Ire­land may fancy its chances out­side EU

The Sunday Telegraph - Money & Business - - Business - LIAM HALLIGAN Fol­low Liam on Twit­ter @liamhal­li­gan

The White House is “100 per cent cer­tain” of strik­ing a trade deal with the UK. Hav­ing vis­ited Wash­ing­ton last week, Liam Fox is bask­ing in pres­i­dent Trump’s pre­dic­tion of a “very big and ex­cit­ing” free-trade agree­ment.

As we move to­wards Brexit, forg­ing trade links else­where makes sense. Help­ing UK ex­porters sell into the 80pc-plus of the global econ­omy out­side the EU sends a pow­er­ful sig­nal dur­ing these Ar­ti­cle 50 talks. An agree­ment with the world’s big­gest econ­omy would be a good start. And to think – Trump’s pre­de­ces­sor had us “at the back of the queue”.

The EU has spent al­most a decade try­ing to ham­mer out a US trade deal. Ne­go­ti­at­ing as a bloc of coun­tries, of­ten with con­flict­ing ob­jec­tives, is one rea­son Brus­sels has cut so few mean­ing­ful trade agree­ments. The EU has no deal with any top-10 global econ­omy. The 50 or so EU deals we of­ten hear about are mostly with min­nows, cov­er­ing just 8pc of the world econ­omy.

The EU an­nounced a “free trade agree­ment with Ja­pan” ear­lier this month – but it was a stunt. The pur­ported cars-for-cheese deal, if it hap­pens, is years away. Both Tokyo and Brus­sels wanted to make Trump look iso­la­tion­ist ahead of the Ham­burg G20 sum­mit, so they is­sued a joint press re­lease with no tech­ni­cal agree­ment. Now Trump is get­ting his own back, rhetor­i­cally hug­ging Bri­tain to keep the EU on its toes. Away from the niceties of in­ter­na­tional trade diplo­macy, as we go into high sum­mer, the UK eco­nomic picture looks mixed. GDP grew 0.3pc dur­ing the three months to June, we learnt last week, up from 0.2pc the quar­ter be­fore

– with the ser­vice sec­tor lead­ing the charge. Year-on-year growth slowed, though, from 2pc to 1.7pc, as in­fla­tion rose, eat­ing into real-term pay.

The very lat­est ev­i­dence, in con­trast, points to higher re­tail sales in July and a man­u­fac­tur­ing boom. Fac­to­ries raised their out­put at the fastest pace since the mid-nineties over the last quar­ter, ac­cord­ing to a CBI sur­vey. Ac­count­ing for 11pc of GDP, man­u­fac­tur­ing may un­der­pin the broader econ­omy dur­ing the se­cond half of this year. Much de­pends on whether a com­pet­i­tive ex­change rate trans­lates into higher ex­ports. Op­ti­mism among ex­port­ing man­u­fac­tur­ers is at a 40-year high, de­spite the drum­beat of Brexit gloom.

As I head off on hol­i­day, I wanted to de­vote the bulk of my last col­umn for a fort­night to the Repub­lic of Ire­land. The Emer­ald Isle is al­ways in­ter­est­ing – and re­solv­ing North-south bor­der is­sues is in­te­gral to our Ar­ti­cle 50 talks. For the most part, Dublin is wed­ded to Brus­sels. Ir­ish diplo­mats are over­whelm­ingly Europhile.

The broader pop­u­la­tion has mean­while en­joyed years of EU “struc­tural fund” largesse and in­de­pen­dence from “the Brits”. Yet dur­ing re­cent trips to the land of my fa­thers, I’ve sensed at­ti­tudes are shift­ing. This could prove sig­nif­i­cant as the Brexit ne­go­ti­a­tions get se­ri­ous.

The North­ern Ire­land peace process won’t be de­railed by Brexit. Yes, the Repub­lic will stay in the EU’S cus­toms union, as the North leaves with the rest of the UK. Yet the chair­man of the Repub­lic’s Cus­toms Au­thor­ity is

“prac­ti­cally cer­tain” there will be no cus­toms posts. Num­ber plate recog­ni­tion and e-bor­der tech­nol­ogy can work won­ders, avoid­ing a sym­bol­i­cally awk­ward “hard bor­der”.

Con­cerns that a “fric­tion­less” Ir­ish fron­tier might be a back­door for EU mi­grants into Bri­tain, with the South still ob­serv­ing EU “free move­ment” rules, are also sur­mount­able. Out­side the Schen­gen agree­ment, the Repub­lic al­ready col­lects pass­port in­for­ma­tion for all vis­i­tors. With good in­for­ma­tion­shar­ing, Bri­tish and Ir­ish bor­der author­i­ties can con­tain this prob­lem too. The big ques­tion is how Dublin plays its hand dur­ing Ar­ti­cle 50 talks.

Of­fi­cially part of “team EU”, just an­other EU27 na­tion, the re­al­ity is very dif­fer­ent. UK trade to­tals a bil­lion eu­ros a week, se­cur­ing one in 10 Ir­ish jobs. In some sec­tors, like food and drink, half the Repub­lic’s ex­ports are Uk-bound. Our free trade, free move­ment deal pre­dates the EU, and even the Repub­lic it­self – ev­ery­one wants it main­tained. Ev­ery­one, per­haps, ex­cept Michel Barnier. The EU’S chief ne­go­tia­tor has rea­son to make life dif­fi­cult for both the UK and the Repub­lic, mind­ful of Lon­don’s de­ter­mi­na­tion not to jeop­ar­dise much-im­proved An­glo-ir­ish re­la­tions.

Smart folk in the Repub­lic are now con­cerned that, while pun­ish­ing the UK, Brus­sels may also pun­ish Ire­land. I’ve never said the Repub­lic should leave the EU, but se­ri­ous peo­ple are now rais­ing what was, just weeks ago, an un­think­able threat.

“Sim­ply sit­ting on the side­lines and al­low­ing the EU to ne­go­ti­ate for Ire­land is es­sen­tially un­ten­able,” boomed Ray Bas­set, in a pol­icy ex­change pa­per this month. An am­bas­sador un­til his re­tire­ment last year, Mr Bas­sett is a proper in­sider. His coun­try, he says, must “se­ri­ously con­sider” leav­ing the EU.

The Ir­ish like be­ing “part of Europe”. But they didn’t like be­ing forced to hold re­peat ref­er­en­dums on the Nice and Lis­bon Treaties, or hav­ing a bail-out foisted upon them in 2010. Brus­sels keeps moan­ing about low Ir­ish cor­po­ra­tion tax, which has brought huge in­ward in­vest­ment. And the Repub­lic has just be­come a net EU con­trib­u­tor.

The UK and US ac­count for a huge slice of Ir­ish trade. Add in the rest of the world and, post Brexit, al­most two thirds of Ir­ish ex­ports will be sold out­side the EU. Now, what if the UK and US did sign that free trade deal?

The Repub­lic would then sit ge­o­graph­i­cally in the mid­dle of a trade bloc to which it has mas­sive eco­nomic ex­po­sure and bound­less cul­tural affin­ity. Yet it would not be able to join, for­bid­den by EU rules.

For 40 years, “Of­fi­cial Ire­land” has never coun­te­nanced leav­ing the EU. That could be about to change.

‘Sim­ply sit­ting on the side­lines and al­low­ing the EU to ne­go­ti­ate for Ire­land is es­sen­tially un­ten­able’

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