Irish food firms would be vulnerable if the UK and EU were to fail to strike a Brexit deal, because their costs of raw materials would be higher, while exports to the UK market would face high tariff levels, a new report has warned.
In the new, 61-page report, the Economic and Social Research Institute, the Department of Business, and Enterprise Ireland identify the reliance of Irish-owned firms on imports of raw materials, such as petrol and fuel, from the UK, which could drive up costs and hit exporting firms hard.
Irish-owned firms are more exposed than multinationals to the additional costs of importing raw materials and intermediate goods, which a hard Brexit would entail, and food firms are particularly vulnerable.
Under a no-trade deal, tariffs on Irish food exports to the UK would likely be huge — as much as 18% for some products, under World Trade Organisation rules, the report warns.
“While the final Brexit outcome is still highly uncertain, an understanding of who is most exposed to any changes in trading arrangements is an important step in developing plans and policies to mitigate any negative impacts,” said Martina Lawless, associate research professor at the ESRI, who wrote the report.
“Food products stand out as being particularly exposed, with a relatively high dependence on the UK market as an import source and high potential tariffs in the absence of a comprehensive trade agreement.” she said.
The report estimates that Irish-UK trade in goods consists of almost €18bn in imports and over €15.5bn in exports.
Separately, investors watching the trade tit-for-tat between the US and China may well have reason to fear the havoc that a full-blown conflict between the world’s two biggest economies could wreak globally, according to a model by economists at Pictet Asset Management in London.
They estimate a 10% tariff on US trade, fully passed on to the consumer, could tip the global economy into a state of stagflation and knock two and a half percent off corporate earnings.
But equally likely to be affected from the fallout of a full-blown trade war are the economies of a number of countries that are tightly integrated into the global value chain — which companies increasingly use to fragment production of their goods.
It reveals economies like Taiwan — home of Foxconn, which manufactures Apple’s iPhone — Hungary, and the Czech Republic could be equally, if not more vulnerable to the risk of a trade spat than the US and China. And it finds that Ireland is the tenth most-exposed economy.
Additional reporting Reuters