Is the EU immune from the symptoms of no deal?
Brexit Secretary Stephen Barclay has claimed Ireland would be hit harder than the UK by a no-deal – and that will force the EU back to the negotiating table. There are also reports that the EU is proposing a massive aid plan for Ireland to cushion any blow.
The case of whether the UK or EU would do worse out of a no deal is very clear cut. Every serious prediction suggests the UK would do much, much worse.
The IMF World Economic Outlook 2019 estimates that a WTO Brexit would slash UK GDP by between 3.7
per cent and 4.9 per cent, while the Bank of England’s November 2018 forecast estimate suggests a reduction of between 4.75 and 7.75 per cent over five years.
By contrast, the IMF predicts the impact on the EU27 would be well below 1 per cent. The Bank of England makes no estimate.
That’s in the short term. In the long term, the differences are if anything even more pronounced.
The European Commission notes that “external studies suggest a long-term negative impact of around 3 to 8 per cent on UK GDP”. They cite the IMF (2019) which estimates almost 3 per cent; and the UK government’s own 2018 estimate of 7.7 per cent.
The IMF suggests that impact on the EU27 would be less than 1 per cent.
One easy way to visualise the problem for the UK is that it is one country having its trade access degraded to 27 other nations. The others are 27 having their access degraded to one.
So does the EU have nothing to be afraid of from a no deal? Well, not exactly. The impact would not be spread evenly across the 27 different member states, and Ireland would take a large part of that blow.
A large proportion of trade in goods to Ireland come and go via the UK – over the Irish sea into ports such as Liverpool, Fishguard, and Holyhead, overland to Dover, and then across the channel to the continent. This means Ireland is very vulnerable to disruption affecting the UK, because of its knock-on effects.
Other countries such as the Netherlands, France, and Belgium might also be more strongly affected than countries with fewer direct links to the UK. But Ireland would bear the brunt because of its geographic position. That’s before you even start to think about resolving the mess on the border.
Will this threat to Ireland be enough to force the EU back to the negotiating table, as Mr Barclay suggests? It appears very unlikely. The EU wants to avoid a no deal, but it shows no sign of changing its red lines for the UK.