Brexit: What does it mean for Ireland?

IIEA24th June 20165min
The United Kingdom has voted to leave the European Union.

The United Kingdom has voted to leave the European Union. While it is not yet accurate to say that the UK’s troubled four-decade relationship with the EU is at an end – there is still the matter of the UK’s withdrawal negotiation to be addressed – it is clear that the relationship between the EU and its ‘awkward partner’ has entered a new and uncertain phase, one that will create great difficulties for Ireland.

 

 

An asymmetric shock

As evidenced by the market reaction of the morning of 24 June, Brexit will have immediate, dramatic, and profound consequences for all parties. However, this will be an asymmetric shock: Ireland is the country most exposed to the risks of Brexit and will be disproportionately affected by the UK’s vote.

Ireland is the only Member State to share a land border with the UK and it remains the most deeply integrated in terms of trade, supply chains, migration, language and culture. The shock will be both economic and political.

 

In short, the UK’s decision presents this country with one of its greatest challenges since independence.

The precise nature of the new relationship between the UK and the EU will now have to be decided in the course of what may be a protracted and difficult negotiation and the Irish government will surely position itself to protect the country’s interests.

 

What will be the effect on Ireland?

In the short-term, Ireland can expect to suffer some damage to trade and investment from currency fluctuations and market volatility – both of which are already evident.

In the longer term, the country could see damage to trade with the UK through restrictive tariffs on agricultural goods and other produce, as well as the return of a customs regime between Ireland and Northern Ireland, with the associated delays and potential for supply chain disruption.

Depending on the terms of the withdrawal, there may also be an impact on mobility and migration, as a UK outside both the EU and the Single Market raises questions over the viability of the Common Travel Area we share with the UK, and introduces the possibility of passport controls at the Northern Irish border.

If the UK’s withdrawal leads to the introduction of a hard border on the island of Ireland this may serve to heighten political tensions in the North.

The Northern Irish situation will be exacerbated by the 56% majority in favour of Remain in the region: indeed, Sinn Fein has already called for a border poll on Irish unification, as provided for under the Good Friday Agreement (though such a poll can only be called by the Northern Ireland Secretary, Theresa Villiers).

 

What is the Irish interest?

A number of key Irish interests for the upcoming negotiations can be identified:

Trade

–  Ireland and the UK conduct €1.2bn worth of trade every week, a relationship which must be protected

–  Any potential trade barriers, including tariffs and customs posts, would present a major risk to the economy and must be minimised

Migration and the Common Travel Area

–  There is no precedent for the UK and Ireland Common Travel Area to exist half-in and half-out of the EU and its continued existence may now be in doubt

–  Any changes to current arrangements could have repercussions for migration, employment and social welfare

Northern Ireland

–  The status of the border will be a primary concern for the Irish side

–  The future of EU funding to the region, which has long-supported the peace process and regional development, must be clarified

–  All sides will hope to avoid disruption to the Northern Irish settlement

Foreign Direct Investment

–  It has been suggested that FDI flows to the UK may now be diverted to elsewhere in the EU

–  This may be a positive, mitigating factor for Ireland in this debate and the country should now position itself to take advantage

Energy market

–  Security of energy supply and the integrity of the All-Island Electricity Market will be a concern

Conclusion

As a committed European state and member of the Eurozone, Ireland is distinct from the UK, but there is still significant overlap between Irish and British policy priorities.

Thus, Ireland will doubtless favour a swift and bespoke solution in the upcoming withdrawal negotiations – in other words, one which would mitigate the immediate shock damage of Brexit by preserving much of the current relationship between the EU and UK.

But much will depend on the tone of the negotiations in the European Council.

It will be hoped that, once the initial shockwave of discontent across the EU dissipates, there will be an opportunity for this to develop into a benign negotiation, in which all parties in the European Council seek a mutually beneficial future relationship.

In the short term, the Irish interest is clearly favoured by this scenario. But a tailored deal for the UK may also raise difficult questions about the future of EU integration, and like many Member States, Ireland will have to be conscious of the long-term implications of such an arrangement.

In either case, it will be vital in the months ahead that Irish policy makers make their concerns known in the European context, in order that the disruptive effects of Brexit on the British-Irish relationship be minimised.