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Brexit and Ireland: an unholy trinity of options

Posted on November 24, 2017 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

As the heat rises in the run-up to Christmas on the Brexit front we are looking into the barrel of The Great British-Irish Trilemma.  There are no safe places to hide here and no amount of palaver and fudge will duck the key issue.  Minister for Foreign Affairs, Simon Coveney puts it succinctly and accurately like this:

The Government in London has repeatedly outlined three ambitions which simply cannot all be delivered. These are, firstly, that the UK leaves the Single Market and the Customs Union; secondly, that all parts of the UK jump together, so to speak; and thirdly, that they want no return to any hard or visible border on this island. Well, we fully share that final objective, which, to be blunt, is the most important – it’s the bedrock of peace and stability on this island. We just don’t see, and the EU doesn’t see, how it is compatible with the other two ambitions.

Keynote Address by Minister for Foreign Affairs and Trade, Simon Coveney T.D., to Eurofound Foundation14 November 2017

What the EU and the Irish Government (and many in the UK) are saying is that what has been said, to date, by the UK Government just doesn’t add up. You can exit the Single European Market (SEM) and a Customs Union (CU) but you can’t avoid a hard border somewhere. If you want to exit the SEM AND the CU, you either have a border running around Slieve Gullion in County Armagh or you can have a hard border running down the sea between Cairnryan and Belfast. No amount of loose talk about cameras, technological solutions, flexibility and random spot checks can get around this very awkward truth.  The distinction between SEM and CU is very significant. With SEM you have, more or less, freedom of movement of labour and harmonisation of many rules and standards and with CU you have a common external tariff on goods, but not services, and that’s all.

It may be argued, as some have, that a special carve-out deal would be possible for the agri-food sector ensuring some degree of harmonisation of standards and reciprocal inspections. However, such opts outs (or opt-ins) would be complex, difficult to enforce and politically problematic and, in any case, confined to just one sector. However concerned some may be about staying in the UK and having an opt-out for agriculture, the matter concerning sectoral deals will be decided at the negotiating table according to the formula of 27 vs 1.

We should not forget that the bulk of cross-border or cross-island trade is ‘East-West’ impacting on exporters or enterprises across the entire island or Ireland. In other words, a ‘hard border’ running down the Irish sea would have potentially large and negative economic consequences at least in the short-run for producers and exporters in both parts of Ireland. The notion of ‘market diversification’ is all very well in theory but in practice it takes many years if not decades to establish new markets founded on familiarity, trust, marketing and secure legal trade arrangements.

Where does this leave us? Not in a pretty in a place. ‘There are no good options’ as the saying goes.  However, the least-worst option would appear to be continuing UK membership of the SEM and CU for as long as possible and for as much as possible across all sectors and domains of the ‘four freedoms’ (relating to labour, capital, goods and services). Failing that, some sort of special status for Northern Ireland would be the least worse in the long-run. But, would it work politically and would it involve significant short-term upfront economic pain as Northern Ireland producers and exporters lose hassle-free and cost-free access to markets in Great Britain? Time will tell and it may be that political events globally as well as in Europe and within the UK could change the options and reframe the choices somewhat. However, there is no getting away from the unholy trinity of options staring us right now and until the end of this year and probably well into 2018-2019. Simon Coveney was hardly mincing his words when he went on to say the following:

Failing that [UK staying in CU and SEM] however - and in order to ensure that peace on this island can be sustained, that North-South cooperation can continue and that our all-island economy can continue to grow – we will need unique solutions for Northern Ireland.

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