JIM POWER: A year out, and anything is still possible on Brexit

The future trading relationship between the EU and the UK is obviously the most crucial question of all from an Irish perspective. says Jim Power.

All going to plan, a year on from yesterday, at 11am, the UK will have left the EU and, for the first time since we joined, we will no longer have Britain at our side.

Last week, we got some idea of how the process might evolve and of what the coming year might look like, and possibly thereafter.

The EU Council has agreed that the UK can have a transition period until the end of December, 2020.

During that transition, the UK will have access to the Single European Market, will still be involved with the various EU agencies, but will have no input into policy-making.

This transition will give time and some certainty to UK business and ease fears about a hard exit on March 29 next year.

Of course, the issue of the North is still very up in the air and the so-called ‘backstop’ is difficult to comprehend.

The stage is now set for the second round of negotiations, which will primarily focus on the future trading relationship between the EU and the UK.

From an Irish perspective, this is obviously the most crucial question of all.

We can ruminate about the border, but the future trade relationship between the UK and ourselves is where it is at and is the issue that will fundamentally impact on economic life in Ireland for years to come.

The politics of Brexit in the UK are still utterly bizarre and the divisions in the UK political system are quite extraordinary.

Anything is still possible, but more sensible people are pushing towards, at worst, a soft Brexit and, at best, no Brexit at all.

Based on the behaviour of UK Labour party leader, Jeremy Corbyn, last week — when he sacked one of his senior colleagues, Owen Smith from the shadow cabinet, after Smith sensibly called for another referendum — it is hard to see how Brexit can be avoided.

If the Labour Party had a leader with any semblance of sense, another referendum would be held and Brexit would most probably be reversed.

However, the Labour Party does not have a leader with any semblance of good sense, so reversal is most probably not an option.

However, the next best option — a soft Brexit — which would see a free trade relationship between the UK and the EU, is a distinct possibility, although, given the complicated and divisive politics involved, the old mantra that “nothing is agreed until everything is agreed” is still the most logical perspective.

For Ireland, the future trade relationship is what it is all about, and a hard Brexit, involving the UK leaving the EU without a trade deal and the subsequent application of World Trade Organisation (WTO) trade tariffs, would be bad for Ireland.

The only question is: how bad?

This week, Love Irish Food (LIF), of which I am chairperson, published some research, looking at the impact of a hard Brexit on the Irish food sector.

This research is based on an analysis of our food trade with the UK, the WTO tariffs that would likely apply, and interviews with the leaders of some of our most exposed food companies.

Not surprisingly, the implications would be very serious for the sector and, indeed, for the Irish consumer.

If we consider that 70% of the yogurt, 43% of the chicken fillets, and 98% of the biscuits that we consume are imported, with much of this trade coming either from the UK or using the land bridge provided by the UK, the implications of tariffs and increased customs checks are pretty obvious.

The snow event in early March showed, in pretty dramatic fashion, the fragility of the food supply chain.

With increased border delays or tariffs, this food supply chain would become even more pressurised.

Consumer prices would inevitably rise and shortages of some products could become a real issue.

For the food companies exporting to the UK, the challenges would also be immense.

The bottom line is that new markets would have to be found on both the import and export sides, and the UK land bridge would have to be bypassed, where possible.

On the plus side, Irish producers would be presented with the opportunity provided by import substitution.

Hopefully, all of the foregoing analysis is just scaremongering and a good deal will be done ahead of December, 2020.

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