Kieran Coughlan: Rocky Brexit road for Irish farmers

Where were you June 24?
My instinct is that the day the referendum result confirmed a Brexit is one of those defining moments in our lives that we will perhaps remember forever, like 9/11, or even the day Munster won the Heineken Cup in Cardiff in 2006.

Perhaps more for me, (or for us collectively as dairy and beef farmers), the choice of our nearest and most important trading neighbour to exit the single market could negatively affect the prospects for farming in this country in the medium term.

I say the medium term because, as of yet, Britain has not officially notified the EU of its intention to exit the EU.

Unlike Irish constitutional referendums which are legally binding, the UK vote was simply a reflection of the will of the people.

In any event, it is expected that the exit process would take at least two years.

So in the short term, our trading relationship can resume as usual.

At the time of writing, sterling had weakened by nearly 10% from pre-Brexit rates, meaning the cost of buying euro-denominated purchases has suddenly got that bit more expensive.

However, from a positive perspective, both sterling and euro have declined against the dollar, the euro to a lesser degree, but such devaluations give the EU’s food exporters a boost in international trade.

As a backdrop, sterling had already declined by about 10% over the past year against the euro, making things more difficult for Irish exporters.

The devaluation of the pound against the euro will increase the competitiveness of British-produced food over the medium term.

In the shorter term, UK farmers cannot ramp up production overnight.

The devaluation of the pound may result in trends like cheaper chicken replacing beef or lamb, as consumers stay within their household budget.

From a farming perspective, what has come to light is that when Britain exits the EU, whatever trading, tariff and customs agreement is concluded by the EU will determine Ireland’s position for dealing with the UK.

As members of the EU, we will not have the capacity to make our own deal with the UK, such as retaining the free trade between our nations which is currently the case.

The overtures from certain EU leaders looking for a swift divorce from Britain, and the suggestion that talks will not be amicable, may be highly politically charged with the underlying motive to quell dissent for the EU project within their own countries.

Behind this rhetoric, Ireland must act as peace broker and ensure that its relationship with Britain is not compromised.

In the medium term, the prospects for Irish agriculture depend hugely on what Brexit deal is hammered out.

Looking at a worst case scenario, tariffs and customs could be imposed, along with significant devaluation of the pound against the Euro, and a significant relaxation of regulations for farmers within Britain.

In such a scenario, imports from the EU become prohibitively expensive in Britain, both because of tariffs and because of the weakness of the pound; and meanwhile, production increases in Britain due to a relaxation of their standards.

The historic links between Britain and its Commonwealth countries will pose a renewed threat to trade with Ireland when Britain leaves the EU; between them, they could reset their own trading relationships, freed from the constraints of existing EU arrangements.

Looking at the positives in the short, medium, and long term, our reputation, existing trading relationship, language and our proximity to the UK continue to offer natural advantages; it should remain easiest for Britain to turn to Ireland for food than to nearly any other country.

In the event that Britain sources its imports instead from new non-EU suppliers, this causes displacement in the global market, freeing up opportunities for Irish companies to supply other markets previously served with that product.

Even in the event of a hardened trading relationship between the EU (including Ireland) and Britain, that sword cuts both ways, because food currently sourced from Britain could be produced in Ireland.

In the longer term, fundamentals for Ireland remain strong, as the world population continues to grow with an increasing demand for first-world diets, rich in dairy and beef.

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