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With Brexit looming, Ireland braces for its economic impact

March 26, 2017 at 3:57 PM EDT
The International Monetary Fund and other international financial bodies have warned that leaving the European Union could have negative consequences for Britain's economy. As Prime Minister Theresa May prepares to formally withdraw the United Kingdom from the EU, Britain's closest neighbor, the Republic of Ireland, is already feeling fallout. NewsHour Weekend Special Correspondent Patricia Sabga reports from Ireland.
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PATRICIA SABGA: For four generations, Michael Guinan’s family has made a living from this modest dairy and beef farm in the Irish midlands.

MICHAEL GUINAN: This is a family farm. And my son is here with me now full time. And it’s becoming increasingly difficult to get a living for two families on the farm.

PATRICIA SABGA: Difficult thanks to uncertainty surrounding the future trading relationship between the Republic of Ireland and the United Kingdom.

MICHAEL GUINAN: Nobody saw Brexit coming. We talked about it. We sat back and said, “Nah, it can’t happen.” But it has happened.

PATRICIA SABGA: The United Kingdom — England, Scotland, Wales, and Northern Ireland — is the Republic of Ireland’s biggest trading partner. Around 1.3 billion dollars’ worth of goods and services criss-cross the border every week. But those commercial ties could be frayed by Brexit.

This is the border between Northern Ireland and the Republic of Ireland. Right now there are no border controls on goods and services moving between the two countries, because they’re both members of the European Union. But when Britain pulls out of the EU, it could trigger tariffs on Anglo-Irish trade. And when trade barriers go up, so does the cost of doing business.

John Comer is President of the Irish Creamery Milk Suppliers Association.

JOHN COMER: I can’t see any upsides to the impending Brexit.

PATRICIA SABGA:PATRICIA SABGA:to reach a free trade deal before Brexit is complete, the relationship would revert to rules laid down by the World Trade Organization. That could impose tariffs as high as 40 percent on Irish dairy products sold to Britain.

JOHN COMER: If we don’t get markets that are free markets in terms of no tariffs and no quotas and no impediments, I don’t think that’ll be sustainable, and I don’t think we’d be resilient enough to withstand that dramatic impact.

PATRICIA SABGA: Britain’s exit from the EU is not expected to be completed for at least two years, but the future is already weighing on Irish farmers, thanks to Britain’s currency, the pound, losing around 12% of its value against the Euro since the Brexit referendum.

MICHAEL GUINAN: That immediately affected our competitiveness in the UK market. It made it more difficult to push Irish produce into the UK market at a decent price.

PATRICIA SABGA: When farmers’ livelihoods take a hit, it can negatively impact rural merchants, when bills for things like livestock feed and farming equipment bought on credit go unpaid.

MICHAEL GUINAN: The merchants are now finding it hard to recoup that money. As a result, that’ll impact on who they can employ and pay. So it’ll have a knock on effect there.

PATRICIA SABGA: Brexit uncertainty is not just a problem for Irish agriculture. It’s also affecting small businesses in cities like Dublin, Ireland’s capital.

Ian Martin’s company sells first aid and hygiene products imported from the UK. He told us his customers are concerned Brexit could raise his prices.

IAN MARTIN:
They know, at the moment, the goods are coming from the UK. But if we have various tariffs coming into Europe from the UK, it’s gonna put my cost of my goods up. The goods are gonna have to come from France or Germany, which is going to put additional costs on it, because it’s going to travel further to come into the Irish marketplace.

PATRICIA SABGA: Martin’s lack of clarity over future sales has already led him to delay hiring replacements for employees who’ve left.

IAN MARTIN: We had a member of staff left us there last October. And we said, “Look, will we recruit a replacement for him, knowing what’s actually happening in the marketplace, or will we just consolidate and keep the decks going as they are, knowing that there’s a few big shocks gonna hit the marketplace?”

PATRICIA SABGA: Ireland’s Minister of Foreign Affairs and Trade, Charlie Flannigan, plays a leading role in the country’s Brexit negotiations.

CHARLIE FLANAGAN: The object of the exercise now must be to ensure that the very close and positive relations between Ireland and Britain continues, acknowledging of course that leaving the single market, Britain has got to suffer some detriment. And we want to ensure that that detriment to the UK is not going to have consequential loss and damage for us here in Ireland.

PATRICIA SABGA: Which places the issue the border dividing the two countries front and center.

CHARLIE FLANAGAN: We are now faced with a situation where we will have an EU frontier right across the island of Ireland from east to west, a distance of almost 500 kilometers, and we need to ensure that in the context of the new arrangement between the UK and the European Union, that invisible border is maintained in so far as it can.

PATRICIA SABGA: The 300 mile border dividing the Republic of Ireland and Northern Ireland is seamless now, but it was heavily fortified during The Troubles, the 30-year sectarian conflict between Northern Ireland’s Catholic Nationalists and Protestant Unionists that formally ended with 1998 Good Friday Agreement.

But Brexit is now polarizing Northern Irish politics along sectarian lines. Catholic Nationalists are calling for Northern Ireland to be granted a special status to stay in the EU, which would effectively push the post-Brexit border out to the rest of the UK.

Protestant Unionists in Northern Ireland and the British government reject that idea. But Ireland’s Foreign Affairs Minister Charlie Flannigan says it’s supported by the Good Friday Agreement.

PATRICIA SABGA: You’ve got the results of a democratic referendum that the British government has to put through, but we also have the Good Friday Agreement. Which one of those takes precedent?

CHARLIE FLANAGAN: I think it’s fair to say that while not explicit in the Good Friday Agreement, certainly implied right the way through it was a greater level of relationship north and south. And the Good Friday Agreement implies that relations north and south will continue to grow and foster in harmony.

PATRICIA SABGA: So it sounds like you’re saying that the Good Friday Agreement implies a special status–

CHARLIE FLANAGAN: Yes.

PATRICIA SABGA: –to Northern Ireland within the context of Brexit?

CHARLIE FLANAGAN: Yes.

PATRICIA SABGA: Either way, neither Ireland nor the UK alone will decide the future of their border.

EDGAR MORGENROTH: Ireland is only one of 27 European countries that’s going to make that decision on what that looks like.

PATRICIA SABGA: Edgar Morgenroth, an associate research professor at Dublin’s Economic and Social Research Institute, says border controls are a real possibility.

EDGAR MORGENROTH: If what’s proposed by the UK, and their actions are such that it’s not in Europe’s interests, then we are likely to see proper border controls…

PATRICIA SABGA: Which could entail physical barriers to check the movement of people and goods. That could invite a re-emergence of smuggling in black market items, including livestock, which was rife during the Troubles. That concerns John Comer, who represents dairy farmers.

JOHN COMER: If there’s illegal or illicit transactions of cattle across borders, it will be very, very complicated. We have many members that have lands that straddle both sides of the border.

PATRICIA SABGA: The potential for economic disruptions prompted credit rating agency Moody’s to warn earlier this month that of all European countries, Ireland is the most exposed to Brexit risk.

But there could be a silver lining for Dublin. It’s already marketing itself as a prime landing spot for lucrative London-based financial services that may want to relocate to another English-speaking EU city with a legal system similar to Britain’s.

CHARLIE FLANAGAN:I believe Dublin offers opportunity in terms of a skilled workforce, in terms of a really nice place in which to set up business and trade.

PATRICIA SABGA:PATRICIA SABGA:foreign direct investment — are unlikely to fully offset the blow Brexit could deliver to Ireland’s economy

EDGAR MORGENROTH: We are going to pick up a reasonable slice of whatever might relocate. Will that counterbalance the negative effects that come through trade? Well, our estimates suggest that it won’t, because we will only pick up some FDI, whereas we’re going to lose quite a substantial amount through the trade impacts with the UK.

PATRICIA SABGA: So while Dublin could see a Brexit boon – back in the Irish midlands, farmer Michael Guinan is bracing for hard times.

MICHAEL GUINAN: It’s the small people that suffer. The bigger people will probably always find a way around things. But it’s the smaller producer and the small farmer that’s gonna be hardest hit in this.

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