would create an external border of the EU running right through the island. “More broadly, the imposition of passport controls at the Border with Northern Ireland would be at best inconvenient and at worst a worryingly regressive step in terms of facilitating cooperation between both parts of the island,” said the ESRI. “Significant numbers of Irish-born people are resident in the UK and likewise a substantial number of UK-born people are resident in the Republic of Ireland. While many of these people will have passports which relate to their current residencies as opposed to their places of birth, many others could find themselves post-Brexit being resident in a country where their right to residency might come into question in the event of a Brexit.” Then there is the impact on energy markets. Prof Morgenroth said it was not widely understood that an all-island electricity market has been in place since 2007.
That imposes its own burdens, although he noted that Ireland would be vulnerable to any problems in the British market if it remained independent of the rest of the EU. “Under these circumstances enhanced interconnection between Ireland and the rest of the EU could provide a useful but costly diversification, reducing risk for Irish consumers.”
The ESRI is keen to stress this is a “worst-case scenario” examination. But the findings are clear: Irish anxieties over Brexit risk are warranted.