Concern deepens in both parts of Ireland over the state of paralysis in Brexit negotiations

Evidence mounts of the economic damage of No Deal to the economies north and south and the implications for the border which are disputed between the British and Irish governments. A no-deal Brexit would mean Northern Ireland’s economy would be at least 3% smaller compared to if the UK stayed in the EU, a new analysis highlighted by the BBC NI Economics correspondent John Campbell suggests.

That is a much less severe impact than a UK government analysis which suggested a 9% hit. he two studies are not directly comparable as they use different economic models with different underlying assumptions.It also suggests the backstop would negatively impact the NI economy

However, the study, from the Fraser of Allander Institute (FAI), finds that the impact of a hard Brexit is worse than the backstop. The backstop is a position of last resort to prevent the hardening of the Irish border in the absence of other solutions.It would see Northern Ireland staying aligned to some rules of the EU single market and the whole of the UK forming a “temporary single customs territory” with the EU

It would mean some products coming into Northern Ireland from elsewhere in the UK would be subject to new checks and controls. Those checks would be new “trade frictions”, adding to the cost of doing business.

The study suggests a backstop would make the NI economy between 1.3% and 2.7% smaller after 15 years, compared to its size if Brexit did not happen. The size of the impact would depend on how much the UK diverged from the single market with more divergence leading to a more negative impact.

The least damaging Brexit – according to the study – is the “Norway option” where the whole of the UK effectively remains in the single market.It would cost Northern Ireland’s economy an estimated  1.1% of GDP compared to no Brexit… It makes a rough estimate that a weaker UK economy could lead to a further 1% to 1.5% GDP loss in Northern Ireland.

The Northern Ireland Department for the Economy, which commissioned the report said, the analysis showed “there will be material and significant economic consequences arising from the decisions that will ultimately be made around the terms of the UK’s withdrawal from the EU.

Campbell also analyses the UK’s plan to keep their side of the border open. Apart from having a disastrous effect on NI food producers it  almost certainly violates World Trade Organisation (WTO) rules  and is unsustainable for more than a matter of months.

If the UK leaves the EU without a deal, Northern Ireland and the Republic of Ireland will immediately be in different customs and regulatory territories….The UK government has promised that it will not harden the Irish border in any circumstances.

For Irish exporters to Northern Ireland, it would be like Brexit hasn’t happened.

However, Irish goods going direct to Great Britain, such as on the Dublin-Holyhead route, will be subject to new tariffs and controls.

So won’t Irish exporters just ship their GB exports through Northern Ireland to avoid tariffs?

To some extent this will be possible.

HM Revenue and Customs (HMRC) say there will be a “general anti-avoidance rule” to discourage Irish firms from using Northern Ireland as a tariff-free back door into GB.

However, if Irish businesses have traditionally shipped through Northern Ireland, they can continue to use this route without facing tariffs.

HMRC will not be applying any new checks or controls on products crossing from Northern Ireland ports to GB. Instead, there will be “intelligence led” enforcement.

What about products going from Northern Ireland to the Republic?

The no tariff, no checks plan is a unilateral initiative by the UK – it will not be matched by Ireland.

As an EU member, Ireland will be obliged to impose tariffs on Northern Ireland goods crossing the border and carry out checks to protect the single market.

In effect, this means Northern Ireland goods, particularly in the agrifood sector, will face substantial new trade barriers but Irish goods going in the other direction will not..  The government has acknowledged this will impact on the competitiveness of Northern Ireland businesses.

The Ulster Farmers’ Union said that in order to protect the food industry in Northern Ireland the plan should be changed.

The union’s president, Ivor Ferguson, said the current plan would mean a “catastrophic” outcome for farming and food production in Northern Ireland.

“Steep export tariffs, additional checks and regulations, combined with a proposed zero tariff on agricultural goods from Ireland to NI, will result in significant disruption and pose a logistical nightmare for farm businesses.”

Does the plan comply with World Trade Organisation rules?

The most important WTO principle is that members do not discriminate. So, if zero tariffs are applied to one member, they should be applied to all other members.

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South of the border…Ireland will try to ensure checks in a no-deal Brexit will be done away from the border, Tánaiste Simon Coveney has said..

“Ireland would have to work to protect its place within the EU single market.Doing this without the backstop will lead to “unpalatable decisions…..These are difficult choices. We do recognise the reality that Ireland will have a responsibility to protect its own place in the EU single market and that will involve some checks. But I can assure you that we will try to do that in a way that limits the risk, and we will try and do it, obviously, away from the border.”

Ireland’s latest contingency plan, published in July, said no deal would mean cross-border trade could not be as frictionless as it is now.

The costs of a No Deal are even higher for the Republic than previously thought and have shaken the cabinet  as Pat Leahy reports in the Irish Times

Cabinet members were told that 10,000 jobs in the tourism and hospitality industry were likely to be lost in the first three months after Brexit.. The implications for parts of the agri-food industry also shocked some of those present while Mr Coveney told the meeting that there would be “carnage” in the fishing industry after a no-deal, according to one person present.

Ministers were also told it was inevitable there would be some checks on goods imported across the Border but that those checks would not take place at the Border. When pressed by some Ministers for more details about the nature of the checks, Mr Coveney declined to elaborate – though there was some mention of mobile checks – but it is understood that discussions are taking place in Government Buildings about issuing more detail to the public, perhaps as early as next week.

Indo columnist Dan O’Brien is a leading critic of the Irish government’s rigidty in public over  the backstop which eliminates  border checks but would require them if the backstop contingency was abandoned without a viable alternative. Ireland is squeezed between  protecting the all-island economy and agricultural  trade with Britain and protecting the wider EU single market. With the British currently vowing to keep the border open on their side, the immediate pressure falls on the Irish in ways they have yet to face up to fully.

Yesterday, the Tánaiste and Foreign Affairs Minister Simon Coveney spoke of the risk of Ireland being “dragged out of the EU’s single market” in the event of no deal.

He said that because EU countries’ commitments to policing borders with non-EU countries could not be clearer.

The treaties that form the EU’s de facto constitution state “products coming from a third country shall be considered to be in free circulation in a Member State if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied in that Member State”.

Coveney yesterday spoke of having to convince other members that Ireland is meeting its treaty-enshrined obligations.

Yet more than three years after the British vote to leave the EU, the Government’s position is that it is still talking with the European Commission on how those treaty-enshrined commitments to police the Border will be met.

All other external frontiers of the EU have traditional border checks, not least so that the “duties and charges” mentioned in the treaty are paid.

Instead of de-dramatising these checks, something the Government always had the power to do, it sought something that was never in its power to deliver – absolutely no change to how the Border functions (in the form of the backstop).

If that gambit fails, the Government will have the choice between policing the Republic’s side of the Border to the satisfaction of the guardian of the treaties – the European Commission – and other member countries or face those countries treating Ireland as a non-member of the single market sooner or later.