Message to the EU: Ireland’s economic interests are as important as the peace process

Irish Times Brussels correspondent Patrick Smyth demolishes the option of a border down the Irish Sea – not just because the UK government and the unionists won’t have it – but because it is against the economic interests of the Republic.  This assessment follows the leaking of a report by the Office of the Irish Revenue Commissioners saying that an invisible border on the island is “impossible”.

“It is probably somewhat naive to believe that a new and entirely unique arrangement can be negotiated and applied to the EU/UK land frontier.”

The report suggests local frontier points will have to be agreed with the UK, and says it is “not inconceivable” there will be eight crossing points, including a permanent customs post on the M1 between Dublin and Belfast.

91,000 Irish companies trade with the UK.  After Brexit, their customs declarations will mean an 800% increase in volume.

That will mean special permits, extra investment, more paperwork and potential delays.

Ports and airports will need extra infrastructure, such as temporary storage facilities for customs clearance.

Even the Ploughing Championships will be hit, since heavy equipment brought over from the UK will need to be declared under a Temporary Importation Procedure.

Extra staff will be needed at An Post to manage customs checks on parcels coming in from the UK.

Even smaller regional airports will now need customs infrastructure.

The report says that every day 13,000 commercial vehicles cross the Irish border.

Critically, it says a completely open border is not possible from a customs perspective, and it would be naive to believe a unique arrangement can be found.

There will be further complications for shipping.

When goods are shipped from one EU member state to another they maintain their EU status. They get they status because they have applied for it and it’s restricted to ships that operate solely between EU ports.

“Ships plying their trade between the UK and Ireland will no longer be able to benefit from the arrangements currently in place, leading to additional compliance costs for operators,” the report states. Overall, the potential explosion in customs declarations will mean a huge increase in paperwork for traders and Revenue.

“The actual scale of the increased activity is unknowable,” the report says.

Senior official suggests says it could end up being a multiple of between 10 and 30.

One problem is that imports from the UK tend to be small, mixed consignments, each of which might attract a separate tariff.

“A far greater number of small consignments, each requiring an individual customs transaction, may be involved in our UK imports than would be the case with current third country supply chains,” the report suggests. There are currently 1.1 million import declarations.

Revenue estimates there would be a doubling of this number.

Current control rates are 9.4% which so that would mean an extra 90,000 declared articles requiring documentary controls, and 25,000 needing physical controls. In terms of export controls, the report estimates a 40% increase.

“Export control rates are lower than in the case of imports but an additional 6,000 consignments would require examinations of documents and or the goods themselves.

The Revenue report is a worst case scenario following the logic of a failure to agree on the bespoke comprehensive free trade agreement with the EU which the UK is seeking. Smyth’s analysis concludes that for both parts of Ireland and GB ,a deal  would need to mimic the single market and the customs union . The analysis  carries the significant implication that the challenge  therefore is as great for  the EU as the UK.

The idea of a separate, special deal and status for Northern Ireland, not only on agri-food issues, has had strong support North and South, notably among nationalists, but is anathema to unionists.

They insist on equal treatment with the rest of the UK.

And as Varadkar made clear again in the Dáil, making the case for a separate NI deal is not part of the Government’s strategy for economic as much as political reasons.

“I know the issue of Northern Ireland and Border issues are extremely important,” he told TDs on Wednesday, “but from the point of view of Irish business and agriculture, the trade between Ireland and Great Britain is much greater than the trade between Ireland and Northern Ireland.”

Important as North-South trade is economically – and emotionally – the South’s economy is in reality far more dependent on east-west trade across the Irish Sea, and particularly so in the agri-food sector.

The UK remains by far the biggest importer of Irish agri-food, representing 47 per cent of total Irish agri-food exports or €5.1 billion (in 2015).

Whereas, on the other hand, North-South trade represents just over a seventh of this – in 2015 the Republic exported €690 million in food and beverages to Northern Ireland.

The same dependence on East-West trade is also true of Northern Ireland. The UK remains the most significant market for businesses in Northern Ireland – sales to Great Britain were worth one and a half times the value of all Northern Ireland exports and nearly four times the value of exports to the Republic.

 North-South trade

The North exports three and a half times more agri-foods across the Irish Sea than it sends south across the Border (£2 billion to £625 million in 2015). That said, the nature of the North-South trade does involve far more integrated supply chains – a quarter of milk produced in the North is processed in the South, while 42 per cent of its sheep and lambs are also processed here.

But that broader commercial reality makes it inconceivable that Northern farmers and food businesses, or business generally, would be willing, even at the price of preserving a frictionless North-South border, agree to tariffs and phytosanitary controls – a border – in the Irish Sea.

There is a danger, some Irish officials fear, that the inevitable preoccupation in the talks with Northern Ireland and with safeguarding the peace process may distract attention and sympathies among our fellow member states from the scale of the challenge Ireland faces on the East-West trade front, and not least in the hugely important agri-foods area.



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