The external influences on Northern Ireland’s political future…

The debate about the constitutional future of Northern Ireland tends to revolve around internal factors like demographic trends, relative economic advantage, and the dysfunctional state of current political arrangements. But Northern Ireland doesn’t exist in a vacuum and may also be subject to the influence of trends in global, European, British and Irish politics and economics more generally. In this discussion, I want to focus on these external factors, and their influence on Northern Ireland, rather than on the economic, social and political changes that are taking place within N. Ireland itself.

These external factors may be broadly summarised as follows:

1.    Economic and political globalisation
2.    The growing heft and influence of Ireland and the Irish diaspora.
3.    Economic integration and “Ever closer union” within the EU
4.    The rise of English, Scottish and Welsh nationalism
5.    A return to “the sick man of Europe” for the post-Brexit UK economy?

1.    Economic and political globalisation

The Covid pandemic has highlighted just how integrated and interdependent the global economy has become, with a blockage in Suez creating supply chain ripple effects across much of the globe. The worldwide web has enabled the outsourcing of many key business functions such as call centres, manufacturing hubs and Information technologies to remote locations in India and beyond. Trends and fashions in in- and out-sourcing will, of course, come and go, but the world’s economy remains more “globalised” or integrated than ever before.

It follows that local polities and economies have to decide how and where to locate themselves within this more globalised environment. Ireland has chosen to be the location of choice for the European headquarters of virtually every major infotech, medtech and big pharma company in the world. You can argue the merits and demerits of the Irish state in almost every sphere, but the success of its agencies in cultivating, attracting and consolidating links with the emerging and major players in these industries has been quite extraordinary.

It is obviously open to debate whether this strategy will continue to be quite so successful in the future with a global minimum 15% corporation tax rate and a clampdown on tax avoidance loopholes. The IDA seems to be quite sanguine about these changes and points to the many other factors which make Ireland an attractive location for foreign direct investment (FDI). Karlin Lillington also discusses them here. In summary, they include:

1.    a stable policy environment – government policy on FDI has been consistent since the 1960’s,
2.    an open entrepreneurial culture – fostered by many years of developing local technical and management cadres
3.    a highly educated workforce
4.    a welcoming environment for incoming senior executives and their families to live
5.    and Ireland’s position as the only remaining major English language, common law jurisdiction within the EU.

Over 50% of people aged 25-34 in Ireland now have a third level qualification, the crucial demographic for multi-national recruitment. With Ireland now also having had a significant FDI sector for over 50 years, there are also increasingly experienced and senior cadres of managerial talent in all the crucial management specialisms of Sales, Marketing, ICT, Finance, Logistics, Production, engineering, R&D, Consultancy, Law, HR and public relations. Skill shortages are still endemic, and many Europeans have made their home here to fill those gaps, but if you are willing to pay enough, you can get the skills you need. The average salary in Facebook Ireland was €154,000 p.a. in 2018.

It all depends on where you want to locate yourself in the global employment chain, but if you want the top jobs with the best salaries, it helps to be as close to HQ as possible. It is also probably the best defence against arbitrary redundancy, as the employees of P&O discovered to their cost just recently. The benefits may not be evenly spread, and house price inflation has put the price of a house beyond many, but there is no doubt that the general standard of living in Ireland has been rising for some time, even if it lags significantly behind the headline 13.5% growth in GDP last year.

Northern Ireland, by way of contrast, has had much less success in renewing its industrial base, following the decline of the more traditional linen, shipbuilding, and bus building industries. It is beginning to develop a reputation in certain information systems niches, but these have not yet become global players or large scale employers. The retailing sector is dominated by a few UK near-monopoly suppliers, and most businesses import/export to the UK rather than further afield. Ireland, on the other hand, has reduced its exposure to the UK market from c.70% of total trade prior to EU accession to c. 10% now.

So, to a certain extent, the debate around the Protocol is also a debate around where people see Northern Ireland’s future economic growth coming from. Is it to remain essentially a satellite economy of the UK, or are there greater growth opportunities in the EU and beyond?

The interests of Northern Ireland’s relatively large agricultural sector also seem far more closely aligned with Ireland’s agricultural sector (which will soon have the added competitive advantage, relative to Northern Ireland, of continued membership of the Common Agricultural Policy (CAP): The UK government has guaranteed to retain CAP level income subsidies only until the end of this term of government, and sees cheaper imports from the USA and southern hemisphere as one of the principal potential benefits of Brexit.

The public sector in Northern Ireland employs almost 30% of the workforce and is heavily dependent on the subvention from the British exchequer, variously estimated as between £10 and £15 Billion p. a., or 20-30% of total GDP. Some have argued that most of this would not be transferable to Ireland in a united Ireland context as it relates to Britain’s much higher defence expenditure, accrued pensions entitlements, and national debt servicing. No doubt there would be some hard inter-governmental bargaining around this in the event of a transfer of sovereignty, but it is worth pointing out that the Irish Free State did not take on responsibility for a portion of the Imperial debt on independence in 1922, and the UK Withdrawal divorce payment to the EU included provision for outstanding pension liabilities.

Needless to say, the 30% of the Northern Ireland workforce employed in the public sector will want some cast iron guarantees as to their future employment prospects in the event of a border poll leading to a transfer of sovereignty from London to Dublin.

2.    The growing heft and influence of Ireland and the Irish diaspora.

Leading Brexiteers have admitted they gave little thought to the implications of Brexit for Ireland and Northern Ireland during and immediately after the referendum campaign and some proceeded to express extreme annoyance that the Irish tail was wagging the British dog in the subsequent withdrawal negotiations. Few imagined that the Irish government would take such a hard line on the location of any subsequent customs border, or that the EU would remain united in support of Ireland on this issue.

Despite being the leader of the least nationalistic major Irish political party, Leo Varadkar became the focus of no end of bile and scorn in popular English newspapers and Brexiteer circles with suggestions that he was little more than Brussels’s poodle and in thrall to the possible political advance of Sinn Fein. And yet, despite this, there was unanimous support in the Dail for his policies, and public opinion on the Brexit issue was overwhelmingly in favour of his stance. Virtually all agreed that a customs border within Ireland was a non-starter.

It is worth noting that the Belfast (Good Friday) Agreement (GFA) was negotiated in the context of both Ireland and the UK being part of the EU and its aspiration to an “Ever closer union” as inscribed in the opening paragraph of the 1957 founding Treaty of Rome. Most Britons seemed to have missed that aspiration and continued to regard the EU as “The Common Market” limited to economic cooperation alone.

However, for Ireland it meant the promise of open borders and a movement away from over-dependence on the British market. An “Ever closer union” also meant the distinctions between Irishness, and Britishness would gradually reduce, and with them much of the basis for the N. Ireland conflict. Article 50 didn’t exist when the GFA was negotiated, so the possibility of Brexit was never considered.  Joint EU membership was the context for the GFA, even if the EU was never a direct party to it. Most people in Britain never seemed to understand the existential threat which Brexit posed for the peace process, or else they simply didn’t care. They had other fish to fry.

While Britain was busy making more enemies within the EU, Irish diplomats were assiduous in cultivating support for the Irish position to the point where the EU remained utterly united on this and other negotiating priorities for Ireland. They refused to even discuss a trade deal with the UK – subsequently the Trade and Cooperation Agreement (TCA)- until the Withdrawal Agreement containing the Protocol was signed, sealed and delivered.

The fact that Boris Johnson himself, in talks with Varadkar in the Wirral, agreed the protocol (in preference to Theresa May’s backstop) was a testament to the success of this diplomatic effort. The fact that Dominic Cummings later claimed Johnson didn’t understand the protocol and had no intention of implementing it (also confirmed by Ian Paisley Jnr. in his discussions with Johnson) it is neither here nor there.  Irish diplomacy had won the day.

With an Irish American in the White House, and with the Chairman of the Ways and Means committee of congress, Richard Neal, (and ranking Republican, Kevin Brady) also being Irish Americans, US support for the Irish position has been unwavering. This is significant because the House Ways and Means Committee must approve any prospective US UK trade deal. To date there has been almost no progress in those trade negotiations pending the resolution of the Protocol issues, and the US has has only just agreed to lift Trump era trade tariffs on UK metal exports having done so for the EU last year.

The bottom line is that many of the Brexiteers’ cherished ambitions – a trade deal with the US and improved access to EU financial markets – are on hold and may even be going in reverse as the EU reduces its dependency on London based financial clearinghouses. Many Brexiteers had predicted the EU was on its last legs anyway and that Brexit would be followed by many other countries seeking to exit the EU. Instead, Brexit, the pandemic, and now the Ukraine crisis have done nothing but strengthen the EU and bring recalcitrant members like Poland and Hungary more into line.

Ireland’s agreement to global corporate tax harmonisation has removed the last major irritant in Ireland/EU relations and Ireland could increasingly play a pivotal role in mediating EU relations with the USA and UK. Ireland’s election to the EU Security Council (beating Canada to the seat) is a reflection of Ireland’s increasing heft in global affairs with the result that there will be no changes in UK/EU relations without Irish agreement. This may well feel to many to be a case of the Irish tail wagging the British dog, but that is the reality that Britain now faces. Brexit may well have been about taking back control, but it has been at the cost of reducing Britain’s influence in the world that we live in.

3. Economic integration and “Ever closer union” within the EU

There is no doubt that part of the impetus behind Brexit was a realisation that the EU was serious about the aspiration to “an ever closer union” contained in the opening declaration of the founding Treaty of Rome (1957).  The UK had sought to put off that evil day by refusing to join the Euro, the Schengen passport-free zone, and through a number of rebates, opt-outs and derogations from the obligations imposed on other (and all new) member states. Many have argued that the precipitous expansion of the EU from 15 to 27 member states without any institutional reform after the fall of the Iron Curtain was driven by the UK in part to make further integration difficult if not impossible. Many EU negotiations were already famously tortuous. How much more difficult would it be to get unanimous agreement for many key decisions when the membership went up from 15 to 27 states?

A favourite Brexiteer criticism of the EU has been the supposed democratic deficit in its decision making processes. Leaving aside the fact that the criticism is coming from a state with an unelected head of state, an unelected chamber of parliament, an unwritten constitution that says whatever a court decides it says at any one time, and an electoral system that allows a party winning less that 40% of the vote to gain an overall majority and were with the election is essentially meaningless in the majority of “safe seats” where the result is a foregone conclusion; it is quite possible to come to the opposite conclusion.

The requirement for unanimity among 27 member states for many decisions, and large weighted majorities for many more could easily make the entire EU apparatus unmanageable and ungovernable, were it not for the strong commitment to collegiality and avoidance of polarising rhetoric which has been built up over the decades. Despite being castigated as unelected officials, European Commission presidents have been selected by the European Council representing all member states by consensus and must be confirmed by the European Parliament. Jean-Claude Juncker was confirmed by 422 votes for to 250 votes against, for example, with Ursula von der Leyen confirmed by 383 to 327 votes – majorities most prime ministers would die for.

The result of this collegial problem-solving process is that a negotiated solution to most problems is generally found, and without the resort to demagoguery, polarisation, threats and outright violence which had been the hallmark of European disputes pre-EU. Global warming, Brexit, the pandemic and now the Ukraine crisis has given a new impetus to developing common European solutions to reducing carbon footprints, reforming agriculture, pooling healthcare procurement and pandemic management processes, and developing common energy security and defence policies. As these policies diverge from those being pursued by the UK, inevitably this will lead to greater divergence between Ireland and the UK – with consequent strains for N. Ireland.

It is in no one’s interest to increase those strains, and the EU is certainly not seeking to do so. It is simply the inevitable consequence of two competing power blocks moving in somewhat different directions. There is a limit to how much N. Ireland concerns can constrain forces that are global in scale, affecting a market of 450 million people. European leaders have made it plain that protecting the integrity of the Single Market is one of their top priorities and tweaking the Protocol in a way that could provide backdoor access to the market for third party goods transiting through N. Ireland is simply not compatible with that priority. Certainly, risk assessments and the practicalities of customs controls are open to discussion, but a fresh crisis would erupt if large quantities of non-EU-compliant goods were to be found to have leaked into the Single Market. There is no point in pretending otherwise.

Northern Ireland has the disadvantages of not being directly represented in EU decision making processes and is also excluded from participating in EU markets for services, the most dynamically growing part of almost any modern economy. With UK financial services heavily centralised in London, this means N. Ireland is effectively excluded from sectors that enable modern economies to grow. N. Ireland is developing some expertise in niche computer security products and services but has yet to achieve scale or attract many global players. There is a huge need to develop a distinctive economic development strategy for N. Ireland, but the UK government has shown little interest in doing so, and N. Ireland parties have shown little focus on the issue. Whatever way the world economy develops in the future, it seems N. Ireland is destined to be a follower rather than a leader, which is a pity given its history of industrial leadership in the past.

4. The rise of English, Scottish and Welsh nationalism

This topic probably needs little elaboration here, except to say it could have profound implications for N. Ireland in the future. Historically the unionist community is divided between a more English orientated Anglican component, and a more Scottish oriented dissenter (mainly Presbyterian and Methodist) tradition, which sometimes made common cause with Irish nationalists. More recently, with the liberalisation and secularisation of N. Ireland society, these religious distinctions have become less definitive, with both making common cause against Irish nationalism.

If Scotland were to leave the UK, and even more so if it were to join the EU, where would that leave many unionists with little direct attachment to England or Wales? If English nationalism were to become even more hard-line, where would that leave the Barnet formula which benefits N. Ireland to the tune of somewhere between £10 and £15 Billion per annum, a figure which appears to be increasing each year? If Brexit is less of a success than its progenitors promised, how will a severe north-south split within England be avoided if all available resources are not re-directed towards the English midlands and north?

The lack of attachment of even many in the Conservative and Unionist Party (to give the Tories their full title) to the union with N. Ireland has been well documented in a number of polls. Brexit was a far higher priority for them than even the continuance of the union. If Britain were to return to its pre-EU status of “the sick man of Europe” where would a desperate government, look to make savings at least political cost? There has been an uptick in British academic interest in the mechanisms by which a united Ireland might come about. Could this be a harbinger of political winds to come?

A lot rests on the “success” of Brexit and the outcome of political developments in Britain. The point is that much of this is beyond unionist control.

5. A return to “the sick man of Europe” for the post Brexit UK economy?

So how realistic or likely is it that the UK could return to its pre-EU incarnation as “the sick man of Europe”? The UK government’s own study has pointed to a likely 2-8% decline in GDP and a 1-10% decline in income per capita depending on the precise outcome of Brexit negotiations. With the outcome having veered towards the harder end of the Brexit spectrum the declines could be at the more severe end of those spectrums.

Also, much has changed in the world economy since 1973. The global economy is much more integrated today with manufacturing having moved largely to China and the far east, and many knowledge-based industries to India. Britain has substantially de-industrialised, and many of its leading-edge businesses have been sold to foreign corporations. London’s role as the capital of European financial services is at risk, and with it huge profits and government revenues. The end of “Londongrad” as the capital of Russian money laundering could be one more blow to future revenues.

So where do Brexiteers see UK growth coming in the future? Those trade deals that have been signed to date are little more than copy and paste jobs of preceding EU trade deals and cover just a small fraction of UK trade. Trade with the EU (and Ireland) has plummeted, and its near-monopoly control of the N. Ireland retail industry is at risk. The many EU workers who have left will take their skills and productivity elsewhere boosting the European economy, not Britain’s.

It is not as if Britain cannot succeed in the modern world. It’s just difficult to discern a coherent economic strategy that gives it an edge over anyone else. Singapore-on-Thames has an attractive ring to it, but what makes it superior to Singapore itself? Europe has its problems, too, but most of its under-performing economies appear to be recovering. Ukraine remains a huge unknown in the mix, but at least Europe has the capacity and scale to address global problems on a global scale, and a willingness to do so.

Conclusion

The bottom line is that we live in a volatile and rapidly changing world and N. Ireland doesn’t have a lot of agency in addressing the challenges it may have to face in the future. Decisions with major implications for its people will continue to be made in London and Brussels with little regard for the particular concerns of a divided community. Attempts to understand what is happening in and to N. Ireland through the prism of internal demographic, economic and political changes only give us a small part of the overall picture. Harold MacMillan may or may not have said “events, dear boy, events” when asked what might throw his government off course, but the essential sentiment is to try, in as much as possible, to be the master of your own destiny.

What vision do unionists have, other than to put off the evil day of a united Ireland for as long as possible? What vision do nationalists have, for a united Ireland that is different from Ireland that we have today? Without some planning for events that may or may not occur with our permission, we are no better than a ship without an engine in a storm-tossed sea. Planning for future scenarios doesn’t make them any more likely to occur, just less traumatic if they do occur. And sometimes if you do plan well, you will create options that might not otherwise have been available to you. The risks are in plain sight. Coherent and concerted attempts to address them are less obvious in our discourse. We will have no one to blame but ourselves if the fragile consensus that has allowed relatively peaceful co-existence to develop in N. Ireland for the past 25 years goes pear-shaped again.