Brexit could mean changes to our food and farming sector
Their decision could have significant implications for our farming and food industry, which have been explored in detail by Trevor Donnellan and Kevin Hanrahan in a new study from Teagasc. ( www.teagasc.ie/publications/2016/3927/BrexitPaperApril13final.pdf )
The broad conclusions of this study are that Irish agri-food exports to the UK would decline as a result of Brexit, but this reduction would be partially offset by an increase in the value of exports to other destinations, where prices are not likely to be as high as those achieved on the UK market.
The magnitude of the loss in Irish agri-food export value is highly uncertain and would depend on the UK’s future trading relationship with the EU (including Ireland) and the direction of UK agricultural policy after Brexit, both of which remain unknown.
Britain, Ireland and Denmark joined, what we then called, “the Common Market” in 1973 (43 years ago) becoming its seventh, eighth and ninth member states.
It has evolved since then into the European Economic Community and the European Union and now has 28 member states.
No one has left or been kicked out. (Greenland joined, as part of Denmark, in 1973, but left in a dispute over fishing rights in 1985).
This referendum could lead to the first occasion where a full Member State left the Union.
And Britain is an important member state, with the third highest population and the second largest economy.
Its population is growing by 1% per annum, while population in Germany and France is either declining or stagnant.
Britain is particularly important as a destination for Irish exports and as a source of our imports.
Irish exports in 2014 were valued at €92 billion, of which almost €13.6 bn were exports to the UK.
Total Irish imports were valued at €61 billion in 2014, of which almost €20.6bn were from the UK. Our trade dependence on the UK in the past was even greater.
When Britain decided to join the “Common Market”, back in the early 1970s, we really did not have an alternative but to join as well.
At one stage in the negotiations General de Gaulle vetoed the British application but not ours. However, neither of the applications proceeded.
In 1960 about 75% of Irish exports went to the United Kingdom. By 1970 this figure had dropped to about 61%.
One major effect of our EU membership (and our economic growth and diversified economy) is that our dependence on the UK market has now fallen to about 14%.
However, Irish agri-food exports to the UK amount to about a third of our total exports and are concentrated in the beef, dairy and processed foods sectors (ready meals etc).
For these sectors, in particular, the prospect of disruption of trade with the UK, with introduction of tariff barriers, is potentially serious.
In their study, Trevor Donnellan and Kevin Hanrahan set out to measure what these impacts might be.
It is a difficult exercise, since no one knows on what terms trade will be conducted after a decision to leave is made.
There are eleven possible scenarios for trade between Britain and the EU after a Brexit, depending on the nature of an agreement and whether agriculture is included in a deal or not.
(The UK Treasury published last week their own study of the likely impact of “Brexit”, with a wide range of different outcomes, depending on the assumptions about trade).
Furthermore, if Britain leaves, it will be able to devise its own agricultural policy, and we do not know at this stage, what form it might take.
Any Brexit arrangement will have negative consequences for the Irish agri-food sector. Even a Free Trade Agreement, where there are no new tariff barriers, would result in increased costs for Irish exporters.
The worst possible outcome for us would arise if Britain were to establish liberal trade agreements with agricultural exporters - such as Brazil or Argentina, who do not (yet) have a trade agreement with the EU.
Trade with the UK will not collapse, but will decline (by how much depends on the deal done).
We would then have to seek markets elsewhere with probable lower prices and higher costs of doing business. Of the four scenarios analysed, the worst outcome involved a reduction of the value of Irish agri-food exports of about 8% or €800m.
The most favourable involved a loss in value of €150m or 1.4%.
One possible opportunity! We also import considerable quantities of foodstuffs from the UK.
There will be barriers, small or large, against these also, which may create opportunities to replace them in our own home market.
