The Brexit negotiations drag on and Ireland is a most interested spectator as we fear the consequences of a hard border or a no deal Brexit. The EU establishment fear that other member states may be tempted to leave if Britain is seen to get a good deal.
On the British side the Conservative party is deeply divided on what deal is acceptable and are dependent on the DUP to stay in power. Unless Britain gets a good deal Theresa Maye may be tempted to go for a no deal Brexit or face another leadership struggle and a general election which the Labour party might well win.
With close trading links to Britain and a shared land border, Ireland is the EU member most at risk after Brexit. Brexit could lead to a costly rise in tariffs, paperwork and transit times. The long drawn out negotiations has also impacted on the value of sterling which has also caused huge problems for sectors such as the mushroom industry.
The UK accounts for around 17% of Irish exports, but that figure leaps to 44% when foreign-owned firms are excluded. Employment-heavy industries in rural areas are also among the most reliant on trade across the Irish Sea.
Products of Ireland’s agri-food sector are among the EU’s most exposed to Brexit, led by cereals, fruit and vegetables, almost 90% of which are exported to the UK. High volume Irish industries such as meat, dairy products, the live animal trade and wood manufacturing are also among the most exposed.
In 2016, 34% of our dairy exports went to the UK, representing 53% of cheese exports, 29% of butter and 12% of SMP (Skim Milk Powder). Exports of cheddar cheese were 78,000 tonnes, representing 82% of all cheddar imported by the UK in 2016.
The UK market is the only market of significance for Irish cheddar (60%). Some 50 per cent of our Beef exports go to the UK which could easily replace these with imports from Argentina & Brazil.
There is also a very significant cross-border trade. In 2016, we imported over 800m litres of milk from N. Ireland for processing by Aurivo, Glanbia, Lacpatrick & Lakeland Dairies. Of this amount, approx. 120m litres were sold as fresh milk (25% of our fresh milk market).
If the UK were to impose any significant tariffs on Irish imports then this would create huge economic problems for us. However, Britain cannot readily source alternative cheddar and many other dairy products elsewhere at a lower price; the exception might be butter from New Zealand.
Irish agri-food would face some of the highest tariffs if the EU-registered World Trade Organisation tariff schedule was applied to EU-UK trade should Britain leave under a so-called “Hard Brexit” in 2019,
However, the UK exports more to Ireland than it does to China, India and Brazil combined. In fact, we are their 5th largest market. Exports of goods and services from Britain to other EU countries were worth £274 billion in 2017, while exports from the rest of the EU to the UK were worth about £341 billion. So the EU has a balance of trade in their favour of £67Billion. Britain is the largest import market in Europe for German cars, taking every fifth vehicle exported from Germany. Last year 950,000 cars made by Volkswagen, BMW and Mercedes-Benz were registered in the UK. Not to mention the Czechs, French, Italians & Spanish car imports.
So, presumably common sense will ultimately prevail in these Brexit negotiations and we will not end up scoring own goals in our respective economies.