The issue of Britain’s relations with the European Union dogged the premiership of John Major, the UK’s last Tory prime minister. An endless series of parliamentary rebellions from his party’s Eurosceptics eroded his authority and helped propel the Conservatives into the wilderness of the opposition benches for over a decade.
David Cameron sought to forestall a similar threat by committing to an in/out referendum on EU membership if he was re-elected. With the United Kingdom Independence party (Ukip) growing in strength and faced with a number of high-profile defections during the last parliament, Cameron opted for the same political manoeuvre that was followed by Labour’s Harold Wilson, way back in 1975.
Forty years ago, Mr Wilson was faced by the threat the prime minister faces today: his party was deeply divided over the question of EU — then EEC — membership. He wanted to remain within the EEC, but he also wanted to prevent a rupture in his party. So he cleverly referred the question to a higher authority: the electorate. Waving a threadbare “renegotiated membership” to voters, he kept Britain in the EEC and managed to avoid his party splitting on the issue.
Mr Cameron faces the same quandary and has opted for the same response. It’s important to understand this background for two reasons. First, it indicates that whatever he may say publicly, he privately wants the pro-EU membership side of this debate to win. This is important as it means the machinery of British government will work to secure an “in” vote. Second, this referendum will be held not so much because Britain is deeply divided over EU membership, but because the Conservative party is.
So might Ireland have to plan for a British exit from the EU? Not if Open Europe, the think tank, is right. Its “Brexit Barometer” currently reckons the chance of the UK leaving the EU during the next parliament is just 19%. Nonetheless, the situation remains fluid, with significant risks that the likelihood of Brexit will rise.
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What, for example, would be the response of UK voters if the eurozone’s rescue of Greece fell apart? What if a Labour party led by Jeremy Corbyn were to campaign for an “out” vote? Or what if the EU were unable or unwilling to give Mr Cameron concessions that he can present to British voters as a successful renegotiation? Not so long ago, firm assurances were given that EU money would not be used to fund fresh eurozone bailouts, but these assurances were speedily discarded when Greece needed assistance.
It’s important then that we understand the implications of a possible Brexit for Ireland. Open Europe recently published a report that considered the likely consequences of Britain leaving and outlined two outlier scenarios. Under the worst-case scenario, the UK would fail to strike a trade deal with the rest of the EU and would therefore fall back on World Trade Organization rules. Under these conditions, Open Europe reckons, UK gross domestic product (GDP) would end up 2.2% lower than if it had remained inside the EU.
In a best-case scenario, where the UK strikes a Free Trade Agreement (FTA) with the EU, pursues an ambitious deregulation of its economy and opens up almost fully to global trade, UK GDP would be 1.6% higher than if it were to stay within the EU. Open Europe admits that these are outlier scenarios and that the more likely outcome is something in between, but — worryingly — it reckons that Ireland would lose out regardless. Under the best case scenario Irish GDP would be expected to fall by 1.1 per cent per annum. Under the worst case scenario it would be expected to drop 3.1 per cent per annum.
There are several reasons why the think tank believes that Ireland would be disproportionately affected by Brexit. First, we still export 16 per cent of our manufactured goods and 19 per cent of services to the UK. Any new EU tariffs directed against Britian would therefore be especially painful for us. Second, new border posts would cost the state money and the rest of us time. Third, as a net contributor to the EU budget, Ireland would be asked to contribute more to make up for lost British contributions.
So, the likely economic and political impact of Brexit on Ireland suggests that it’s in our interests to back UK efforts to reform the EU. Open Europe’s conclusions were echoed by the report Brexit and its Impact on the Irish Economy published by the National Treasury Management Agency (NTMA). It concluded that “the ultimate economic impact” of Brexit on Ireland would be governed by the nature of the withdrawal agreement between the EU and the UK. The larger the degree of access to the EU market negotiated by the UK, the smaller the effect.
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“Whatever the deal put in place it is likely that Irish trade to the UK will suffer, especially the agri-food industry. The energy market may be affected negatively while foreign direct investment into Ireland and the financial services sector might see some positive knock-on effect,” the authors warned.
The potential impact on agri-food hints at another problem. While foreign multinationals located in Ireland sell in markets across the globe, indigenous businesses mostly sell to the UK, and would therefore be disproportionately disadvantaged by any disturbance to trade across the Irish Sea.
And what of Northern Ireland? In addition to economic costs there would be political costs of restoring frontier posts. The dismantling of the border following the 1998 Good Friday agreement improved cross-border relations and the reintroduction of a physical border could reverse this effect.
The heavy economic and political impact of Brexit on Ireland shows that it is in our interests to back UK efforts to reform the EU. Our strong relationship with Britain means we are well placed to act as an honest broker in negotiations between it and other EU member states. We should do so.
@cormaclucey