Good Riddance party won’t mourn a tough Brexit

A free international trading system is vital for Ireland’s continued survival. Brexit and Trump threaten that, writes Colm McCarthy

IRELAND’S exposure to Brexit involves more than keeping the border open, important though that certainly is. The fate of the British economy and its future trading relations with the EU remain entirely unresolved and managing the land frontier could turn out to be the lesser challenge. The explicit inclusion, at number four, of the land border issue in the UK government’s 12 priorities for the negotiations is reassuring.

The post-Brexit border may not be completely ‘frictionless’, the aspiration of Theresa May on her visit to Dublin last Monday and of Brexit minister David Davis in last Thursday’s White Paper. But Irish politicians have clearly succeeded in persuading their UK counterparts that the frictions must be minimised. They have also ensured that EU negotiators support the expressed desire of both governments to conclude the least disruptive deal possible. It is difficult to see what more could have been achieved by Irish ministers and officials at this early stage.

The White Paper reveals very little about UK negotiating strategy and the likely path of the trade relationships which Britain will embrace, or endure, once the divorce from the EU has been accomplished. There is much aspirational waffle about Global Britain and the boundless opportunities awaiting the UK’s exporters once the unspecified Euro-shackles have been sundered. The British prime minister visited Washington last Friday week to explore trade opportunities with Donald Trump, the most protectionist US president since the 1930s. She arrived within days of his cancelling the draft Trans-Pacific trade pact and his unilateral declaration of intent to renege on the 23-year-old free trade agreement with Canada and Mexico. Mrs May proceeded to Turkey to explore trade possibilities with a country which has a customs-free deal with the EU. Turkey is bound by the EU’s common external tariff and cannot conclude solo trade deals with anyone, unless it secretly plans to quit the customs union. There have been equally optimistic trade missions to assorted non-European countries to which Britain exports very little. The shock of the referendum result last June has dislocated the British political and administrative system and there is considerable indulgence in wishful thinking.

The UK has decided to depart a large, rich, long-established and deep free-trading zone consisting of its immediate neighbours after 44 years of membership. Should trade access to this zone be diminished, it will not be easy to find alternatives elsewhere. The dilemma was succinctly posed by one of the Remain campaigners prior to the referendum: “We export more to Ireland than we do to China, almost twice as much to Belgium as we do to India, and nearly three times as much to Sweden as we do to Brazil. It is not realistic to think we could just replace European trade with these new markets.”

The speaker was the Home Secretary and MP for Maidenhead, one Theresa May. Nothing has changed in the real world in the eight months since these comments were made, aside from Mrs May’s job description and the US lurch to protectionism. There is something almost heroic about the optimism of British ministers on the free-trading vistas opened up simply by quitting the largest free-trade zone that has been available to the UK in modern times. How come no other EU government has cottoned on to these exciting possibilities?

The referendum last June was conducted by the Leave side on the promise that the UK could regain control over borders and law-making without economic damage. If the cost turns out to be serious, there will be recrimination, not least in the Conservative Party. Mrs May’s conversion into a ‘hard’ Brexiteer has reunited the Tories for now and may have seen off the electoral threat from Ukip. But large elements of the broad Tory church are unreconciled and the divisions will re-emerge, as they have already done in the Labour Party. Europe has been a source of division in British politics, in both main parties, since the 1950s, which the narrow 52 to 48 vote for Brexit has neither altered nor concealed. A potent Leave argument was the illegitimacy of the UK’s continued membership of a European confederation which had changed character, in an integrationist direction, since the decision to join in the 1970s. The same ‘we wuz conned’ complaint will now be available to the 48pc should a heavy economic cost emerge. Tory Remainers will argue that the Eurosceptics mounted a dishonest coup and Mrs May’s party reunification project could hit early trouble.

While the government here should wish that the dreams of the Global Britain optimists come true and that the UK economy prospers, there are obvious dangers in being seen as advocates for the UK inside the EU-27. It cannot be assumed that the divorce with Britain is universally mourned around Europe as an unwelcome end to a great romance. British Euroscepticism is not new and the ambivalence in both main parties has been reflected in a lukewarm, semi-detached attitude to membership. The last UK premier to have been genuinely enthusiastic about the European project was Ted Heath, the one who negotiated British entry almost half a century ago. The marriage never worked in the eyes of many in continental Europe.

The result is the presence of a sizeable Good Riddance party, reflected in the atti- tudes of Jean Claude Juncker, the Commission president, and Guy Verhofstadt, the appointed interlocutor for the European Parliament. Irish negotiators are steering a careful course, avoiding both the fifth-columnist trap and the punishment detail. This is entirely a damage-limitation mission: it is a disaster for Irish foreign policy that the UK has chosen to depart the European Union and there has been too much happy talk about speculative upsides.

It now looks as if the Article 50 notification will be delivered early in March and the negotiations on Britain’s EU departure will commence in April or May. If common sense prevails, there will be formal talks about trade relations in parallel with the divorce settlement and Britain will seek a generous free trade agreement with the EU as well as a special arrangement with the customs union.

Until negotiations commence and the positions of the main protagonists emerge, it is difficult to draw conclusions about the trade-offs which might confront Irish negotiators.

The Government and the broader political system need simultaneously to devote greater, and public, consideration to economic policy for the longer term. Ireland’s business model for the past 70 years has had two key components, a positive climate for inward investment combined with best possible access to European markets, including the most convenient, the United Kingdom. Both components are now under threat.

The promotion of inward investment through an attractive corporate tax regime is facing attacks from East and West. The European Commission has taken exception to what it regards as abuses, various European countries have already reduced their rates to more competitive levels and Mr Trump is keen to do the same.

On the trade side, it is profoundly in the interest of small developed countries to preserve a free international trading system. This too is endangered, both by Mr Trump and by the UK decision to quit the EU.

Has the Irish development model been broken?

‘It cannot be assumed that the divorce is universally mourned’