Mr. Paul Kelly:

The first question raised by all three Senators was about the Border and the regional dimension. I will start by stating, as is generally known, that agrifood is the largest indigenous sector. In all regions, particularly outside the greater Dublin area and Cork city, in its broadest sense, it has by far the largest industrial output and level of employment. Therefore, it is hugely important to the regional economies, all of which are in the bottom half of the 1,330 NUTS 3 regions in Europe. Ireland has a very high GDP per capitaratio. However, it is the cities that rise it. From a regional perspective, we are disadvantaged in the European Union. The big concern is that the economic sector which is most affected is the most important in each of the regions. That is of critical importance The growth plans the industry has included in the national agrifood strategy, Foodwise 2025, will be a key part of regional development.

With regard to the Border, it is acknowledged that there is very intense agrifood activity in the Border region, including County Cavan. There is the particular issue of the Border and the implications Brexit will have, initially for the currency but also further down the line. There are very deep integrated supply chains. It has been mentioned that a lot of raw material comes from the North and vice versa. That characterises the nature if Ireland-UK food imports and exports. It is not just all about finished goods. There are a lot of intermediates and ingredients travelling in both directions.

I share the lack of optimism of the Senators and think of the speakers who spoke this morning. It is very welcome to see the issue of the Border and North-South trade being mentioned in the first phase in the three priorities Mr. Barnier has to deal with from an EU 27 perspective. However, it is very difficult to see how we can find a free-flowing solution for goods if the United Kingdom moves outside the Single Market and the customs union. The United Kingdom will be a third country and an international market. There will be various pieces of legislation that will need to be complied with and official controls applied. It is very difficult to see how there will not be certain requirements that will have to be dealt met. To what extent can we minimise the friction? That is what I believe we need to be looking at, including electronic rather than physical solutions.

Yesterday some of the representatives of the French farming sector called for a hard border between the North and the South because they were concerned about the flow of goods and materials in the European Union from an area what would effectively be outside it. That is the challenge we are going to face on the issue.

With regard to an east-west border, unlike the Border between the North and the South, any special case that we will be able to develop around it will be very limited. The issue of an east-west border will be very much decided by the EU 27 and the United Kingdom and the trade relationship between them, despite the fact that we are their most important partner. It is worth bearing in mind that about 40% of our food and drink exports - about €4 billion in value terms - go to the United Kingdom. A number of countries that adjoin the United Kingdom, including France, Belgium, the Netherlands, Denmark and Germany, are all exporting food and drinks to a similar value to the United Kingdom, but in percentage terms, it is significantly less. Therefore, the impact on them will be be significantly less. We will probably need to deal with that issue with the United Kingdom together as the EU 27.

The important point to bear in mind is that North-South trade is very much about deeply integrated supply chains. We, therefore, need to address the managing of supply chain issues. There are products which move North and South and businesses with operations on both sides of the Border. An east-west border is more about markets. Ultimately, we are selling to 65 million people in Britain. We also need to focus on that issue. If that market is shut off to us, unfortunately, the supply chain issues will not be as important. I believe there is a certain degree of leverage with the European Commission and the negotiating team in task force 50, an aspect on which we need to continue to work.

Mr. Carroll alluded to currency risk being a significant and serious issue. State aid rules need to be changed to allow supports to be put in place. That was done in 2009 at European level when we had the financial crisis and that allowed the agencies here such as Enterprise Ireland to put measures in place under state aid rules. We welcome that in the negotiating position of the Government, which was published a few short weeks ago, a specific reference to the need for measures in the event of a serious disturbance in the Irish economy. That is alluding to that type of issue. Further work on that will need to be done by the Government to ensure changes to these rules.

All three Senators referred to market diversification and new markets. Between 2010 and 2016, food and drink exports to the UK increased by €1 billion but, at the same time, as a percentage of our overall exports to the UK, they decreased. The reason was that we were increasing exports to the rest of the EU and other international markets at a faster rate. Diversification into other markets is continuing. Bord Bia's annual report on exports, which comes out in January every year, stated this year that we are exporting to 180 countries, an increase of five on last year. A small number of countries account for the bulk of value and volume of our exports. In 2016, there was a reduction of more than €500 million in exports to the UK. Half of what had been built up in painstaking fashion over six years building on the work of the previous decades disappeared overnight. That is the type of risk we face.

Market diversification is, therefore, hugely important and that is why we have called for a €25 million fund for market retention in the UK market and to build on overseas markets. That additional money needs to be put into Bord Bia, Enterprise Ireland, and the companies themselves. Companies need to invest significantly if they move into a new market. For example, if they want to build a business in Sweden, Germany or Italy, that is an expensive proposition. Many businesses, particularly SMEs, will need a great deal of support to put experienced salespeople on the ground and for trade financing and so on. Mr. Carroll may add to that shortly.

Senator Daly made a point regarding the UK perspective. We have a great deal of contact with our fellow food organisations in the UK, not only about Brexit but about a variety of food policy issues. We have had that constantly because we are effectively a single market in terms of Irish companies operating in the UK and UK companies operating here, with a similar legal system and the same food legislation, which is currently European in origin. Based on our interaction since July last year on Brexit, there is a clear indication that they share similar concerns to us for a number of reasons. Ireland is the largest export market for British food produce. They want the same free, unfettered access we have into the UK market into our market. They are a deficit producer; they produce less than two thirds of their own food requirements. They require raw materials, intermediates and finished food products. Importers share almost identical concerns to an Irish or French exporter who exports into the UK. They are concerned about currency, tariffs and regulatory divergence. Despite the fact that, as in Ireland, food manufacturing is the largest employer among manufacturing sectors, it does not have the same resonance or importance as the agrifood sector in its totality has in Ireland. It is not up the political pecking order in the same way as other business sectors.

That can be demonstrated in anecdotal terms by the fact that the director general of the Food and Drink Federation in the UK managed to meet our Minister for Agriculture, Food and the Marine before he managed to meet the UK Minister with responsibility for agriculture, Ms Andrea Leadsom. That shows how the sector is perceived in the UK in political terms and that is a concern for us as well. We have been working, as have the Government and the Irish embassy in London, to push agrifood up the agenda in the same way as the UK food and farming industries. It needs to be up the agenda because it is only then that the policy concerns and policy remedies will be understood and accepted by the British Government.

The same applies at European level. We have worked closely with European bodies, including FoodDrinkEurope. They very much support our policy recommendations. We are building a coalition of interested countries, particularly those that are close to the UK on the other side of the English Channel and the North Sea. One of the big issues is the food and drink sector which, despite being the largest employer at European level, comprises 99% SMEs and, therefore, it does not jump off the page like the UK financial services industry and the German car industry. There is a huge body of work to be done to make sure everybody is aware of the economic importance, the existing employment and the regional impact that agrifood has not only in Ireland, but in all members states, including the UK.