The future of the Irish border is one of the key sticking points in the ongoing Brexit negotiations between the European Union (EU) and the United Kingdom (UK).
Last December, the Brexit talks could only move to its second phase after, in the words of Irish Prime Minister Leo Varadkar, the UK government “guaranteed that, whatever its future relationship with the European Union, a hard border on the island of Ireland will be avoided.” Put simply, if EU and UK negotiators cannot agree on a new free trade agreement in the second phase of negotiations, Northern Ireland (NI) will continue to comply with the rules of the EU’s single market and its customs union. In that case, the border between NI and Great Britain is also supposed to remain completely open. The UK government’s commitment, however, is at odds with Brexit’s main objective to leave the EU’s single market and customs union. In addition, the Good Friday Agreement, which underpins the peace process on the isle of Ireland, and the Common Travel Area (CTA), which guarantees the free movement of people between Ireland, NI, and the rest of the UK, would be threatened by a hard border. This week’s EconoGraphic outlines the deep economic ties between Ireland, NI, Great Britain, and the EU(26). We believe the economic realities should compel EU and UK negotiators to find a creative solution to the thorny Irish border issue.
Trade is a vital engine for economic growth in both Ireland and NI. In 2015, the latter’s domestic trade with Great Britain accounted for “22 percent of all NI’s sales in goods by value.” This underscores the importance of keeping the border between Great Britain and NI free of any additional regulatory barriers. Ireland is NI’s number one external export destination. Companies from NI exported 35 percent of their total goods across the border to Ireland in 2016. It is important to note that NI’s economy is the second weakest of all UK economies when measured in gross valued added (GVA). Any disruption of NI’s exporting industry by a change in the Irish border’s status quo could therefore threaten the country’s economic stability and ultimately even endanger the peace process.
Of course, Great Britain and NI are also important trading partners for Ireland. In 2016, Irish exporters sold goods worth north of $18 billion to British customers. However, the largest percentage of Irish exports goes to the EU26 countries in continental Europe. The UK serves as a commercial land bridge for those exports. New custom checks and tariffs would put significant pressure on Irish exporters using the UK land bridge. At the same time, direct ferry routes from Ireland to France or Belgium take two or almost three times longer than the land bridge. A hard border between Ireland and Great Britain could thus undermine the competitiveness of Irish exports.
Many small and large companies in Ireland and NI, especially in the agri-food sector, are part of complex cross-border supply chains. For example, Bailey’s, the Irish Whiskey and Cream Liqueur producer, buys milk from 1,500 farms in Ireland and NI to create its signature cream. Perishable intermediate agri-food goods, such as milk, are particularly sensitive to higher transit times resulting from customs checks, e.g. health checks and controls. In turn, a hard Irish border would jeopardize cross-border supply chains and the existence of many small- and medium sized companies on the island of Ireland.
*Great Britain includes England, Scotland, and Wales. Northern Ireland is considered part of the United Kingdom, but not Great Britain.
*EU(28) without the United Kingdom and Ireland.