John Whelan: Brexit illustrates need for all-Ireland trade body
Prospects for a brighter future — as the rollout of Covid vaccines becomes a reality — continue to be dampened by the uncertainty created by the brinkmanship of Boris Johnson's government in the EU-UK trade negotiations.
Most firms have survived the impact of the pandemic, albeit financially weakened in many cases, but will need massive government support to avoid collapse in the event of a no-deal Brexit.
The worst can be avoided, if a tariff-free deal can be done, as most of Ireland’s economic fabric has been preserved and could revive quickly. But the situation remains precarious for many vulnerable people and businesses across the country, north and south.
The construction industry is one of the many for which smooth cross-border trade is essential, and there are worries that in the event of a no-deal Brexit, entailing application of World Trade Organisation (WTO) tariffs, a levy of 4%–8% could be applied to basic construction materials crossing the border, with associated regulatory documentation further adding to costs.
Watching the trucks pull out of Irish Cement in Castlemungret in Limerick, or O’Brien’s Cement in Waterford, and heading up to the building sites in the North, at first sight might strike you as odd. But, a deeper look reveals the incredible integration of business linkages north and south, with 80% of all cement used in the building of offices, factories, and houses in the North supplied by the cement factories spread across the Republic.
The flour mills in Fermoy, Mallow, and Midleton are long gone, leaving the Portarlington mill, with limited capacity, the only one left south of the border.
About 4,000 tonnes of flour is imported into the Republic from the UK every week. The National Association of British and Irish Flour Millers estimates that WTO tariffs, in the event of the UK leaving the EU without a deal, would be €172 per tonne of flour — or the equivalent of 15c per loaf of bread.
Guinness is also another all-island-of-Ireland product, which is brewed at St James’ Gate in Dublin, then transported up to Belfast, where it is packaged, and some of it is then brought back down to Dublin for export.
Diageo said that 18,000 of its trucks cross that border each year, “so even small hold-ups to process those truck movements would be really unwelcome”.
It also stated in an annual report that it has no intention to change its supply chain because of Brexit. But does this mean higher prices for your pint?
The harsh reality is that with Brexit, hard or soft, trade with the UK will be disrupted and in particular across the 500km Irish border, which will become an external border of the EU.
The level of integration, as indicated above, in the construction, flour, and drinks industry is a microcosm of the level of integration in business supply chains across the island.
Longer-term, Brexit brings the spectre not only of the return of tariffs — if the UK as a whole leaves the customs union — but also the re-emergence of many non-tariff barriers to trade once considered to be long left-behind by the process of European integration and cross-border co-operation.
In the early years of European Economic Community (EEC) membership, the reduction of tariffs and participation in the Single European Market led to a brief export boom as the North’s exports to both the south and to mainland Europe expanded dramatically.
In the mid-1990s, as the intergovernmental relationship further improved, and the Irish economy began to swing up, so too did trade around and across the Irish border. The 1998 Good Friday Agreement marked a watershed in British-Irish and Irish cross-border relations.
It provided for institutions, such as InterTrade Ireland, specifically intended to facilitate and enhance north/south co-operation and trade on the island of Ireland. Common membership of the EU was a vital context for this, given that it centres on a process of integration across national borders for mutual benefit.
This context has now changed, and heightened policy activism will need to be deployed to ensure growth does not falter and cross-border relations do not fall back to the bad old days.
Extensive fiscal support has been announced in the past week by the European Commission, with a budget of €8bn to support co-operation between regions, citizens, and economic stakeholders over their respective land and maritime borders. The new package includes a specific funding allocation for the Peace Plus programme for border counties in Ireland to enable it to continue in the 2021-2027 period.
However, unprecedented monetary and fiscal support can easily be wasted. It must be funnelled into stronger and better economic growth.
There are at least four priority areas for policymakers to focus on.
First is agriculture, food, and drink. The Northern Ireland protocol should still stand regardless of whether a trade deal is struck or not, but food and agricultural products — and all goods classified as sanitary and phytosanitary — will be subject to specified cross-border regulatory processes.
Second is the highly regulated pharmaceutical, medical devices, and cosmetics sector. From next year, the North will continue to uphold the EU’s falsified medicines directive, but the UK will not.
This directive prevents falsified or fraudulent medicines from entering the EU market. The manufacturers must continue to place a barcode on each of the product packs and log crucial product information on the relevant EU database, as well as meet UK medicines regulatory requirements. This is one of the many administrative tasks which will complicate the process of cross-border trade.
Third is the construction sector; non-tariff barriers which include legal and safety regulation, non-recognition of qualifications, and differing taxation regimes, are seen as the key issues for the sector post-Brexit.
Fourth is the so-called 'at risk' products. Currently, as part of the UK-EU trade talks, tariffs may be charged on goods “at-risk” of moving from the North into the Republic, as Ireland remains in the EU.
Products such as cigarettes, alcohol, and diesel are likely to be targeted, but there are many others which may become of interest to illegal traders once the extent of the tariff differences between British and Irish products becomes clear.
It is proposed to set up a joint committee of UK and EU government officials, which will determine if goods are “at risk” of onward movement to the EU.
However, a much wider information and advisory service will be required to meet the needs of the many small and medium-sized businesses to grapple with the increasing range of regulatory requirements, as well as tariff and tax issues, in trading across the border post-Brexit.
InterTrade Ireland, with a new mandate, is ideally placed to provide this service.
