All islands economy

Posted on May 29, 2015 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

The development of closer economic ties between both parts of Ireland has been a feature of growing European integration as well as the establishment of a ‘peace dividend’ following the Good Friday agreement of 1998.  While much research work has been undertaken in relation to cross-border and all-island economic affairs there is a considerable gap in knowledge about the extent and nature of cross-border activity as well as a trend among academic and applied economists to focus both inwards within their own jurisdiction and outwards beyond Ireland rather than on ‘what lies up the road’ or ‘what lies down the road’. To some extent this development is understandable given the pressing issues arising from the recent financial and fiscal crises (which are not entirely over) and the perception that to some degree the ‘problem’ of the recent troubles has been largely resolved and that there is not the same saliency or urgency around cross-border affairs.

In my professional experience I have noticed a diminution of interest, over the last 20 years or so, among economists in relation to all-island economic matters as evidenced in the relative lack of exchange, thematic focus and appearances of various conferences and events.

Efforts are underway in the Management School at the Queen’s University Belfast to develop a more all-island research approach. Work by bodies such as the Centre for Cross-Border Studies as well as work by the ESRI and individual consultants is to be greatly welcomed. But, more needs to be done.

One of the benefits of recent times is that the goal of a more integrated island economy is seen for its worth in regards to business, employment and public welfare rather than something driven by a political agenda linked to Irish unity. At the same time, a greater awareness of the potential for economic cooperation between Ireland as a whole and Great Britain means that policy needs to focus on a much wider set of relationships. The two islands are still closely bound by realities of culture, language, institutions and civic norms that have economic significance.

InterTrade Ireland provides statistics on areas of cross-border trade. These show a modest level of trade in manufactured goods and a gradual increase since the 1990s. However, when compared with the total value of merchandise exports from the Republic of Ireland, manufactured good exports has dropped from 2.1 to 1.4% between 1996 and 2014 (source: CSO). There has been a modest upward trend since 2009, however.

  • North to south goods exports have fared better especially since 2001 when a surplus in goods exports opened up with the North exporting more to the South than the South to the North. Most of the cross-border trade in manufactured goods has been in food and drink.
  • Unfortunately, there is a relative lack of data on cross-border service trade. Tourism has increased since the beginning of this century but most of the increase is in the direction of North to South.
  • Areas of business activity that could be developed further on an all-Ireland basis include renewable energy and transport as well as deeper cooperation in particular health services and education. Progress has already been made in these areas.

The island of Ireland is rich in natural resources ranging from discovered and undiscovered deposits of petroleum off the coastline to ocean and wind power, biomass and solar energy. Exploratory drilling and testing for oil and gas has signalled a potential for these resources to be used in a phased way over a long period of time. There is an opportunity for both administrations to identify commercial opportunities for productive and environmentally positive use. In the case of petroleum extraction off the coast there is a strong case for direct public engagement and investment modelled on lines adopted by Norway in the 1970s. At the very least the current special rates of corporation tax including the Profit Resource Rent Tax (PRRT) are too low and need to be increased.  These challenges could be considered on an all-island basis with a long-term strategic plan to invest in renewable energy from a dedicated all-island wealth fund.




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