Ireland must prepare now if we are to avoid the €8bn cost of a catastrophic hard Brexit
THIS week, British Prime Minister Theresa May took her Cabinet to the north-east of England, the region whose vote for Brexit was the first sign that predecessor David Cameron’s grand plan had come unstuck.
Mrs May visited several factories and explained that her latest Brexit plan would be good for jobs in the north-east. On television afterwards, their managing directors made it clear they would be moving operations to the Continent if the Brexit deal harmed their market access to the EU.
By the end of the week, the stories were about stockpiling food and medicine in case there was a no-deal Brexit next March. The mystery is why it took so long.
Only recently did big business finally show its teeth, with warnings from the likes of Airbus, BMW and Rolls-Royce aero engines on the threat to their UK operations. Even the mainstream media, worried by the “Project Fear” label, seemed reluctant to examine the consequences of a so-called “hard Brexit”.
As a result, it seems fair to say that the Irish public is better informed about the consequences of such an outcome than the British.
But even they may find it hard to grasp what a no-deal departure might mean.
The EU will be legally obliged to treat the UK like any other non-EU state with which it has no trade agreement, and impose its often severe tariffs on imports from the UK. On the other side, bizarrely, under world trade rules the UK would have to apply the EU tariffs on the EU itself until there is a new trade agreement between them – and that could take a very long time.
It seems no exaggeration to call such an outcome a catastrophe.
Overnight, Britain would leave not just the open market for goods and services but the legal framework which covers so many EU activities. That is why there is talk of aeroplanes being unable to fly to and from the UK, and medicines being unavailable for lack of regulation.
British political infighting means there is now very little time to avoid this catastrophe. The deal is supposed to be done in October. Even if it is not, frantic unofficial talks will continue until March. The uncertainty will have its own baleful effects.
It is very difficult for governments, companies and consumers to know how much trouble and expense they should go to in preparing for this kind of crisis. Stockpiling is not much use when more than half the goods which come into Dublin port each day are consumed within 48 hours.
There is no preparation possible for a sudden 30pc tariff on exports which had been duty free.
The only response to disaster next spring is to make sure it does not happen and there is a withdrawal agreement followed by a transition period.
There is talk of extending the March deadline and the Taoiseach has indicated Ireland would support that. The other 26 will do so only if agreement is in sight and it just needs more time.
Time is also needed for the major preparations which must go ahead even if there is a deal and a transition period until the final settlement. It might still end up with Britain becoming a “third country” outside the EU. Analysis from the IMF last week suggested Irish employment would be 50,000 lower in 2025 than it would have been without such a Brexit and national income would be €8bn less.
If it is not to be even worse, the State and Irish business must use the time to prepare. Government will have to invest in port and sea transport facilities, and develop financing arrangements to help companies adjust. The banking and insurance industries will need a new regulatory framework. The list is endless.
THE biggest shock may be in the retail trade, which affects citizens the most. The small Irish market always suffered from lack of competition but Brexit may see the departure of some major chains. The unavoidable Brexit-related increase in prices will be topped by bigger margins for those which remain.
It would be the height of folly not to make plans for this situation, but it may be too pessimistic. Perhaps deliberately, all the scary talk has overshadowed a major shift in the UK position. Mrs May has taken over the negotiations herself. Even more significantly, a government paper on Tuesday accepted that the full EU rules would apply during the transition period.
If the prime minister can avoid a party split and general election, that opens the way to a withdrawal agreement in March and life continuing just as it is while transition negotiations settle Britain’s final position with the EU.
Behind the extraordinarily erratic behaviour of the British government runs a clear trend towards remaining in the single market and/or a customs union.
No country would benefit more from that than Ireland, so it is ironic, to say the least, that the Irish situation is the main threat to such a happy outcome. Under existing agreements there can be no transition period unless the North is to remain in the EU system while the rest of the UK does not.
The Taoiseach is garnering support in the EU capitals for this Irish “red line”. He can expect no thanks if the line turns out be marking the edge of the cliff.
Although European history is littered with tragic events which nobody intended, we must still assume that this kind of disaster will not happen and can at least hope for something more than just a free trade agreement between Britain and the EU.
The British would have to make a lot more concessions than there are in their current White Papers, but this is a steeplechase, not a flat race. It must be taken one fence at a time.
Under existing agreements there can be no transition period unless the North is to remain in the EU system while the rest of the UK does not