Brexit: No case for separate North deal in Government strategy

Analysis: UK is the biggest importer of Irish agri-food, representing 47% of Irish exports

The ESRI has warned of a potential impact on trade from a hard Brexit - where we are subject to WTO-level tariffs. Photograph: The Irish Times

The ESRI has warned of a potential impact on trade from a hard Brexit - where we are subject to WTO-level tariffs. Photograph: The Irish Times

 

When Taoiseach Leo Varadkar spoke somewhat vaguely in the Dáil last Wednesday about an Irish fall-back position on Brexit the significance of his words about Ireland’s strategy was not lost on one group of avid Brexit watchers: farmers and the agri-food sector.

Monday in Brussels, round five of the Brexit talks resumes with negotiators returning to the “divorce” issues of the financial settlement, citizens’ rights, and Northern Ireland.

From Ireland’s perspective these early discussions are something of a phoney war.

The real meat, on the objective of a seamless Border on this island, will not begin until later, when “sufficient progress” has been made on these other issues.

That is when the two borders dreaded by farmers in a hard Brexit scenario - a trade border with tariffs, and an animal health inspection border that the EU requires of all “third country” borders - will be tackled.

How Ireland addresses the issue of these two borders is central to and a microcosm of the Government’s Brexit strategy.

The leak last week of an early discussion paper from the EU Commission, circulated as far back as February, had once again resuscitated the idea that borderless trade in agri-food products - though not other products - between Northern Ireland and the Republic could be maintained on an all-island basis.

That would be possible if the North remained verifiably compliant with EU animal health and food safety rules, perhaps under the aegis of devolved powers to the Northern Executive. As the UK hinted at in its paper on Northern Ireland.

Border controls

This proposal would necessitate Border controls on agri-food products between the North and the rest of the UK down the middle of the Irish Sea.

The idea of a separate, special deal and status for Northern Ireland, not only on agri-food issues, has had strong support North and South, notably among nationalists, but is anathema to unionists.

They insist on equal treatment with the rest of the UK.

And as Varadkar made clear again in the Dáil, making the case for a separate NI deal is not part of the Government’s strategy for economic as much as political reasons.

“I know the issue of Northern Ireland and Border issues are extremely important,” he told TDs on Wednesday, “but from the point of view of Irish business and agriculture, the trade between Ireland and Great Britain is much greater than the trade between Ireland and Northern Ireland.”

“This is particularly the case for the agri-food sector so we are determined to secure a customs union partnership and a free trade agreement or area between Great Britain and Ireland when it comes to the post-Brexit scenario.”

The imperative now for the Government in the Brexit talks, or what one official calls the “macro” game, remains what it has been - trying to persuade the UK that, as a whole, despite what its government says, that it should remain part of the customs union. Or in an arrangement that mimics it and the single market.

And in no other sector is this as important as agri-foods.

Free trade zone

Indeed the leaked Commission paper has long been surpassed in the internal discussions between the Government and the union’s Brexit task force, with which, we are constantly being told, we are ad idem.

The Government is also clear that it also does not see any prospect of a UK-Ireland free trade zone apart from or distinct from an EU-UK one.

The logic of the Dublin position is driven by the figures as much as an awareness of the immovable political obstacle of unionists’ objections.

Important as North-South trade is economically - and emotionally - the South’s economy is in reality far more dependent on east-west trade across the Irish Sea, and particularly so in the agri-food sector.

The UK remains by far the biggest importer of Irish agri-food, representing 47 per cent of total Irish agri-food exports or €5.1 billion (in 2015).

Whereas, on the other hand, North-South trade represents just over a seventh of this - in 2015 the Republic exported €690 million in food and beverages to Northern Ireland.

The same dependence on East-West trade is also true of Northern Ireland. The UK remains the most significant market for businesses in Northern Ireland - sales to Great Britain were worth one and a half times the value of all Northern Ireland exports and nearly four times the value of exports to the Republic.

North-South trade

The North exports three and a half times more agri-foods across the Irish Sea than it sends south across the Border (£2 billion to £625 million in 2015). That said, the nature of the North-South trade does involve far more integrated supply chains - a quarter of milk produced in the North is processed in the South, while 42 per cent of its sheep and lambs are also processed here.

But that broader commercial reality makes it inconceivable that Northern farmers and food businesses, or business generally, would be willing, even at the price of preserving a frictionless North-South border, agree to tariffs and phytosanitary controls - a border - in the Irish Sea.

There is a danger, some Irish officials fear, that the inevitable preoccupation in the talks with Northern Ireland and with safeguarding the peace process may distract attention and sympathies among our fellow member states from the scale of the challenge Ireland faces on the East-West trade front, and not least in the hugely important agri-foods area.

The ESRI has warned of a potential impact on trade from a hard Brexit - where we are subject to WTO-level tariffs - of a reduction in bilateral trade flows between the UK and Ireland as high as 21.6 per cent. And the agri-food sector could be hit even harder because of the scale of WTO tariffs.

Ultimately the maintenance of a frictionless east-west border (and inevitably of a similar EU-UK border) remains as important to Ireland as maintaining the same on the island.

How we persuade the UK that its real interests lie in re-embracing the customs union is the mountainous challenge facing our diplomats.

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