This question is important in so far as some elements in the Tory party and the DUP are hoping that Ireland and the EU will back down on the backstop at the last minute. The short answer is NO, but there may be some softening around the edges and creative language to make it more sellable to HMG and the HoC. “No Deal” however is looking increasingly possible or even likely, given that even at “5 minutes to midnight” the cabinet still can’t agree among themselves.
I have written extensively about the backstop for the best part of a year and indeed have believed some sort of Irish Sea arrangement would be needed after discussions in UCD about a week after the Referendum. There however seems to be increasing anger from the Brexiters that insignificant Ireland is defying “the will of the people” and must be bullied into submission by its former Colonial masters. The fact that if Ireland were still a part of the UK, as Ireland is so overwhelmingly pro EU, the referendum result would have been “Remain” seems to escape them.
Some commentary is sabre rattling, has been going on for months, and the Irish will take no notice as previously discussed here. This earlier piece concludes with:
In conclusion then, sabre rattling towards Ireland will not work and indeed has been and will be counter-productive. In the long term, if indeed the UK leaves the EU, Ireland should be a very important ally. Far more is achieved by cooperation than belligerence. And England – or at least those ‘little Englanders’ who are such ardent supporters of Brexit – need to wake up and realise that their country is no longer powerful enough to ride roughshod over its smaller neighbour. Indeed, economically that particular boot may very well soon be on the other foot.
Brexit will of course damage Ireland in the short term. All the economic models predict this, the only difference is to the extent of the damage. It is not the purpose of this article to discuss this and most models are for a fairly soft Brexit scenario. A “No Deal” Brexit will be such a disaster for the UK that it seemed impossible – indeed it still seems impossible given the Armageddon it will cause to the UK in the short term. In the longer term two LSE economists, Swati Dhingra and Josh De Lyon, have just published a book: What would it be like? -on the realities of a No Deal Brexit (pub 8th Nov) which I have not had time to read, but the reality seems grim – unsurprisingly the worst of all outcomes.
In recent days some commentary has had a nastier tone – if a Hard Brexit trashes the UK economy that will be absolutely fine provided Ireland suffers more. The DUP of course need to add their tuppence to the belittling of Dublin campaign. Here is a classic example:
Looks like we’re heading for no deal. Such an outcome will have serious consequences for economy of Irish Republic. In addition, UK won’t have to pay a penny more to EU, which means big increase for Dublin. Can’t understand why Irish Government seems so intent on this course. https://t.co/1L4WF1n85N
— Jeffrey Donaldson MP (@J_Donaldson_MP) November 6, 2018
This is bizarre on many levels, but two points jump to mind immediately. The first is that the NI economy is far more dependent on IE than vice versa with something like 33% of NI exports going to Ireland but only 1.3% of Irish exports going to NI. The second is that in a “No Deal” scenario (Brexit with a hard border) there is a clear majority for a United Ireland (56% pro, 40% against 4% undecided). The irony here is inescapable: the DUP doing more in 3 years to ensure a United Ireland than SF has done in the past 30. The monetary threat is also laughable as previously discussed on PP here.
My analysis would be that Ireland will suffer less than the UK and indeed in the medium term “No Deal” would be very good for Ireland. There are of course some economic models which show that Ireland will be nearly as badly affected as the UK so the future is uncertain. Even if that were the case the backstop’s premier purpose is to ensure that peace on the island of Ireland continues. This is far more important to Ireland than pure economics.
I would prefer not to have to find out and am a backer of a People’s Vote in the UK but I have compiled a short list below of reasons why I think Ireland will be more successful than the UK after Brexit.
- Ireland is much better prepared for Brexit than the UK. Full economic modelling and war gaming was carried out before the referendum and was ready to be put in place immediately. Cameron was so confident of victory, that HMG had no plans in place for a leave outcome. Neither did the Brexiters. Only the BoE hand done serious preparation. The UK has being playing catch up ever since.
- Ireland will remain part of the EU and will have all the EU trade deals, Euratom, etc. and have its entire operating system intact. The UK will have to start from scratch.
- Ireland has full support from the EU. The backstop is seen as essential for the GFA and the peace process. This chimes very much with the EU whose first and foremost mission is to ensure peace in Europe. Most of the EU member states are small and to show membership is worthwhile it must fully back Ireland. Considerable EU emergency funds will be available for Ireland if needed. The UK is alone.
- Ireland had a disastrous bank crash after the GFC but has recovered phoenix-like. Crisis management structures were put in place which were incredibly effective and are now being put to excellent use. There is a coherent and focused Brexit policy, with universal cross party support and indeed from a super-majority of the general public. This is in stark contrast to the UK.
- Preparations for a “No Deal” Brexit are way ahead of the UK with major port infrastructure projects, ferries e.g. the Brexit Busting Ferry and major efforts to keep companies prepared.
- The real economic performance figures show that Brexit so far has not only not slowed the Irish economy, it has turbocharged it. The Economic and Social Research Institute (ESRI) have revised the projected 2018 growth figure up to 8.9% and the 2019 figure to 4.5%. The 2017 growth rate was 7.8%. UK growth by contrast has gone from being the best to worse performer in the G7 and is in the 1.5-2% region. A fixed loss of growth is much easier for Ireland to deal with. A 2% loss would likely put the UK in recession but be easily bearable by Ireland.
- There are considerable upsides in expansion of banking from UK relocation and EU headquarters e.g. B of A, insurance, legal services, aviation– including a 3rd runway for Dublin Airport, tech, and British and NI companies relocating fully or in part to Ireland. Indeed this is already happening.
- Opinion polls show a clear majority in NI for a United Ireland in a “No Deal” scenario. This has been a national aspiration for nearly a century and many see this as an opportunity too good to miss. Many Irish would be prepared to go through considerable economic hardship to bring this about.
- In the past the UK and Ireland have competed for FDI. With Ireland remaining in the Single Market it is likely to capture a far greater share.
- Ireland’s dependence on the UK for exports has been declining for decades. It was 11% of the total in 2016 and may well drop below 10% this year.
- Ireland is one of the few countries with which the UK has a substantial trade surplus – the trading power asymmetry is nowhere near as weighted in the UK’s favour as might be expected – see the earlier Sabre Rattling article.
- The Agribusiness sector is however at risk, but Britain will still need feeding so this is not likely to suffer greatly. Indeed with chaos at Dover/Calais etc.demand could increase.
As usual comments are welcome! There may be more points I have missed so please provide! I may have missed out upsides for the UK, which include increased arms sales to regimes the EU refuse to deal with, tax evasion and these mythical trade deals none come to mind.