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Brexit: The implications for Ireland

by Frank Schnittger Sat Mar 14th, 2015 at 03:39:43 PM EST

UK Prime Minister David Cameron has promised to hold a referendum on the UK's membership of the EU should the Tories win an overall majority at the next election due in May.  Never mind that his pledge was mainly to fend off the challenge of UKIP, and that he hopes to have negotiations with the EU in the meantime which might address some of the criticisms many Britons have of the EU. Opinion polls in the UK have been sharply divided on Brexit (with a trend favouring remaining in more recent polls), and any renegotiation of the UK's terms of membership is likely to influence the outcome of the vote.

The fact is however - whether Murdock media inspired or not - that many Britons lack a sense of fellow feeling with their compatriots in EU. They view their security as being guaranteed in large part by the USA and look to the EU as little more than a free trade area with a lot of unwanted immigration and meddling bureaucrats which need to be cut down as much as possible. There appears to be a disconnect between the business elite - generally very much in favour of British membership - and the working and lower middle classes who are much more concerned with the impact of immigration on their job prospects and the social and cultural life of the UK - an impact they blame on the EU, even though net immigration very much predates membership of the EU.

The irony is that there are now more than a million Britons living in France and Spain whose residency status and health care could be severely impacted by Brexit. But many of these don't have a vote, or won't go to the trouble of voting. Some indeed, would vote for UKIP in any case.  The little Englander mentality runs deep even in some of those who have made their homes elsewhere.  Basically many in the UK want the benefits of being part of a large market without bearing any of the costs of social solidarity which the EU ideal mandates.

It is doubtful whether the implications for expatriates or neighbouring states like Ireland will have a huge bearing on any UK referendum debate. The implications for N. Ireland could be very serious indeed.  So much so that the Irish Department of the Taoiseach (Prime Minister) is setting up a specialist unit to consider and prepare for such a development - having stayed studiously neutral and silent on the Scottish independence debate. Follow me below the fold for an initial assessment of what the implications for N. Ireland and Ireland might be.

1. Northern Ireland.

The constitutional status of N. Ireland was last settled in the Good Friday Agreement which guaranteed equality of esteem for both the Irish nationalist and British Unionist traditions and agreed that the constitutional status of N. Ireland can only be changed by a referendum vote of the majority of the electorate in N. Ireland. That agreement has delivered over 15 years of peace in N. Ireland if one excludes a few riots and contentious marches in the meantime.

All military outposts and border checkpoints have been dismantled. You would hardly know you are moving from one jurisdiction to another when crossing the border and there is an increasing amount of trade, tourism and cultural exchange across that border. The Euro is widely accepted in N. Ireland and both economies are increasingly integrated. The importance of agriculture in N. Ireland means that the N. Ireland economy has more in common with the Republic of Ireland than it has with the rest of the UK. Partly because of the Common Agricultural Policy, you simply don't get the animus against the EU that you get in England.

So what if the UK leaves the EU? Firstly, a lot depends on the terms of exit. Presumably both Ireland and the UK will remain outside the Schengen Area, so at least there will not be a return to passport controls on the border between Ireland, North and south.  Presumably the UK will also seek to retain free access to the single market as an EFTA member.  However what if the remaining EU members take the view that the UK should not be a beneficiary of the single market if it does not share in the costs of the complementary social cohesion goals of the EU?

It is one thing for the EU to give preferential treatment to relatively small EFTA economies like Iceland, Liechtenstein, Norway, and Switzerland, quite a different matter to do so for a major competitor economy like the UK. Why should, for instance, Germany give the City of London the same access to financial markets as, say, Frankfurt, when the UK no longer carries the cost of EU membership?  It could be argued that the UK is no different from Switzerland in this regard, but there are close social and linguistic ties between Germany and Switzerland that are less evident with the UK.  

Even if no immediate trade barriers are erected, there is the risk of a divergence in regulations and tax rates as time goes on. Why should, for instance a Tobin tax be imposed on EU financial institutions if no similar cost is imposed on UK financial institutions?  It is for this reason that big business in the UK is almost unanimously opposed to Brexit - the fear of a loss of access to the Single Market, or at least a loss of influence over the rules by which that market is regulated. They fear the EU progressively adopting regulations that are less advantageous to the UK.

But for N. Ireland, the fear is much more immediate. A loss of access to EU CAP subsidies would put N. I. farmers and related industries at a severe disadvantage to their southern counterparts. The N. I. economy is still hugely dependent on fiscal transfers from Westminster and there is no fear of an immediate shift in N. I. politics toward a United Ireland.  But sectoral tensions will increase and there is a danger that the fragile consensus built up over the Good Friday Agreement will start to unravel with all the sectarian tensions this might entail, especially in deprived loyalist urban areas of Belfast and Derry.

A Brexit may also lead to renewed pressure for another referendum on Scottish independence with an independent Scotland likely to seek to rejoin the EU.  Given that N. Ireland Unionist's historical and cultural ties are predominantly with Scotland rather than England, a move by Scotland to rejoin the EU would put them in the awkward position of being tied to England rather than Scotland and still outside the EU despite their close integration with the Irish economy and dependence on the CAP..

2. Ireland

The very fear that UK big business might lose access to the single market might also prompt many of them to move at least their European Headquarters into an EU jurisdiction. Given that Ireland has close historical, cultural and linguistic ties to England and a lot of experience in attracting US multinationals to locate their European Headquarters as well as considerable manufacturing and development facilities in Ireland, I have no doubt that the Irish Industrial Development Authority will be licking its lips at the prospect of attracting a lot of UK financial services and other businesses to locate at least part of their operations in Ireland. The UK would also cease to be Ireland's major competitor for FDI looking for access to the single market.

On the other hand, the UK remains Ireland's largest trading partner accounting for 32% of Irish imports and 15% of Irish exports and any disruption of UK Irish trade would be very damaging to the Irish (and UK) economies.  You can be sure that the Irish Government will be very focused on retaining this trading relationship as part of any Brexit negotiation - by special opt-out if necessary. Given the relatively small size of the Irish economy, and a general recognition of Irish dependence on UK trade, it is not difficult to see the EU making some provision for Irish interests in that situation.  In particular, the Island of Ireland might be regarded as a single market, whatever divergences may emerge between the UK and EU elsewhere.

At a political level the dissipation of British Irish tensions in the wake of the Good Friday agreement as exemplified by the visit of Queen Elizabeth to Ireland in 2011 has resulted in Ireland and the UK becoming close negotiating partners within the EU.  The loss of a key ally will be keenly felt by the conservative dominated Irish Government who will feel the EU centre of gravity drifting eastward and becoming ever more dominated by Germany. It is conceivable that Irish sensitivities and concerns will become increasingly marginalized in an EU context.  In some ways this could be a positive in that Ireland is much less opposed to the social market and agricultural aspects of the EU.  But overall the Irish Government will feel the loss of a major negotiating partner very keenly indeed.

The bottom line is that the Irish Government - almost any Irish Government - will try to prevent a Brexit very vigorously - including siding with the UK in any negotiations over the future of the EU, and seeking to influence how the very large Irish diaspora in the UK will vote in any referendum. Almost 1 million people in the UK were born in Ireland and 6 million people (c. 10% of the population) have at least one Irish grandparent. They do not necessarily take their voting directions from the Irish government, but many will be sensitive to any risk of a deepening rift between Ireland and the UK.

However, aside from the danger of the peace settlement in N. I. unraveling somewhat, a Brexit may not necessarily have disastrous consequences for the Irish economy, depending on the terms of exit negotiated.   Indeed, I would venture to suggest it could have very much more serious consequences for the UK economy, especially if the EU decides not to cut the City of London any slack in the Single Market.  It could also be very damaging for the political cohesion of the UK as a whole, with English anti-EU sentiment out of step with much more complex and nuanced attitudes in Scotland and N. Ireland in particular.

But sin scéal eile (that's another story) as we say in Ireland.

I would be particularly interested in our British readers take on this piece. My contacts with Brits are largely with expatriates at the moment, and I may be out of touch with debate around the EU on the British mainland. I was surprised to see the trends in opinion polls have swung quite so strongly in favour of membership since 2013, and wondered what was behind that.  Is the business argument gaining traction?

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Mar 14th, 2015 at 05:59:25 PM EST
I haven't really seen any significant analysis of the implications of Brexit for Ireland, which is why I wrote this piece.  However it also means I am flying blind to some degree and may have left out some rather obvious factors or drawn conclusions not entirely supported by the facts. I look forward to further debate on this topic clarifying the issues from various points of view.  

If Cameron fails to achieve an overall majority (quite likely, in my view), the whole conversation may be moot in any case. However that does not mean that the continuing Eurosceptic tension within England, in particular, will not continue to be damaging to both the UK's and the EU's economic and political development.  I have no doubt that part of the Irish success in attracting US FDA, for instance, has been due to continuing business uncertainty over the UK's continued membership.

Equally UK opposition has acted as a huge drag on EU integration more generally, and encouraged the development of Eurosceptic, nationalist, and chauvinist movements and parties elsewhere. From a UK point of view, the UK's continuing in/out tensions have resulted in it getting far less out of EU membership than it could have and left it with the worst of both worlds, neither fully in or out.  Indeed without the financial services sector and its access to the Single market, where would the English economy be?

Discuss, please.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Mar 15th, 2015 at 05:03:28 AM EST
Britain's may be the 6th largest GDP in the world, but much of it comprises various financial "services" via The City.

This trade will be very damaged by a "Brexit", EU competitors will certainly move swiftly to freeze London out of european markets. Equally, the advantage the UK has for US trade into the EU will cease to exist and that money will go elsewhere.

So, basically Brexit will be a disaster for the City. And, whatever I may feel about the idea that this may be a good thing for the country in the long term, in the short term it will destroy any budget plans Cameron intends to enact. If we feel a winter of discontent from Osborne's austerity now, we will look back on these days as High Summer compared to the Ice Age he will feel licensed to unleash in the aftermath.

But, I recognise that, along with most people on this blog, I probably am closer to being a high information voter than many here and genuinely fear that, unless there's a change of heart from right wing tabloids, the country will vote to leave the EU by a wide margin.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sun Mar 15th, 2015 at 07:50:07 AM EST
I have analysed and summarised the data on UK opinion polling on EU membership from Wikipedia

The data shown is a simple average of all polls taken in each year.  It should be noted there are fewer polls in earlier years and far less polls which ask the question in the context of the UK's terms of membership having been renegotiated before a referendum.  

What is striking is that there are two trends:

  1. A gradual but pronounced increase in support for membership

  2. A significant increase in support for membership after a renegotiation of the UK's terms of membership.

This of course begs the question as to what the outcome of any renegotiation might be, and whether this meets the expectations of those who have changed their mind based on their expected outcome. (Or does it mean that Cameron merely has to go through the motions of a renegotion in order to satisfy a vague desire to get a pound of flesh out of the EU and see the terms rewritten?).

Clearly perceptions of the outcome to any renegotiation will be key to the result, as will the relative turnouts of the stay and leave camps.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Mar 15th, 2015 at 08:58:54 AM EST
[ Parent ]
Farage is currently claiming that his price for supporting a minority Conservative administration is that there will have to be referendum this year. Obviously this is intended to avoid the likelihood of a favorable re-negotiation.

However, the view of journos is that there isn't a hope in hell of anyone getting the legislation through Parliament this year, even if they wanted to.

However, re-negotiation is more about the attitude of the major EU powers than it is about what Cameron wants;-
a) if they want to throw him a bone to keep the UK in, then I'm sure a deal will be constructed, and some of them will possibly even be prepared to act outraged to give Cameron some favorable pr about his deal making skills,
b)If they are sick of the UK playing footsie and play hardball in the negotiations, then it could go very badly in pr terms.

Also, I think that any polling would be very soft right now, it all depends on how the campaign goes and that really does depend on the attitude of the tabloids. If the owners and editors can be persuaded they want to stay in, then we will vote to stay in. But if they go full Farage, then nothing the established parties say will make any difference.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sun Mar 15th, 2015 at 09:36:25 AM EST
[ Parent ]
I agree the polling, this far out from any real prospect of a referendum, is likely to be v. soft.

I think there is quite a lot of common ground between the right wing dominated EU governments and Cameron right now, and it will be easy for them to act outraged whilst giving nothing away that they don't want to give away anyway.  The sense of having to keep the UK on board will protect them from centrist and left wing criticism at home anyway.

with on Grexit hardening, EU leaders will be desperate to avoid a Brexit as well.

Of course all of this does not bode well for the EU from a left wing or even a centrist perspective.  The social market will soon be a distant memory. Neo-liberalism and corporatism are still gaining ground for all the crises they have fomented: in fact, because of the crises they have fomented.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Mar 16th, 2015 at 08:59:19 AM EST
[ Parent ]
Same data as above, but with some "regional" data added.  No one ever seems to bother sampling N. Ireland.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Mar 15th, 2015 at 09:22:32 AM EST
Yes, but remember that fully half the UK population live within 100 miles of London, so that's where the referendum will be won or lost.

And they're far more euroskeptic than the rest of the country, despite the fact that their very financial dominance depends on a finance industry that will be crippled by a Brexit.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sun Mar 15th, 2015 at 09:41:32 AM EST
[ Parent ]
No one ever seems to bother sampling N. Ireland.

That is british polling tradition, because North Ireland never influences the common elections, they always excluded from polling. Obviously wrong excluding one of the most pro european regions in this case. though.

by IM on Sun Mar 15th, 2015 at 07:44:27 PM EST
[ Parent ]
N. Ireland Unionists have held the balance of power in Westminster before, and polls are sometimes held on attitudes to a united Ireland etc.  It would be nice to be able to evidence my (and your) assertion that N.I. is much more pro-EU than (say) England, but I didn't find any polling data to support this perception.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Mar 15th, 2015 at 09:07:00 PM EST
[ Parent ]
Here in my part of London, what disturbs me most is the complete lack of action from the many, many rich businesses that will lose out under Brexit.

They are happy to keep contributing to the Tory election fund, despite the risk this runs. They have contributed next to nothing to the pro-European campaigns. Farage is getting a free run.

Of course the hopeful sign is that the polls are swinging in a good direction despite everything. I think this is because many more people than ever before have some kind of link with Europe. Even if you only go on holiday there, some of the Faragist bombast naturally feels a little hollow.

However, the complacency of the 1% seems to be the running theme, from euro crises through to the Brexit debate. You can be sure that if the Tories/UKIP get in there will be a referendum and the Chernobyl that is Wapping will pollute the debate in a mighty fashion. If that isn't counterbalanced, then "accidental" Brexit is entirely possible...

by Metatone (metatone [a|t] gmail (dot) com) on Sun Mar 15th, 2015 at 09:53:58 AM EST
That has been my view all along, which is why I concur with Helen's view above that current polling is "soft" despite the clear trends and growing majorities in favour of staying.

I am currently in Spain and there are a lot of Brit expats living here who are UKIP sympatisers despite the fact that a Brexit would jeopardize their residency status and health benefits. It never ceases to amaze me that people who have chosen to live in Spain and benefit from many of its services still seem to spend a lot of time knocking everything Spanish...

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Mar 15th, 2015 at 10:08:00 AM EST
[ Parent ]
Frank Schnittger:
It never ceases to amaze me that people who have chosen to live in Spain and benefit from many of its services still seem to spend a lot of time knocking everything Spanish...

Same thing for France. Though it doesn't amaze me. As I see it, the British are profoundly insular, and that doesn't change because they take up residence in a nearby country. They are still mentally based in Britain, they still "fly out" and back "in". Their ego is generally flattered by the status they derive from being able to afford a place in the sun (or in prestigious areas they couldn't find/afford in Britain). In most (but not all) cases I've come across, they ascribe their "success" to their business acumen and hard work. The EU? What? The country they reside in? How to avoid tax is the main thing...

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Mar 15th, 2015 at 03:08:44 PM EST
[ Parent ]
Particularly in France, many of the British "expats" are very much the UKIP demographic - the richer half of the Daily Mail demographic. Often they were small business owners, or middle-senior management in the era of large corporations.
by Metatone (metatone [a|t] gmail (dot) com) on Sun Mar 15th, 2015 at 03:54:58 PM EST
[ Parent ]
A local Spanish cafe usually has a Daily Mail on offer to its patrons - the only English newspaper on offer - so your perception may v. well be accurate. On reading it I was astonished to find how brazenly and openly pro-Tory it's entire coverage was - with not a pretense at "balance" - whatever that is.... a half truth, perhaps?

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Apr 1st, 2015 at 02:29:22 PM EST
[ Parent ]
There's no actual campaign yet, so I don't see the lack of contribution as a problem.

I can't see a Brexit because there are too many 1%ers with too much to lose.

Remember - the British establishment tradition is to use Euro-immigration and Euro-finance for direct profit, but to use racist dog whistles for political advantage.

There is no contradiction there, although it might look as if there is to the politicalyl uncynical.

I don't think Cameron will win the election, so there's no immediate danger of a referendum. If by some miracle he does - possibly in coalition with UKIP - I expect Murdoch support for a Brexit to be muted.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 17th, 2015 at 04:13:18 PM EST
[ Parent ]
The German business elite thought they could control Hitler and use him to their advantage as well.  Generally the 1% are quite good at controlling the rubes, but accidents do happen...  I'm inclined to agree with you that Brexit is unlikely, but that doesn't mean it isn't a useful exercise to think through the implications and alert public discourse accordingly. So far the implications of Brexit for British expatriates or for N. Ireland haven't even entered public consciousness.  If not us, who?

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Mar 17th, 2015 at 08:44:18 PM EST
[ Parent ]
I wasn't going to Godwin, but I felt a similar point should be made. Starting the campaign at the last minute is a good way to do a lot worse than you expected (c.f. Scottish Independence referendum).

Given that the starting point is worse than with the Scots, I can see the lack of groundwork being put into pro-Europe campaigning easily becoming the achilles heel.

Finally, it needs to be noted that unless Rupert passes on, the Murdoch attitude is implacably EU. He doesn't care about the rest of the 1%, he wants Britain out of the EU "to protect and develop his business."
(Does it make sense? Not really, but since when did powerful people need to make sense?)

 So, I think it's unwise to bank on a substantial muting of that particular noise machine.

by Metatone (metatone [a|t] gmail (dot) com) on Wed Mar 18th, 2015 at 04:52:36 AM EST
[ Parent ]
The Scotland campaign worked out very well for the Establishment - a solid vote to stay, but many Labour voters were persuaded to switch their allegiance to the SNP.

Oddly enough, this has given the Tories a fighting chance and made an outright Labour majority much less likely.

Of course this might just be a happy accident. But whatever the reasons, it's hard to think of it as a failure.

As for Murdoch - I'm not sure we should write off the possibility of more phone hacking prosecutions. So although Murdoch is his own man, he may still be amenable to timely hints about various possible futures.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Mar 18th, 2015 at 05:20:37 AM EST
[ Parent ]
Table 10.2 of this report on UK agriculture lists N.I. income from some CAP income streams as £298M or 9.1% of total UK income of £3,263M in 2012.  Table 10.6 lists total UK income from all CAP incomes streams as £4,433M.  Assuming N.I. retains 9.1% of total share, that would equate to £405M.  (by way of comparison N.I. GDP is 2% of UK total, and thus EU agricultural subsidies are 4.5X more important to N.I. than to UK as a whole.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Mar 15th, 2015 at 01:48:29 PM EST
There is, of course, an implied imbroglio concerning the agricultural sector : as long as the CAP is based on quantitative subsidies, the opportunities for cross-border fraud would be pretty juicy.

Whether that would require the reintroduction of border controls, or whether it could be handled by tighter traceability, it would be exceedingly costly to prevent.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Mon Mar 16th, 2015 at 06:43:09 AM EST
[ Parent ]
As Table 10.2 shows, virtually all CAP payments, and 100% in N. Ireland are decoupled payments (not linked to production)

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Mar 16th, 2015 at 08:09:19 AM EST
[ Parent ]
Things you always wanted to know about public finances in Northern Ireland but were afraid to ask (Part 1) » NERI Blog » Nevin Economic Research Institute

Total public spending is around two-thirds of local `GDP' in Northern Ireland

Let's start with the ladybird introduction to public finances in Northern Ireland.  In a full year total income or output, in Northern Ireland, is roughly £30 billion (latest estimate was for 2012 when it was £29.4bn)). Total public spending by Government in respect of Northern Ireland is estimated by the Department of Finance and Personnel (DFP) to be approximately £24 billion of which £23 billion is for total expenditure on services which, in turn, include just over £3 billion in estimated UK-wide `non-identifiable' spending.


Not including North Sea oil, total revenue collected in Northern Ireland is estimated to be around £14 billion leaving a gap of just under £10 billion in any year. This is equivalent to about one third of local economy GVA (it is not possible to estimate GDP precisely for Northern Ireland).

In other words, the Westminster "subvention" to N. Ireland, both direct and indirect is about £10 Billion, or a third of N.I. GDP.  There is no way the Republic could pick up that amount of slack in the short or medium term, so a "United Ireland" isn't really a financial option, even if there could be considerable rationalization and saving on public services North and south.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Mar 15th, 2015 at 06:25:17 PM EST
Since I wrote this diary, I've come across a couple of relevant articles: One, by Dominic Hannigan TD chairman of the Oireachtas Joint Committee on European Union Affairs and Labour TD for Meath East makes many of the same points as myself - so much so you would think we cogged off each other!

Another story is based on the launch of a book on the topic, and focuses on the implications of the re-imposition of a physical controls at the border between the UK and Ireland.

Both seem to feel that Ireland can play an influential role in any UK debate and negotiations around Brexit.  I'm not sure how much Ireland can do about the animus against the EU that is driving the UK debate. The business case against Brexit has already been made: it is the popular case that is lacking.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Apr 1st, 2015 at 02:52:08 PM EST

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