Dr. Kevin Hanrahan:

My name is Kevin Hanrahan. My colleague, Trevor Donnellan, and I are from the agriculture, economics and farm surveys department in Teagasc. We thank the committee for the invitation to discuss the implications of the UK's decision to leave the European Union. Our contribution will be on the agrifood sector. We will not address the fisheries sector as it is outside the remit of Teagasc. The decision by the UK to leave the European Union will present challenges for the Irish agrifood industries, given the importance of the UK as an export market. As members are aware, the precise implications of Brexit for the Irish agrifood sector will depend on a range of issues that will be the subject of negotiations, not only between the UK and the EU but also between Ireland and its EU partners. In this opening statement we would like to briefly outline Teagasc's actions in advance of, and since, the UK referendum in June 2016.

At the start of this year we considered that the risk of Brexit was high and we therefore produced an analysis of possible implications for Ireland's agrifood trade. Teagasc, in conjunction with the Department of Agriculture, Food and the Marine, organised a seminar on the possible implications of Brexit for the Irish agrifood industry, which took place in April 2016 in advance of the Brexit referendum. This conference was attended by more than 100 stakeholders from across the agrifood industry and society. There were speakers from Teagasc, the Department of Agriculture, Food and the Marine, the ESRI and respondents from the agrifood industry.

Teagasc's contribution to the seminar represented preliminary research on the possible impact of Brexit on the agrifood trade between Ireland and the UK. Specifically, it examined the possible impact of Brexit on the value of Irish agrifood exports. This paper, as the Chairman has noted, has been provided to members. Since the referendum result we have also published a short paper on the choices to be made by the UK with regard to designing its future agricultural policy once it has left the European Union. The design of UK agricultural policy will have implications for the future shape of the UK agrifood sector. In turn this will influence the UK's future import food requirements and therefore has knock-on consequences for export opportunities for Irish agriculture and food industries.

Other actions taken by Teagasc include participation in the Department of Agriculture, Food and the Marine's consultative committee on Brexit. Teagasc also has created an internal working group on the Brexit issue. While it is not possible to specify the final impact of Brexit at this time, it is possible to set out the issues that would affect the agrifood sector that may need to be addressed. It is also possible to specify desirable and less desirable outcomes that could arise with these issues. By identifying these issues and the preferred outcomes, Teagasc seeks to provide the Government with an agenda for negotiation in Brussels. We can identify five key policy areas of concern to the Irish agrifood sector, although it should be noted that there are many other concerns that will also need to be addressed.

The key issues are tariff and non-tariff barriers to trade between Ireland and the UK; the future of the EU budget and the CAP given the funding deficit created by the UK's departure from the European Union, whenever that happens; the capacity of the agri-food sector on the island of Ireland to continue to function as a single entity, particularly in terms of trade in agri-food raw materials and food ingredients; future decisions on the design of the UK’s agricultural policy; and future decisions on the UK’s trade relations with countries outside the EU.

Since the referendum result in June 2016, there has been much speculation about how the UK exit from the EU will proceed. At this stage we do not know exactly when the UK will trigger Article 50, how long the exit process will take, or what sort of trade relationship the UK will have with the EU. High levels of uncertainty are associated with most of the issues that arise from the UK’s stated intention to leave the European Union. This uncertainty, along with expectations that UK economic growth will be slower over the medium term as a result of Brexit, has been reflected in a significant fall in the value of the pound sterling against the euro. The immediate short-term impact of the Brexit decision has therefore already been felt by Irish agri-food exporters with business in the UK. The fall in the value of sterling has made it more difficult for Irish exporters to profitably fulfil contracts with UK customers that are denominated in sterling.

It should be noted, however, that this exchange rate impact is just a part of the challenge that Brexit may present for the Irish agri-food sector. Once Article 50 is triggered, the UK will remain an EU member for at least two years and possibly longer. This means that no immediate change in access to the UK market will arise. However, in the medium to longer term, once the UK has actually left the European Union, any change to the nature of the trading relationship between the UK and the EU will become more important.

Tariff and non-tariff trade barriers between the UK and the EU would present critical challenges but would not take effect until the UK has actually left the European Union. Whether the UK and the EU forgo the option of a free trade agreement is therefore a key concern, since a free trade agreement, depending on its nature, could potentially limit the impact of Brexit on the Irish agri-food sector.

Teagasc is committed to undertaking objective economic analysis for Government, industry stakeholders and wider society, detailing the impact of potential policy developments, including Brexit, on the Irish agri-food sector. As greater clarity emerges on the negotiation framework that will shape future UK-EU trade relationship, we will continue to provide Irish policy makers with timely and relevant analysis of the consequences of possible policy options.

I thank the committee for the invitation to come along and we are happy to answer questions.