No Pot of Gold: Ramifications of a No-Deal Brexit on Ireland
Three years ago, the UK narrowly voted to leave the European Union (EU). Dubbed as ‘Brexit’, the move was triggered by a vocal majority of the British population wanting tighter control over their borders. At the time, the British believed that they would be able to negotiate a fair deal that would protect them from bearing the full economic brunt of their decision.
Three years later, that does not seem to be the case, due to the No Deal Clause looming around the corner. The No-Deal Clause essentially states that in the event that the two parties involved (the UK and the EU) do not reach satisfactory trade agreements, they will conduct business as per the much harsher World Trade Organization’s rules (1). British policymakers seem no closer than before in reaching a consensus regarding the terms of their exit. While the hazards of this situation for the UK are very clear to everyone, their exit from the EU may also have some unforeseen, severe consequences on the Irish economy as well.
As part of the EU, the UK enjoyed the benefits of free trade and free movement of labor and capital between member countries. This allowed for cheap transportation of goods and services between the two nations, particularly with the Republic of Ireland, which is the only country to share a land border with the UK.
According to data by the British Parliament (2), Irish exports to the UK amounted to a total of roughly €24.8 billion, about 15.5% of Ireland’s total exports. Out of this, €4.5 billion amounts to the export of items of daily necessity, such as food and drink. According to estimates, after Brexit, the tariffs on this relatively small percentage of Irish exports would amount to around €1.7 billion (3). While it may seem like an insignificant amount in the grand scheme of things, this amount is indicative of the opportunity cost that both the Irish and the British populace will face. Of course, as one of the most popular economies in the world, the UK will be able to bear the brunt of this impact. However, Ireland, also a highly isolated nation that only shares a land border with the UK, may find this to be a disastrous consequence, because Irish exports will seem less attractive to British consumers. This would result in reduced consumption and reduced imports from Ireland.
Micro-businesses and entrepreneurs in the region will also likely suffer from Brexit. There are around 3,800 micro-businesses employing over 13,000 people in Northern Ireland, that conduct regular trading across the border into Ireland. The severity of the impact on these businesses cannot be overstated. Micro-businesses generally tend to be located in areas with no real industry, or to empower poorer or minority communities. Around 80% of these businesses export exclusively to Ireland, and would suffer immense consequences, essentially shutting down most of them, as they would be unable to absorb the additional costs levied by taxes and tariffs after Brexit.
Apart from economic repercussions, there may also be a harsh effect on the healthcare system in Ireland. Over 60% of medicines coming into Ireland are transported via the UK, a hub for trading with major airports and ports across the country (4). Ireland may find itself scrambling to get access to essential medicinal supplies and drugs to treat its citizens in the event of a no-deal Brexit. The plight would be compounded as Ireland has a primarily nationalized, instead of a privatized, healthcare system, which would significantly increase operating costs and reduce efficiency, likely having a large impact on the fiscal budget.
Considering how multifaceted and intricate this issue is, it’s no surprise that there has been no agreement yet, as it would be extremely tricky to satisfy all parties and maximise the social benefit of Brexit. With every passing day, it becomes difficult to imagine that the UK would not suffer due to this decision, and, it could potentially lead to the end of the United Kingdom, with Scotland and Northern Ireland itching to return to the benefits provided by the EU.
Edited by Naomi Santiago and Julie Park
Sources:
https://www.economist.com/leaders/2018/11/24/the-truth-about-a-no-deal-brexit
researchbriefings.files.parliament.uk/documents/CBP-8173/CBP-8173.pdf
https://www.theguardian.com/politics/2019/feb/05/ireland-and-eu-discuss-emergency-funds-to-offset-no-deal-brexit
Image: https://www.pexels.com/photo/blur-cartography-close-up-concept-408503/
