Oireachtas Joint and Select Committees

Tuesday, 17 February 2015

Joint Oireachtas Committee on European Union Affairs

Possible Exit of UK from European Union: Discussion (Resumed)

2:00 pm

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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I remind people to turn their phones off. It is not sufficient to put them on silent mode because they may interfere with broadcasting equipment.

Apologies have been received from Senator Colm Burke.

Today the committee continues its series of meetings considering critical issues for Ireland in the event that our nearest neighbour, the UK, decides to exit from the European Union. A referendum on this question has been promised by the British Prime Minister, Mr. David Cameron, MP, should his party be returned to power following May's UK general election.

The committee took the decision to examine this issue now in view of the potential impact on this country and the many Irish citizens living in the United Kingdom. We had two meetings on the topic last week and we will hold another five meetings after today. Today's meeting will focus on the four freedoms - the freedom to trade in goods, services and capital and the free movement of people - and what would happen to Ireland in the context of these freedoms should the UK exit the European Union.

We have a number of guests today. We will start with Mr. Dáithí O'Ceallaigh from the Institute of International and European Affairs. He will be followed by Professor Siobhán Mullally, professor of law and director of the Centre for Criminal Justice and Human Rights; Professor Alan Matthews, professor emeritus of European agricultural policy in the department of economics, Trinity College Dublin; and Mr. Steve Aiken, the former chief executive of the British-Irish Chamber of Commerce. I welcome all four of our guests to today's meeting. We look forward to their respective insights on the issue.

Before we begin, I need to remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.

We will begin with Mr. Daithí O'Ceallaigh.

Mr. Dáithí O'Ceallaigh:

I have been asked to talk about the possible implications for trade between Ireland and the UK in the event of a UK withdrawal from the EU. I will preface my remarks by addressing two issues. First, I wish to inform the committee that the Institute of International and European Affairs has just finished editing a book on Great Britain and Europe that we expect to publish on the web early in March and as a printed book later in March so it may be of some help to the committee in its studies.

Second, the situation in the UK is very uncertain and entirely unpredictable. The Prime Minister, David Cameron, has said that he wants to have a referendum in 2017. We in the institute think that regardless of whether Mr. Cameron is re-elected, a referendum in the UK is likely in the next few years and that, in practice, this referendum will be of an "in-out" nature. However, we do not know what the British want. The Prime Minister has said that if he has a successful renegotiation with Europe, he will recommend a "Yes" vote. The British Government has not made clear what it actually wants in a renegotiation so this is uncertain. There will be one negotiation between now and whenever there is a referendum but we do not know what it will be and we do not know what the issues are.

When the referendum comes, we do not know whether it will result in a vote to remain within the EU or a vote to withdraw from it. If it is a vote to withdraw from the EU, there will then be a negotiation period which will probably take the best part of two years. This negotiation will essentially be led by the European Council but most of the work will be done by the European Commission. There is a further question regarding what will happen internally in the UK if there is a vote to withdraw. The Scottish National Party has already said that it does not want Scotland to withdraw unless there is a majority vote in Scotland to do so. There is great uncertainty and the possibility of two negotiations, all of which would affect Ireland's relations with the UK and Europe.

I will now turn to trade. By trade, I mean both merchandise and services. Trade is one of the key economic linkages between Ireland and the UK. The impact on that trade will depend on what happens in the first negotiation and the second negotiation if this takes place. At the moment, trade between Ireland and the UK, like trade between Ireland and the rest of the EU, takes place on the basis of the EU Internal Market - the Single Market. The British appear to be quite happy with the Single Market. From time to time, one sees commentaries in the British press stating that they would like to remain in the Single Market.

However, as I am sure some of my colleagues will mention later, some of the basic freedoms in Europe underpinning that Single Market are freedoms about which people in Britain are demanding serious changes, such as the free movement of people.

If there are negotiations following a referendum to withdraw, there is no doubt but that trade between Britain and Ireland would be affected. That is really what we need to examine. We also need to know how much trade there is between Britain and Ireland. In 2012, 43% of merchandise exports from Irish-owned firms went to the United Kingdom. The proportion of exports from non-Irish-owned firms is much lower, at about 12%. About 20% of our services exports went from Ireland to the UK. Therefore, should there be a change in the arrangements about trade, there will obviously be very big implications indeed for Irish exports to the UK. In the book I mentioned earlier, there is an attempt to quantify the result on this trade, and on Ireland, of a British withdrawal from the EU. The argument is that the effect on Irish exports, were the UK to withdraw from the EU, could be in the order of a decrease of 3.6%. I should mention that there are so many ifs and buts in this thing that we need to examine that figure with caution, but that is the way it looks.

Should the British succeed in a renegotiation of their terms of membership between now and the time of a referendum, and remain in the EU, that in itself could have an effect on our trade. Should they withdraw, however, the effect is likely to be much greater.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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Our next contributor is Ms Siobhán Mullally, who is a professor of law and director of the Centre for Criminal Justice and Human Rights at UCC.

Professor Siobhán Mullally:

I am going to talk about the possible implications of a UK withdrawal from the EU with regard to free movement of persons. The debate concerning the UK's membership of the EU and a possible withdrawal has centred to a considerable extent on the free movement of persons. Proponents of reform argue that the current EU legal framework does not provide adequate safeguards to ensure the free movement of persons without overburdening member states' public finances.

The free movement of persons is protected in the EU treaties and also in the charter of fundamental rights, where we also see a protection of access to social security benefits and social advantages. Also of relevance here is the 2004 citizens directive. Of the proposals to reform current EU free movement law as part of a possible precondition to the UK's remaining within the EU, several of the proposals that have been raised would require a treaty amendment and unanimous approval by each of the 28 member states, followed by enactment into domestic law. Other proposals do not require such change.

At the outset, it should be noted that one of the key concerns for Ireland will be the continuing functioning of the common travel area. Movement between Ireland and the UK of EEA and non-EEA nationals is likely to be significantly affected should the British exit proceed. As recently as December 2011, a joint programme of work was agreed to strengthen the security arrangements of the common travel area and to provide a framework for a more strategic approach for this co-operation.

Given this quite recent initiative and the existence of the common travel area arrangements, albeit relatively informally for a significant period, it seems likely that the UK would wish to treat Irish citizens differently from other EEA nationals should withdrawal proceed.

If withdrawal were to proceed, there would be a number of possible scenarios, which have been discussed. There are uncertainties associated with each. One possibility would be that the United Kingdom would remain as a member state of the EEA and continue to participate in the Single Market with a status similar to that currently enjoyed by Norway, Iceland and Liechtenstein, for example. This would require little change to free movement rights but is unlikely to be an option given that much of the debate on withdrawal has centred on limiting free movement rights. Discrimination between EU citizens dependent on their country of origin is likely to be problematic as a matter of EU law.

A second possible scenario would be bilateral negotiations whereby the United Kingdom would negotiate bilateral arrangements with selected EU member states. This, however, would lead to significant fragmentation of free movement rights and could create difficulties, particularly for Schengen area states if all Schengen area members were not to be included in such bilateral agreements. As such, it is likely to be politically difficult for any individual member state to negotiate bilaterally with the United Kingdom.

A third option would be that domestic UK laws on immigration would apply, in which case we would see a repeal of the exceptions currently provided for EEA citizens. In such a scenario, EEA citizens and family members already in the United Kingdom may be permitted to remain - as permanent residents, for example. Those without rights to permanent residence, particularly jobseekers, would be easier to remove given that the current protections provided by free movement law would not apply. What we would then see would be the introduction of visa requirements for entry for work, study or family reunification. EEA nationals would effectively be treated as third country nationals are treated at present. A range of possible restrictions could be introduced, including visa requirements, linked, for example, to minimum income requirements, language skills and the supply of biometric information. We would see a phenomenon akin to the current five-tier points system that applies in UK immigration law being applied to EEA nationals. There is concern that this would lead to significant reductions in migrant workers, including highly skilled workers, coming to the United Kingdom. Any of these scenarios would be likely to have a significant impact on the operation of the common travel area between Ireland and the United Kingdom.

With regard to the possible reforms that are being mooted as a precondition to the United Kingdom remaining within the EU, a number touch on free movement. One covers access to social security payments, including a proposal limiting access to housing benefits, social housing and tax credits for a minimum period, possibly up to four or five years. With regard to EU citizens who are categorised as workers as defined in EU law, a change in the EU treaties would be required. Therefore, it would seem unlikely to come into effect. For those who are jobseekers or do not meet the definition of "worker" or "former worker", this reform would be less problematic. The European Court of Justice judgment in the Dano case in November 2014 confirmed that limits can be placed on access to non-contributory benefits, including a requirement that the residence conditions of the citizens directive be complied with.

A related proposal would be that the UK Government would seek to renegotiate the principle of exportability so origin states would remain legally responsible for covering unemployment or non-contributory benefits that would, for example, be required by their own citizens for a minimum period.

There is some commentary that these changes would not lead to any significant changes in terms of movement of EU or EEA nationals and that they may actually lead to more vulnerable persons falling through the cracks of social protection. It could have a significant impact on UK nationals living in other EU countries. This, of course, is of significant concern to a number of countries, including Ireland, Spain, France and Germany, where the costs of providing health care are high and where the number of ageing UK citizens would be significant.

A second proposed reform would be in the area of rights to family unity and family protection. The right to private and family life is protected in the EU's Charter of Fundamental Rights and also, of course, under Article 8 of the European Convention on Human Rights. A proposal to impose restrictions on the entry of non-EU citizen family members in light of the Metock judgment could create difficulties and may be viewed as requiring a treaty amendment, at least with regard to those persons categorised as workers and former workers - those who derive rights from the treaties. Other proposals - for example, to link family reunion to minimum income requirements and language skills - have already led to some criticism from the European Court of Justice.

A third proposed area of reform relates to the possibility of limiting rights of entry for job seekers by imposing a requirement that an EU or EEA national seeking entry to the UK be in possession of a genuine job offer. This could raise practical difficulties, but also legal difficulties. Currently, an EU citizen can reside for a three-month period with a valid passport and without recourse to social assistance, and thereafter the right to reside is dependent on having sufficient resources and sickness insurance. Those EU treaty rights to free movement also apply to job seekers, which is particularly relevant here, so long as they have a genuine chance of being engaged in employment. It is likely that a treaty amendment would be required to effect such a reform, and this would be difficult given the protections of the right to private and family life in European human rights and fundamental rights law. Linked to that is a proposal that job seekers who do not secure employment within a six-month period could be removed. This also would lead to difficulties and would come into conflict with decisions already given by the European Court of Justice, notably in the Antonissen case.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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The next speaker is Alan Matthews, professor of European agricultural policy at the Department of Economics at Trinity College.

Professor Alan Matthews:

I am grateful for the opportunity to talk to the committee about the implications of a British withdrawal from the European Union for the Irish agrifood sector. My remarks summarise a somewhat longer submission, which I have made available to the secretariat.

The former ambassador, Mr. Dáithí O'Ceallaigh, referred to the importance of trade between Ireland and the United Kingdom, but the trade links in the agrifood sector are even more important, and more important than for any other EU country. Approximately 51% of Ireland's total agrifood imports are from the United Kingdom, and the United Kingdom takes approximately 51% - the same percentage - of our total agrifood exports. Therefore, more than half of imports and exports of agrifood products come from and go to the United Kingdom. These are also much higher proportions than for Irish manufacturing. A British exit, or "Brexit", from the EU could potentially lead to significant disruption of this trade.

As the previous speakers have mentioned, much would depend on the nature of the trade relationship that is put in place between the UK and the EU post-Brexit. The various alternatives that are on the table include: membership of the European Economic Area, as in the case of Norway; membership of European Free Trade Association, EFTA, combined with literally dozens of bilateral agreements approximating the Single Market, as in the case of Switzerland; a customs union, as in the case of Turkey; a deep and comprehensive free trade agreement, as negotiated with Canada; or trade on most-favoured-nation terms without a trade agreement. I agree with the other guests that the UK is not likely to leave the EU because it dislikes some Single Market regulations, only to sign up to these again outside the EU. Therefore, the most likely outcome is a free trade agreement in which the UK is no longer a member of the Single Market, tariffs on most - if not all - trade between the two partners are eliminated and the United Kingdom is free to set its own trade policy, including tariffs with third countries. In my view, there is a good possibility that in that scenario trade in agrifood products would also remain tariff-free. I will call that the good outcome, although it is clearly less desirable than the maintenance of the status quo. In another scenario, tariffs might be reintroduced on some primary agricultural products and the primary element of processed products, which could include important Irish exports such as beef and dairy products. I will refer to that as the bad outcome.

Even in the good outcome, without the reintroduction of tariffs, there would be additional costs to trading compared to the current situation. Trade conditions would revert to what they were in the early 1990s prior to the introduction of the Single Market. Trade costs arising, for example, from the reintroduction of Customs controls, rules of origin checks, import licence requirements as well as the additional costs of complying with two different regulatory regimes where regulatory divergence occurs, would increase. This would put downward pressure on producer prices in Ireland and upward pressure on consumer prices, an important issue given the close integration of supermarket supply chains between the two countries.

The United Kingdom, given what we know about its preferences regarding food and farm prices, would be likely to adopt a less protectionist trade policy with respect to third countries. That means its average tariff on agrifood products would likely be lower than the EU tariff it applies today. It may also find it easier to enter into free trade agreements with extensive agricultural concessions with partners such as New Zealand, Australia, Mercosur and the United States. For both reasons, competition on the UK market will intensify for Irish exporters, even in the good scenario.

Food trade, more than most, is governed by detailed regulations governing plant and animal health and safety, marketing standards, labelling requirements, allowed food ingredients and many other areas. The greater the degree of regulatory divergence between the UK and the EU, the greater will be the costs for Irish exporters and importers. As aversion to EU regulations is one of the driving forces behind BrExit, one would expect the UK to adopt different regulations in many areas, although there are countervailing forces such as strong UK consumer, environmental and public health organisations which will seek to maintain high standards, as well as the fact that the EU will remain the UK's largest trading partner in food and agriculture, both of which will give it an incentive to keep its regulations harmonised with the EU, perhaps by continuing to transpose EU regulations into British law. None the less, examples where different regulatory regimes might emerge include the regulation of plant pesticide products, genetically modified crops and animals, and food labelling. These are all areas where the UK position is at variance with the EU position at the moment. Dealing with these different standards will imply higher costs for both exporters and importers.

If tariffs were to be reintroduced on some elements of agrifood trade between the UK and Ireland, in what I have called the bad outcome, trading costs could be increased by much more and, in some cases, could become prohibitive. The question of tariffs is also relevant to the introduction of an economic border between North and South of the island. Land borders between EU and non-EU countries are not unusual and in principle, under the good scenario, would not lead to problems additional to what I have already mentioned. Even if the UK were to pursue a less protectionist and more consumer friendly farm and food policy after BrExit, the likely change in food prices North and South of the Border would be much smaller than what we observe today as a result of exchange rate fluctuations. However, if tariffs were reintroduced there would again be incentives to smuggle those agricultural and food products subject to high tariffs.

There might be a temptation among some in Ireland to welcome Britain's exit from the EU because of its traditionally hostile attitude to the Common Agricultural Policy. However, in my view the overall impact of UK withdrawal on the future of the CAP would be rather minimal. Partly, the succession of CAP reforms and the greater flexibility provided to member states under the 2013 reform address many of the UK concerns. It is true the EU would lose a voice arguing for fewer exemptions and more trade liberalisation in concluding trade agreements with, for example, Mercosur or the US but on the other hand the UK is a massive net contributor to the EU budget, the largest after Germany, and it made a net contribution to that budget amounting to almost €11 billion in 2013. If the remaining member states want to maintain farm support at currently foreseen levels, they must be prepared to contribute more to the EU budget to ensure this following a BrExit. In this calculation, some member states that now see themselves as benefiting from high CAP spending could well move to the other side of the ledger.

In my view, BrExit is an outcome to be avoided if that can be achieved, but if it were to happen, the Irish agrifood sector should pursue a number of objectives in the subsequent negotiations on the UK-EU trade relationship. These include minimising the disruption to agrifood trade and particularly to avoid the reintroduction of tariffs, but also to seek to minimise the impact of regulatory differences, through continued UK adhesion to Single Market rules, at least as it relates to items such as product standards, veterinary and phytosanitary rules or through mutual recognition agreements.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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Thank you, Professor Matthews. We will now hear from Mr. Steve Aiken.

Mr. Steve Aiken:

I thank the Chairman for inviting me to address the committee. The views I would like to express are mine and not those of either the British Irish Chamber of Commerce or Dublin City University - as I go through some of my remarks, members may wonder why I said that. As I have this opportunity to talk to the members and to have heard what the three previous speakers said, nothing I say will contradict what they have done. The main point I want to get across is that things have changed significantly and that change is unlikely to be reversed.

I would like to start by quoting both George Osborne and Peter Spencer, the chief economist at Ernst and Young. George Osborne recently said:

My... goal is for Britain to become the most prosperous of any major economy by the 2030s...

It is within the power of my generation to achieve this ...

The ingredients are all here:

We now have the most competitive tax rates of any in the G20.

We've sharpened work incentives with tax cuts for the low paid, welfare reforms and a higher minimum wage ...

[We have also invested significantly in research and development and] We've secured the number one place in the world index for investing in infrastructure.

We're attracting more Chinese inward investment than Germany, France and Italy put together.

By 2030 we're set to have the largest economy in Europe.

These remarks have been covered by Peter Spencer, who said:

However it's not all good news. The global economy has slowed and prospects for the Eurozone appear to be going from bad to worse. The euro has fallen to an all-time low against the dollar, which will help combat deflation and stimulate Eurozone exports at the expense of UK producers. [However] Investors face the uncertainty of the UK General Election, followed by the possibility of a referendum on UK membership of the EU. Overall, the prospects have brightened - but remain ... risky.

These two statements point to several of the significant factors running through current UK political and economic thinking in the lead up to the election. These are that the UK economy is doing well, as is our own, and despite a significant debt burden, the UK's growth is outstripping that of Europe but the UK has more flexibility with its finance and economic policy than the eurozone. That raises a question of the UK's involvement within Europe.

A second issue, as seen from an increasingly sceptical UK audience, is that the problems of the eurozone may not have been arrested and may be getting worse. In the UK this is coupled with a subtext that the EU's attempts at stabilising and reflating the eurozone may no longer be a benign influence on the UK economy, but may be undermining attempts to achieve further growth in the UK.

There is a growing sense - I stress this is currently a minority opinion - in the city of London and several large corporations that I have had the opportunity to talk to that the comparative advantage for the UK of being part of the EU is being eroded. Eurosceptisim, which until fairly recently was largely absent from major UK companies but which was getting a significant hearing within the SME community, is getting a much wider audience. Mr. John Longworth, director of British Chamber of Commerce, at last week's British Chamber of Commerce Conference stated:

Chamber members fundamentally support the Prime Minister's objective: Britain in a reformed Europe. The next government must set out what it will do to protect the United Kingdom against the prospect of being in a club where all the decisions are made by, and for, the Eurozone.

More than any repatriation of powers, businesses want to know that the UK has safeguards against being drawn closer to the Eurozone

...Economic pragmatism - what's best for Britain, for British business, for our national growth ambitions - must win the day.

Before I talk about the impact it is likely to have on us, there are some disruptive factors, as already alluded to by Mr. Dáithí Ó Ceallaigh. The first of those is with regard to the UK election. There is an uncertain outcome both in the likely composition of government and in the role of parties such as the SNP, DUP, UKIP and the Greens. As a subsidiary point, it may be postulated that some form of EU referendum, regardless of the composition of the government, may be on the agenda.

It is also noteworthy that the themes of this referendum will focus not on economic issues but on emotive issues such as sovereignty in certain decision-making processes and, in particular, migration and the free movement of people across the EU.

The second disruptive factor is the effect the success and stability of the eurozone will have on the EU, sentiment in the UK media and the markets.

While not an immediate impact, the nature of the UK and its relationships within these islands is changing and will change significantly. An all-island corporation tax rate of 12.5%, similar arrangements for Scotland, and other regional attempts to gain competitive advantages to counter what is seen as the overwhelming influence of the south east will have an impact on us. We will be measured against Northern Ireland, Scotland and other regions in the UK.

A more fundamental point is that, when the UK thinks of Europe, it looks east. Even though we have a contiguous land border with the UK, in the vast majority of British thinking the EU is 25 miles away across the English Channel. Ireland is not part of the equation in any significant or fundamental way. This will have a considerable impact on us when we examine trade issues, particularly with our largest markets.

In terms of goods, services and trade policy, we must consider where the UK sees itself. For example, the patent box, research and development investment, reducing corporation tax, investment in infrastructure and investment in education are key in its estimation of how to make itself as competitive as possible. Given our success levels, we seek to take the same types of measure. Increasingly, we may be seen to be in competition not just with the UK but also with its individual regions.

The question of the possible imposition of tariffs and border controls has been raised by many informed debaters in Ireland, including myself and Mr. O'Ceallaigh. The implications of border controls and their political impact are recognised by those who are listening in the UK, but they are a relatively small group. When people discuss the EU, they do not think about the wider relationship on this island. It is not a significant calculation when dealing with the pro- and anti-EU lobbies.

The Transatlantic Trade and Investment Partnership, TTIP, is another area of significant impact. I am surprised that I have not heard it mentioned so far. For Ireland and the UK, TTIP is one of the most important areas that we would like to see grow and develop. The relationship with the US is particularly important, as both Britain and Ireland are Atlanticists in their outlook. Seeking a greater relationship with the US that links the world's two largest trade zones is a key consideration.

We have already discussed the UK's competitive edge, but it will undoubtedly seek further competitive advantage. A loosening of EU regulation will form part of that. However, one of the main points that is constantly mentioned is the UK's access to the Single Market.

Taking all of this as the backdrop, what will happen to us and what will the difficulties be for us? I had the opportunity to brief this committee two years ago, when I was asked directly whether I expected to see a "Brexit". I stated that it would be unlikely, for many reasons; the situation is now uncertain. For Ireland, it would impact on trade, agriculture, services, energy policy and so on. In the widest strategic sense as well as an economic and trading sense, a vast variety of activity in Ireland's relationship with the UK is likely to be affected severely. Regardless of the next UK general election and the referendum that will happen, though, the game has changed. We are in a new dynamic.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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I thank Mr. Aiken. He stated that a referendum would happen.

Mr. Steve Aiken:


Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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Will it happen regardless of the election or is he predicting the election's outcome?

Mr. Steve Aiken:

Regardless of the result of the election, there will be a referendum. There is a significant push for the major political parties to hold a referendum. As we head towards the election, we will hear the rhetoric increase, particularly in the British media, and a referendum will occur at some stage during the next Parliament.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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I thank the four speakers for their thought-provoking presentations. It is often difficult to have European matters discussed in this country because much of the time people do not appreciate their relevance or potential impact. It is very clear from all of the presentations that the public has not really zoned in on this topic, which is why this discussion is timely and helpful for our understanding of it.

Mr. O'Ceallaigh mentioned a period of negotiations, perhaps of two years, after any poll that might take place. If this is the realistic timeframe in which these negotiations take place, people will be led into a false sense of security that we will get a deal which resolves the major issues between us and the UK, such as the agrifood sector, trade generally, human rights or the movement of people, and that all will be fine. This might be the case in some areas, but we cannot end up on the other side of an exit of a country whereby that country gets the benefits and all the positives of these agreements. This cannot be the case. We must be careful. The fact we have co-dependence in certain areas should not lull us into a false sense of security that we will reach an amicable agreement. There is often conflict about issues which prevents the type of deals, arrangements or accommodations we want. This is why we have the European Union in the first instance, to try to do this in a balanced way.

My concern is that industry and trade generally will believe there is such a level of co-dependence that an exit will not really matter and we will sort it out. If this is the case, other countries will wonder what is the benefit for them of being restricted or constricted within a European Union and will consider going down the same road. Then we will be in the proverbial manure business. We must sell the argument that if one slate comes off the roof, the entire roof is in jeopardy. Here, and perhaps to a greater extent in Britain, we must try collectively to get the message across that it will not just be a series of bilateral agreements which will get us through.

Mr. O'Ceallaigh spoke about the impact on exports of a 3% or 3.5% reduction. I believe it would be greater. For a while the co-dependence would assist in maintaining the level of activity, but then we would start getting into tariffs and these would have an impact on deals with other countries. We would end up with this spiralling out of control and the consequences would become much greater than anything that might have been anticipated because of the complexity of the various arrangements which exist. We have a job of work to do to create this level of concern in the minds of the people who will be impacted greatest. There is a responsibility, particularly on those involved in active trade between the two countries, to spell out Ireland's concerns to their associates, whether customers or suppliers, on the other end to try to feed into it at the earliest possible opportunity.

The presentations were very solid and did not lend themselves to too many questions. I thank the witnesses for their assistance in our work.

Photo of Kathryn ReillyKathryn Reilly (Sinn Fein)
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I have a number of questions on agriculture and North-South economic relations. With regard to food labelling, a voluntary beef label was agreed in November 2014 under the voluntary label scheme to deal with the issue of nomad cattle. How do the witnesses think a British exit would affect the market for beef from mixed-origin cattle such as those which are traditionally exported to the North for fattening and slaughter?

This issue was fairly contentious and it has only recently been bedded down, for example, under the voluntary scheme. What could happen to those farmers who are using "Irish" as a voluntary term in connection with their meat?

Second, what will happen to farmers whose land in Border areas is split between the North and the South? What consequences will the reimposition of the border between the EU and Britain have?

Finally, following a possible exit, what will happen in terms of economic and social relations between North and South? When one considers that many existing areas of North-South co-operation such as trade promotion, agriculture and rural development, environmental issues, health and transport take place within an EU framework, what needs to happen in terms of the political leaders?

Photo of Eric ByrneEric Byrne (Dublin South Central, Labour)
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Following our previous experience with witnesses, I came in here of the view that we were dealing with a complex question with many ifs and buts. However, I am sorry to say I have been made deeply depressed by the contributions, particularly when our little dream that the referendum may not be held is, according to Mr. Aiken's position, unrealistic, notwithstanding that the election has not yet occurred and the Tories have not yet won, and all the ifs and buts that go with the United Kingdom's internal dynamics in terms of Scotland and, to a lesser extent, Wales.

We were also dealing with the notion that, no matter what happens, there must be a significant amount of negotiations before the fact, even if the Tories win the United Kingdom election. I do not know how long that might take. Presumably it would take years, because we would be talking about a considerable process of unravelling. What will happen with the internal dynamic, for instance, within Northern Ireland, with the Unionists and Sinn Féin, and with Northern Ireland vis-à-visthe majority of Scottish MPs? There are still a lot of balls in the air.

Frankly, the debate about Europe needed Greece like it needed a hole in the head. Would they agree that those eurosceptics in Britain and across Europe might be taking solace from what is happening with Greece? My worry is that there are so many people who are now becoming eurosceptics that they are seeing immigration. My question on immigration is as follows. Are UKIP, the Conservatives and the British people more concerned about the free movement of people from within the Union of 28 than what they perceive to be the influx around the Mediterranean from North Africa, of, for instance, Iraqis and Libyans? There are hundreds of thousands of people trying to get to Europe. Of course, Britain is conscious of its rail link with France and the horrors of significant numbers of stateless persons all trying to get across, either on ferries or on lorries, to Britain. Is the worry immigration from outside or from within the Union? We are in a horrible situation of an unstable world. There is Russian expansionism in Ukraine, potential Russian expansionism in Latvia, and unstable relations from Moldova to God knows where. Sadly, there are a considerable amount of people on the move - more than ever there has been. Of course, Greece has been seen to be the leaky border that facilitates the through flow. I am rambling. Italy, Australia and Japan, amongst others, are taking specific steps on controlling immigration and the movement of people. I note the horrors that would occur if the worst should be realised.

I congratulate the Chairman of this committee on engaging in this very theoretical but very serious debate. How should the Government now engage, and with whom? Should it start with bilateral talks with our 27 colleagues in Europe? Should it start engaging immediately with the British Tories, or should it start engaging with the Commission? How can we now be sufficiently proactive in engaging with the key players so we will not be left guessing the outcome for Ireland if the United Kingdom decides to leave the Union?

Photo of John HalliganJohn Halligan (Waterford, Independent)
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I found Mr. Aiken’s submission very interesting. He said there will probably be a referendum. Consider the consequences beyond the economic effect on Ireland if the United Kingdom leaves the Union. There was a referendum in the United Kingdom in 1975. Even with all Mr. Murdoch’s media backing the UK Government at the time, the result was still two to one in favour of the United Kingdom staying in the Union, which was very close. The United Kingdom rejected the single currency in 1999 and also the Maastricht treaty. One may recall that Mr. John Major’s Government almost collapsed in 1993. It is very interesting that the Institute of Economic Affairs stated recently that the United Kingdom could be better off outside the European Union. I believe it cites the cases of Switzerland, Iceland and Norway, which lie outside the Union but which are part of the European Free Trade Association. They, apparently, enjoy all the benefits of the EU Internal Market. I was listening to Mr. Nigel Farage some weeks ago. He quotes organisations such as the institute and claims what it has outlined could be the case. Even within the British Labour Party, some of whose members I know, there is a lot of scepticism that is not coming to the fore regarding the European Union. It is not just coming from the Conservatives. I do not believe the view on Mr. David Cameron because many of the businesses in England have railed against leaving the United Kingdom. However, I believe it is inevitable there will be a referendum and that Mr. Cameron has to call one.

During the last few weeks of the campaign in England, the Labour Party itself will come under fierce pressure internally to call a referendum. What is the delegates' view on the Institute of Economic Affairs, which appears to be contending the United Kingdom could very well be fine outside the European Union? What is the delegates' view on Switzerland, Iceland and Norway? Believe it or not, they indicated in recent months that they would have no interest whatsoever in being part of European Union because of the European Free Trade Association. They seem to be doing quite well outside the Union. If a referendum asking the UK electorate to leave the Union were called in the morning, it would be carried.

Photo of Seán KyneSeán Kyne (Galway West, Fine Gael)
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I apologise for being late. I missed the contributions as I was at another committee meeting, which started at 1.30 p.m. I have read through some of the transcripts and other submissions on this matter. I have a few questions for Mr. Matthews on agriculture. I am not particularly sure what trade role the Commonwealth has at present. Would Commonwealth countries benefit or be afforded opportunities if the United Kingdom left the European Union? What will transpire given the view that Britain, as a food importer, would benefit from the Commonwealth rather than the existing arrangements within the European Union?

Regarding the vote, I presume Wales and Scotland are more reliant on the Common Agricultural Policy than England. Would this have an impact? Was any analysis done regarding direct transfers? Wales and Scotland have many environmental programmes that are funded through the Common Agricultural Policy, whereas England has a much higher number of larger farmers with larger single payments who would not be as concerned as the Scots or the Welsh.

My next question is for Professor Mullally.

According to British commentary over a number of years, there seems to have been an inordinate amount of discussion about the radical cleric, Abu Hamza. It took a number of years to expel him and it seemed to be garnering headlines. Does Professor Mullally think that incident alone has caused damage to the case for the European Convention on Human Rights?

I would like to ask Mr. Aiken the old question about Wales. I have not seen individual polling figures, but is there a possibility that Wales, Scotland and Northern Ireland could vote "No", yet if England votes "Yes", the "Yes" side would win? Has there been any discussion on what would happen if the result was 50.5% "Yes" versus 49.5% "No"?

Migration is obviously a big concern. In January 2014, when the rules changed for Bulgarians and Romanians, the television cameras were waiting at airports expecting this huge influx. However, one poor creature got off the plane and was that day's headline. Given that we have a Border with the Six Counties, would there be a concern in Britain that if borders were not reinstated, we would be an easy point of access to the UK for migrants who could come through Ireland?

Photo of Aideen HaydenAideen Hayden (Labour)
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I have a number of observations to make. Mr. Aiken made an interesting point that we are not that important in this debate from the UK's point of view. In fact, giving us some of the historic preferential new tariffs, or no tariffs at all, might be against the interests of regional Britain.

In terms of rational expectations, the witnesses all seem to be agreed that there will be some form of referendum in the UK at some point, whether in 2017 or thereabouts. At what point does it become a self-fulfilling prophecy, one way or the other? In that sense, businesses will start to anticipate an outcome at some stage, particularly concerning foreign direct investment, inward investment and British firms' decisions to relocate some of their activities outside the UK. What impact might that have?

Professor Matthews made an interesting point on standards in the agricultural sector. He said it would be in Britain's interests to keep its standards uniform with the rest of Europe. Does that transpose across to other aspects of the economy? One of the things to fear is that Britain gets all the benefits of leaving with none of the costs other European countries have arising from social or regulatory standards. To what extent does Professor Matthews think that is possible, or will the balance be more in favour of Britain retaining the standards of the rest of the EU countries?

If the various measures currently being taken in Europe prove to be successful in reflating the European economy - for example, quantitative easing and the Juncker plan - to what extent does Professor Matthews think a European recovery could make a difference to the outcome? How much of a factor is a European recovery? There seems to be a view in Britain which says they have done very well outside the eurozone, the strategies they have followed have proven to be the correct ones and they do not need Europe. If Europe was to start turning the corner, however, would that have an influence on matters?

The UK is the EU's single biggest market. Professor Matthews might correct me if I am wrong, but I understand that the UK imports more from the entire EU than it exports. In other words, it is a net importer of all EU goods. How important is that as a factor in the negotiations for other EU countries in trying to influence the UK's outcome? As regards the negotiations, how much are other EU countries willing to concede?

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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Before returning to our speakers I wish to comment on the likelihood of a referendum. My understanding, from speaking to my colleagues in the Labour Party in the UK, is that their leader, Ed Miliband, has faced down calls from within his party for a referendum. I would have thought it would be unlikely, should the Labour Party get into government, that we would see a referendum. It is an issue for them and it is not for this committee to decide whether there should be a referendum. We are more interested in the impact.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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Try influencing the Prime Minister at the moment.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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Let us look at the speech David Cameron made at the Bloomberg headquarters in January 2013. On that occasion, he identified a number of issues on which he would like to see reform in Europe, as well as many other things. I think there were five in all. These included the implementation of the Single Market, on which he will not find any disagreement here; competitiveness; the issue of the disconnect between citizens and Europe; and the need for national parliaments to use to a greater extent the powers that have become available to them since Lisbon. All of which we agree with here.

When it came to a concrete list of proposals, the UK Government undertook to carry out a balance of competences review, going through each Department and identifying the type of power that could perhaps be returned to the UK national Parliament. My understanding is that it was not a huge list of items that came out of that particular review. From looking at the debate in the UK over the past 12 months, I feel the question is more focused towards freedom of people and workers. I noticed in today's Financial Timesthat one of the most senior trade diplomats has said he does not think the programme of negotiation from Mr. Cameron is extremely ambitious. He thinks there is a very small list of requests from the UK Government. It is suggested that perhaps, as a result, a negotiation process could be undertaken and resolved quite quickly post-election, in advance of a referendum.

Can our guests tell us their views on what needs to be changed in order to meet a minimum requirement for the UK Government to advocate a stay-in vote if there is a referendum? Clearly, if the Conservative Government does win, then what we in this country would like to see is for the Government to advocate a "Yes" vote. What is required from Europe? What changes do the witnesses think would be the minimum required to convince the UK Government to advocate a "Yes" vote? A lot of questions have been asked. Does Senator Hayden wish to contribute?

Photo of Aideen HaydenAideen Hayden (Labour)
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I wish to give my apologies. I will read the replies in the transcript.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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I suggest we start off again with Mr. O'Ceallaigh and work our way around. I ask witnesses to answer as many questions as they can, and if they want to make any concluding remarks at the same time they may do so.

Mr. Dáithí O'Ceallaigh:

I thank the Chairman. I shall first address the question of whether there will be a referendum. It is quite true that the Labour Party leadership is against a referendum. However, there are two things which could bring about a change. The first is political pressure, particularly in the run-up to the election. Rather more importantly, Westminster passed legislation which stated that there would be a referendum were there to be treaty changes in the EU. There is quite a possibility that there will be treaty changes in the EU within the foreseeable future. It is my view, for what it is worth, that there will be a referendum in the UK in the foreseeable future, and that no matter what the wording is, in essence it will be a referendum about whether it stays in the Union or pulls out.

On the question of Switzerland, Norway, Iceland, Turkey and so on, none of the arrangements that those countries have with the European Union would suit the United Kingdom. They all mean that those countries have to accept free movement of people. Free movement of people is at the heart of the British problem - the question of immigration.

It would mean, in effect, that Britain would have to implement all forms of European legislation, without being at the table when that legislation is being negotiated. I do not believe the British would find any of the solutions that Switzerland, Norway, Turkey and Iceland have found acceptable. If there is to be a new agreement with Britain outside the EU, it will have to be something specific to Britain.

Let us presume that the UK has a referendum and it decides to withdraw. I agree that the negotiation will be extremely difficult, as has been said by one or two of the members of the committee. I cannot imagine a member state wishing to give the United Kingdom a better deal outside the Union than it has inside the Union, particularly given the amount of time that the member states have had to spend up to now, not to mind between now and when the negotiation takes place, trying to assuage the British position. The fact is that member states are losing patience with the British. We hear that from all over Europe. They feel that concessions were made to the UK in the Lisbon treaty which it was believed would settle the question of British membership for a considerable period, but that is not what happened. Instead, British membership of the European Union is on the table at practically every meeting that takes place in Brussels or Strasbourg. There is a lack of patience with the British within the Union.

The implications for Britain, should it withdraw, are very deep. The leader of the Scottish National Party has said that she would like to see a majority one way or the other within Scotland, and that it is not sufficient for an overall majority in the United Kingdom to withdraw if there is a majority in Scotland that wishes to remain in the EU. If the Scots take that position, it is quite likely that the Welsh will take the same position. Northern Ireland is even more complex. If the British take a decision to withdraw, there is a serious possibility that the United Kingdom could break up. The unitary state with sovereignty in Westminster could break up in one way or another. The Scottish question has not been settled. The implications for Northern Ireland are enormous, as are the implications for our relationship with Northern Ireland. These are matters we really need to ponder.

What should we do? We should decide whether it is in our interests that the United Kingdom remains in the European Union. If we decide that way, and the Government has made its position very clear, we should examine what we can do to try to ensure that it does remain in the Union. There is one area where the British are not involved and, in my view, are very unlikely to be involved, if ever, and that is within the Eurogroup. As a result of what has happened over the last five to seven years, that Eurogroup is becoming increasingly closer. We might need to think of a relationship, or try to bring about a relationship, in which the United Kingdom remains within the European Union but with some type of special relationship with the Eurogroup. As I said earlier, the special arrangements made with Norway or with Switzerland will not meet that situation.

It is correct, as the Chairman said, that in his Bloomberg speech Mr. Cameron indicated some areas of concern. He also indicated more areas of concern in an article he wrote in The DailyTelegraphabout a year ago. Frankly, I am sure solutions can be found in the seven or eight areas of concern he mentioned, but I believe the problem is much deeper.

As mentioned by Mr. Aiken there is a cultural problem here and a historical sense of British exceptionalism. As stated in our book which will be published shortly, it may be that we have reached the endgame in terms of finding new arrangements which keep the United Kingdom within the European Union without inhibiting the drive within the eurozone to go forward.

Professor Siobhán Mullally:

A number of speakers mentioned that free movement rights have been very much at the heart of the push to consider withdrawal from the European Union. Many of the proposals for reform that have been put forward as a possible condition to the UK remaining within the EU would require reform of the treaties and of the core fundamental freedom of free movement and so would be difficult to secure, although not impossible. They raise significant legal challenges and would be politically difficult given that free movement has been very much at the heart of the European project.

There is also concern that some of the proposals I mentioned would have significant implications for UK nationals living in other parts of the EU, including Ireland, Spain, France and Germany. For example, should the type of reforms being proposed be proceeded with, the cost to other EU members states of providing the type of publicly funded health care provided by Spain to ageing UK nationals living there would be significantly difficult. The desired approach of some UK parliamentarians is a type of à la carteapproach to free movement, in other words, free movement negotiated with some member states but not all. This, of course, would be legally problematic, would not fit with EU free movement rules and would be politically very difficult to secure. The preference would be for bilateral negotiations with selected member states but not including all 28 member states and, most specifically, not including the newer member states that have acceded to the EU.

There is significant misinformation circulating around immigration and free movement. There is little evidence to suggest that free movement is primarily for the purpose of, for example, securing access to social security rather than work and study opportunities. Unfortunately, this type of misinformation does take root and hold. With regard to third country nationals, non-EU and non-EEA nationals, there are already significant restrictions in place in terms of immigration under EU law. As such, movement is already restricted and regulated. In the UK context, the points system and five-tier system apply. While there are already significant restrictions in place, the UK and other EU member states have taken a selective approach in terms of prioritising immigration for highly skilled nationals who meet the requirements of their job markets.

The right to seek asylum, the position of asylum seekers and those seeking protection was raised. Withdrawal of the UK from the EU would not change the position in that regard in that the right to seek asylum and protection predates the coming into existence of the European Union. The UK will continue to have obligations under international refugee law, including the 1951 convention relating to refugees to which it is a party, the UN convention against torture to which it is a party and the European Convention on Human Rights which protects against refoulement,namely, return of a person to a country where he or she would face a serious risk of torture, inhumane or degrading treatment. The debate around the European Convention on Human Rights and the Human Rights Act is a related but separate debate.

Of course, that has also become very problematic in the UK and has significant implications for Ireland, given the requirements of the Good Friday Agreement.

With regard to the crisis concerning people fleeing from Syria, the burden of that is being borne primarily by Mediterranean states and with very little EU support in terms of meeting the significant responsibilities and burdens that have arisen.

Regarding the Abu Hamza type of scenario, this is something that arises under the European Convention on Human Rights and the non-refoulement obligations. It raises a core question as to whether we consider that human rights protections apply to all persons, including those persons we may not like and who may not be considered desirable. Is the protection from torture and inhuman and degrading treatment to be considered absolute? It is under European human rights law and, of course, it has been very much valued in Ireland as we saw most recently in the request to the European Court of Human Rights to re-open the Ireland and UK case. Again, significant misinformation circulates around something like that. That protection would remain regardless of withdrawal from the EU in that it is provided for under the UN Convention against Torture, the refugee convention and the European Convention on Human Rights, for example.

With regard to the position of movement between Northern Ireland and the Republic and the safeguarding of the common travel area arrangements, it is likely that there would be an attempt to secure that and that it could be secured in some way. However, managing that in practice would be very difficult given that there would be a need for strengthened border controls with regard to the movements of non-EEA nationals.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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We are outside Schengen at present.

Professor Siobhán Mullally:

Yes, but we still have a common travel area. If the UK were to opt out of free movement laws and were to be outside of that, apart from Schengen, other free movement protections would not apply, so we would require significantly more policing than we currently have. That would be quite difficult in practice as well as legally.

The final point relates to a comment that was made as to whether the benefits of free movement could be retained. Again, this goes to whether it would be possible to negotiate a series of bilateral agreements or a position such as would be available as a member state of the EEA. As I mentioned, that is very unlikely given that much of the debate has been around limiting free movement. Giving that type of concession is unlikely either to meet the needs or desires of those proposing an opt-out for the UK or those seeking to leave the EU entirely.

Professor Alan Matthews:

I will confine my remarks to the specific trade questions that were raised rather than the broader political issues, as the committee has heard some very helpful comments on that already and Steven Aiken will probably add to that when he speaks.

On the trade issues, I refer to the point made by Deputy Dooley to the effect that there might be a temptation among Irish businesses to think that as we have a special relationship with the UK, we can still manage to come to an accommodation which would ensure that our beef, dairy products and other products avoid any tariffs and so forth even if Britain leaves. It is important to be clear that the rules regarding trade relationships have become much tighter since the days when we had the Anglo-Irish Free Trade Agreement. Even though, at least legally, it might be possible to think of the common travel area as a type of bilateral agreement, although as Professor Mullally has highlighted there could be very practical difficulties in introducing it, the idea of a bilateral trade relationship is completely out of the question. First, the UK will remain a member of the World Trade Organization, WTO, which prohibits discriminatory trade arrangements except in the context of regional trade agreements.

It would only be possible for Ireland to have a special relationship if, from a purely theoretical point of view, there was a bilateral relationship. As we know, external trade policy is now an exclusive competence of the European Union and we are not at liberty to enter into our own trade agreements with a third country. If we want to protect our interests in a post-Brexit situation we have to do so through the arrangements that the EU as a whole will enter into with the UK, whatever they might be. It is important to scotch the idea that somehow we can have some sort of bilateral old boys' network arrangement between the UK and Ireland, at least on trade issues.

Deputy Kyne raised the important issue of the UK's relationship with the Commonwealth and so on. I referred to the matter in my opening remarks. Certainly, the UK would, post-Brexit, be entitled to pursue its own trade policy. That means it could set its own level of tariffs which would apply to other countries, including exports from the EU. The UK could also enter into its own free trade agreements. I suggested that it would be highly likely that the UK would find it easier to have a free trade agreement with New Zealand and Australia, because the world has changed since the old days of the Commonwealth, and also with Mercosur, the United States and so on. The UK would be more willing to give agricultural concessions than perhaps the EU is in negotiations with the same groups of countries. I agree with the Deputy that this is an obvious path for the UK to pursue in a post-Brexit situation. That would imply, it seems to me, increased competition in the UK market for Irish exporters, because we would have to compete with cheaper Brazilian beef or New Zealand dairy products than we do at present.

A third comment which came across from a number of contributions is the idea that if Britain were to withdraw it could negotiate a deal which would give it the benefits of access to the Single Market without having to accept the costs. It is important to be clear on the matter. Mr. O'Ceallaigh has explained the nature of the agreements with the European Economic Area countries and with Switzerland, which is a little different. Switzerland has a free trade agreement but it also has a lot of bilateral agreements which link it very closely with the Single Market. It is important to emphasise, as Mr. O'Ceallaigh did, that these countries, in return for getting access to the Single Market, commit to transposing every single EU directive directly into their domestic legislation without having any possibility of influencing it. There are some consultation rights and so on, but these are not very meaningful.

Let us consider the apocalyptic situation in which we are faced with a Brexit and are trying, two years later, to negotiate a common EU arrangement with the United Kingdom. For example, let us look at the key issue of the Transatlantic Trade and Investment Partnership, TTIP, which is no longer tariffs but has to do with regulatory co-operation. I would have thought such co-operation would also be a key area in the post-Brexit trade negotiations. At least in the case of agriculture and food, it may well be the case that the UK would be willing to continue with EU standards and might even be willing to accept, in certain limited areas, that it would simply adopt and transpose EU regulations in these areas. Due to the importance of its own trade with the EU, the UK might be prepared in some limited areas to accept that loss of sovereignty in return for the access that these Single Market arrangements would give it. Perhaps I am not as pessimistic, if we have a free trade agreement, about whether it will be possible to integrate some mutual recognition arrangements and so on.

It would imply, I think, that the UK would simply have to agree that in these areas we will follow EU legislation to ensure we keep our access.

Senator Reilly raised two questions, and she has put me on the spot. It seems to me that Brexit would not require any change in current arrangements. She raised the question of a farmer with land on both sides of the Border. I think that farmer would not notice any big difference because as members are aware one's entitlements to direct payments - let us assume the UK keeps that entitlements type system - are not transferable across borders. If one had a situation where one could transfer one's entitlements across members states in the European Union, then if Britain withdrew, that would affect it. At present one's entitlements on land in the North and in the South are completely separate. As I reflect on it, that would not be affected by Brexit. Similarly, the cattle and the voluntary food labelling is the sort of bilateral agreement that could continue. Although there could be significant disruption to trade, on both of these issues I do not see Brexit as having a major impact.

Mr. Steve Aiken:

I will deal with the issues in the order in which they arose. Senator Reilly raised the issue of beef supplies and Brexit. When I was in the Chamber one of the things we looked at quite closely was what we called the circularity of trade. The reality is that the UK, if it went alone could not source enough beef in the UK and would always look to Ireland. For many of the larger supermarket chains and the fast food companies, British and Irish beef are synonymous with each other. That would continue. If we look at the large numbers of companies that are involved in that space, I cannot see that changing. That would be quite significant.

The one thing that does bother me, as Senator Reilly mentioned, is the issue of the North-South economic relationship and what is likely to happen if there was a Brexit or any sort of change. I am on the board of the Irish-British Association and one of the things we have been trying to do in the past couple of years is to raise this debate because there does not seem to be any critical thinking at the possible implications on a North-South relationship if we move toward Brexit. Last October-November we hosted a conference in Queen's University Belfast and Mr. Dáithí O'Ceallaigh and others in this room attended. Quite a few academics were involved in the conversation, but significantly, of the political parties only UKIP turned up, which made it quite an interesting debate. The reality is that this issue needs serious consideration.

This leads me on to the answer to Deputy Byrne's question on what should Ireland be doing. Ireland is in an unique position with the United Kingdom, because it is trusted as a trusted agent. The United Kingdom views Ireland as a great friend to the United Kingdom, that thinks the same way on many issues. In fact our views and opinions have a considerable degree of weight. We might not think they do, but they do. One of the things we should be doing is helping this advocation process of informing the United Kingdom about the importance of remaining within the EU and talking to our European compatriots about the importance of keeping the UK in the tent.

That leads to a question about what we should be seeking to ask as well. What would the UK be like outside the EU? In the global context it would be much diminished. It would have less influence on the world. It would be still a significant economic power and it would be a significant power, whatever it wants to call itself, but it would be diminished. I sat on several of the EU competency panels both in London and in various other places and one of the things that came through in the discussions and in the study is that it would not be in the UK's interests to be outside the EU.

That is not the same as saying the debate can be shaped among the British populace, or that it is the same sort of result for which they should be looking. That would be the answer I would arrive at for that one as well.

Mr. O'Ceallaigh has already touched on the implications for Wales, Scotland and Northern Ireland. I have had the opportunity to talk to various leaders from the Scottish National Party over a considerable period of time in the past three years. It is quite clear that a major constitutional issue would arise if Scotland voted to stay in and England voted to go. I would say there could be similar sorts of arrangements in Wales and in Northern Ireland. If most of the constituent parts of the UK - by the national composition of the country, rather than by population - wished to remain in the EU but England, with a substantial body of population, particularly in the south east, was potentially looking towards moving out, that would represent a significant crisis point. It would have major implications. A steady hand, a reasoned debate and the voice of friendship from Ireland would be of considerable importance in that context.

I was also asked about the business position and the impact on business if the Brexit were to become a self-fulfilling prophecy. Some businesses actually have a long-range horizon, whereas others do not. Those that have a long-range horizon are already beginning to look at these issues as well. If one listens to the debates within the Confederation of British Industry and the British chambers of commerce, one will be aware that their view is that some form of accommodation will be met. It is an interesting point when we talk about imports and exports. The activities of companies like Airbus and BMW motors as part of the prevailing "just enough, just in time" manufacturing process show how integrated the UK is within the European manufacturing chain. I refer to the large-scale output from certain places as "the Swindon effect" because all of BMW's diesel engines are manufactured in Swindon before being put into vehicles in the US, Germany and Austria. European countries have a great deal of interest in making sure the UK remains part of the process as well.

I was asked whether a European recovery would be of benefit to the pro-EU lobby in the UK. Of course it would. One of the reasons the euroscepticism debate seems to be gathering momentum relates to what is happening around Greece, its wider implications and what is happening in eastern Europe. The UK is looking to show greater leadership in sorting out Europe's problems. If the eurozone were to pull itself out of its current malaise, get the deflation business sorted out and begin to experience real growth again, particularly in key areas, it would be a very positive statement for the UK electorate when it is thinking about whether to remain in the EU.

I will conclude by setting out what I would advocate to encourage the UK to stay in when it votes on EU membership. We have already spoken about the implications of the vote for the free movement of people and of ideas. This is one of the areas we would probably need to look to. The most significant thing we would probably need to do is to ensure the EU is looking at what is possible. We need to make sure it is well signalled to the UK that the EU is willing to move at least in some direction to keep the UK within the EU. Even to mention that the UK would be much better within the EU from the majority of the EU would probably be a very significant push. I thank the committee.

Photo of Dominic HanniganDominic Hannigan (Meath East, Labour)
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On behalf of the committee, I thank all of our guests for attending today's meeting and for giving of their time. The committee will have further discussions on this issue at its meeting next Tuesday.

The joint committee adjourned at 3.40 p.m. until 2 p.m. on Tuesday, 24 February 2015.