Trade tariffs on the horizon if UK public opts for Brexit
At this point no one knows what the terms of Brexit would be, and by extension nobody knows the precise consequences for the UK, Ireland or the EU generally.
Brexit is likely to have negative consequences for Ireland, given our strong trade and employment links with the UK, particularly in the agri-food sector.
Some €4.5 billion, or close to one third, of all Irish agri-food exports are destined for the UK, making it the number one destination for Irish agri-food exports.
However, if Brexit occurs the big question is how would Brexit affect this trade?
The world has been moving towards free trade in recent decades, but many countries still levy tariffs on imports of agri-food products, largely as means of protecting the agriculture sector in their countries from international competition.
The EU is no different, levying tariffs on agri-food imports that originate outside of the EU. By contrast, all trade within the EU itself, including Irish agri-food exports to the UK, is free of tariffs.
Even if Brexit occurs, trade between Ireland and the UK will continue, but the concern is that free trade might come to an end, with tariffs imposed on trade between the UK and EU.
Brexit will require that the UK negotiates agreements on trade and the movement of people with the EU27.
Ideally these negotiations would result in free trade, but it is also possible that those negotiations could fail and that some level of tariffs would apply.
Impediments to trade such as tariffs or the administrative paperwork commonly associated with trade outside a customs union, would reduce the level of trade with the UK and force Irish exporters to look to a greater extent at other markets in the EU or in the rest of the world.
The prices obtained for Irish exports would likely be lower in these other countries and the cost of transportation and other logistical challenges involved in servicing more far flung markets would be significant, making that trade less lucrative.
Post Brexit, the UK could pursue free trade relationships with countries outside of Europe, including agricultural heavyweights such as Australia, New Zealand and Brazil, none of which currently has a free trade agreement with the EU.
If the UK chose to apply low tariffs or no tariffs on imports, then these highly competitive exporters could have access to the UK market and the price of agri-food products on the UK market would most likely decrease.
Irish and other EU exporters would then find themselves undercut on the UK market by these non-EU exporters.
A further complication of Brexit from an agricultural perspective is that UK agriculture would no longer be under the remit of the Common Agricultural Policy. The UK could develop its own agricultural policy and nobody knows for sure what that would look like.
The smart money would be on limited support for UK agriculture, largely in the form of support for agri-environmental measures.
That could spell bad news for UK farmers, with falling incomes and lower land prices a likely outcome in the UK.
In turn UK agricultural production could fall, providing more scope for agri-food exports to the UK market.
The exporting nations that would stand to benefit would depend on the trade policy relationship that the UK negotiates with its trade partners.
It is possible that Ireland might benefit, but the gap could also be filled by non EU exporters.
Ireland is unique in sharing a land border with the UK and over time this has led to a high degree of agri-food sector integration, particularly on the Island of Ireland.
If Brexit occurred this trade could be seriously affected or could even cease in some cases, creating problems for the food processing industry and farming north and south of the border.
Our initial assessment is that Brexit could mean a reduction in the value of Irish agri-food exports of anything from €150m to €800m per annum, depending on the trade policy outcome.
It will only be possible to make a detailed assessment of the consequences, if and when the terms of Brexit become clearer.
If the Leave side wins the Brexit Referendum, Ireland will need to exert it influence in Brussels in shaping the best possible future trading relationship between the EU and UK.
However, the Brexit decision itself is one for UK voters alone, so for next few months we can only sit and watch the story unfold.
