Oireachtas Joint and Select Committees
Thursday, 6 April 2017
Joint Oireachtas Committee on Foreign Affairs and Trade, and Defence
Potential Impact of UK Withdrawal from the European Union: Discussion
On my own behalf and that of the joint committee, I express deepest sympathy to the people of Russia, particularly of St. Petersburg, following the recent atrocity there. We offer our deepest condolences to the families of the bereaved and those who were injured in the attack. It seems as though ever week some part of the world is affected by shameless acts of terrorism. As I have stated previously, it is up to all of us, through international co-operation, to condemn these actions and do everything possible to ensure every effort is made to minimise the occurrence of these acts. I propose that we write to Ambassador Peshkov to express our sympathy.
I also express our utter condemnation of the barbaric act in Syria on Tuesday which caused the death of more than 70 innocent men, women and children.
In the first part of the meeting we will hear from Dóchas. It is part of a series of meetings in the coming weeks on the potential impact of Brexit in areas identified as falling within the remit of the committee, at the end of which it will prepare a report on the relevant aspects. On behalf of the committee, I welcome Ms Suzanne Keatinge, CEO of Dóchas; Ms Raphaëlle Faure from the Overseas Development Institute; Ms Vikki Brennan, director of Proudly Made in Africa; and Mr. Sorley McCaughey, director of advocacy and policy with Christian Aid Ireland. We will hear their opening statements, following which there will be a question and answer session with members.
At the request of the broadcasting and recording services, members, delegates and those in the Visitors Gallery are requested to ensure that for the duration of the meeting their mobile phones are turned off completely or switched to airplane, safe or flight mode, depending on the device used. It is not sufficient to leave them in silent mode as this will still maintain a level of interference with the broadcasting system.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person or body outside the Houses or an official either by name or in such a way as to make him or her or it 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 the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a 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 they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Ms Suzanne Keatinge:
I thank the Chairman for his opening remarks and setting the scene. I was reflecting that it was July last year when Dóchas last met with this committee and we discussed migration and refugees. That issue has not gone away. I share the Chairman's horror about the chemical attack in Syria. If ever there was a need for strong political leadership and collective action it is surely now, yet here we are, in the face of Brexit and all the rest, and some might say that we are getting further away from those collective political actions. We are also seeing the negative consequences in that regard. Later today, the committee will hear from our humanitarian colleagues in MSF, Oxfam and Concern, who will speak about the situation not just in the Middle East, but more broadly in South Sudan, Somalia, Yemen, and north eastern Nigeria. Some 20 million people are at risk of famine, but it is important to get the message across that this is preventable. Many of the Irish NGOs are doing great work on that but the important point is that it is time for political action and for serious financial commitment. If we do that, it is preventable.
Against these pressing humanitarian needs, we also face the new political uncertainty created by Brexit, which is where we want to start our conversation today. It is important to say that in November 2016, Dóchas did a quick survey among our members, of whom 76% felt that Brexit would have a negative impact on our work. In fact, 42% of respondents were already experiencing that impact, much of it from the impact on currency conversions but also other aspects.
It is great to be here today and we welcome Ms Raphaëlle Faure from the UK's Overseas Development Institute, who will share some of her analysis and reflections. I was speaking to her earlier about what the mood was like in the UK and I am sure she will share that with the committee, but it is not all sunshine. We will also hear from Mr. Soley McCaughey from Christian Aid on tax justice issues and Vikki Brennan from Proudly Made in Africa.
What I hope the members will take away from this morning's session in terms of the Brexit conversation and the humanitarian aspects is that, first, there are many things at play. There is no doubt, particularly with Brexit, that it will be complicated, but I hope members will bear in mind that there is an important development perspective and that they bring that to the many discussions I am sure they will have in the coming months in the many areas in which they will be involved. Above all, it surely says that joined-up thinking and the need for policy coherence is as important as ever. Brexit cannot simply be about internal issues of trade, security and border controls. It cannot just be about managing migration and building walls; in fact, we would argue that it has to be about tearing down those walls. Ireland, along with many like-minded countries, has a leadership role to play. Similarly, I hope to illustrate the important role that civil society has to play in many of these debates through our members contributing today and also the many people in the Gallery.
Our role is to bring to members as decision makers the voices of the marginalised, the dispossessed and the poor as well as to provide the committee with the facts on the ground of what is likely to change after these major political shifts. I hope that this is the start of the conversation and that members will keep us in mind and engage in dialogue with us as the situation progresses in the coming years.
The issues before the committee speak to the need for Ireland to continue showing its strong leadership in international development and keep that at the core of foreign policy. We will support and encourage that. This will require championing critical issues, which Irish Aid and others are already doing, in poverty alleviation, gender equality and humanitarian best practice. We must step up to the plate in many other respects, though. It is not that long ago - the end of 2015 - that we celebrated three important multilateral agreements, those being, the sustainable development goals, SDGs, the Paris climate agreement and the Addis Ababa agreement on financing for development. How have we progressed these? I do not need to remind members that Ireland's financing of overseas development assistance, ODA, places us in the lowest percentage at 0.3% of GNI, which is the lowest in 17 years. There is cross-party support for a multi-annual plan to move towards the internationally recognised target of 0.7%, but nothing practical has been done. We must take practical action.
While discussing immediate issues is important, it is also important that we keep an eye on the bigger picture, namely, shaping an Ireland of the future that demands a vision for growth that is based on fairness, equality and sustainability. Deputy Crowe and others attended the launch of the SDG coalition in March. I hope that they agree that we must grab hold of the SDGs. They provide the bold, collective vision for change and transformation that we desperately need. To achieve them will demand a fundamental shift in the way we work and bold and brave political choices. Eighteen months after the Taoiseach signed the SDGs, we are still none the wiser as to how the Government will progress them. We understand that the matter is with the Cabinet and we are awaiting that decision, but time is moving on. This is not about 15 years' time. The SDGs cannot be put on hold until we solve the migration crisis or Brexit. Quite the reverse - they are the roadmap that we need now. They will allow us to respond collaboratively and think outside the box in order to meet the many challenges that the committee will hear about this morning. They demand that we make choices in the spirit of collaboration so that, while we can be realistic and practical, we can also work in a spirit of solidarity.
I thank the committee for allowing us to contribute. I will hand over to Ms Faure of the Overseas Development Institute, ODI.
Ms Raphaëlle Faure:
I thank the committee for inviting me. I sit in London at the heart of Brexit working for a development think-tank. Members' peers in the UK Parliament are also trying to get their heads around what Brexit will mean for development policy.
Article 50 was triggered approximately two weeks ago, some nine months after the referendum. The two-year process for the UK to exit is starting, but at this stage there are more questions than answers. It remains unclear what the implications will be on EU development policy and the associated budgets. Brexit will impact on these issues and change the balance of power within the EU, given that a major member is leaving. Perhaps there are opportunities that Ireland can grasp to be more influential on the EU scene.
Brexit will impact on EU development policy and budgets in three main ways, the first of which is the geographical allocation of aid. Within the EU, the UK had a strong influence on choosing which countries received money. The UK's former colonies and Commonwealth countries benefited, so a question arises over how their interests will be represented once the UK leaves. It is worth noting that more than half of the countries in the African, Caribbean and Pacific group are members of the Commonwealth.
The EU may now decide to focus less of its money on these countries and other member states, such as France, will have a greater voice in decisions. For example, it could choose to push more aid towards francophone countries. However, this would most likely be counterbalanced by important donors like Germany, Denmark and the Netherlands. Newer member states like Poland and the Czech Republic are playing a greater part in EU development policy, presenting another possible counterbalance to France's interests.
Second, there is the question of the future relationship between the EU and the African, Caribbean and Pacific, ACP, group. The committee may know that the Cotonou Agreement, which is the framework under which that relationship is governed, will expire in 2020 and negotiations on a future agreement are about to start. The ACP is a heterogeneous group and it is unlikely that the next agreement will be similar to the current one. Without the UK's influence and involvement in the discussions, questions arise over how the interests of some of the anglophone African and Caribbean states will be reflected.
Brexit will have a major impact on how policy making is done in the EU. The UK was a strong, welcome, progressive and influential voice on development. Other member states looked up to it and the Department for International Development, DFID, and how they undertook aid policy. Now that they are out, other member states will push their own agendas and some issues may lose traction. The UK was vocal on meeting the 0.7% aid-to-GNI target, women and girl's rights, keeping the focus of aid on poverty eradication, having a strong results framework for measuring the impact of EU aid and using cash transfers in humanitarian crises. These issues may lose traction if no other member state takes them on. Perhaps this is an area that the Irish Government, and the committee in terms of its influence on the Government, might wish to consider.
Brexit opens up a number of opportunities. The UK has repeatedly opposed or put the brakes on what is called joint programming. Perhaps there will be more opportunities for this to happen in future. Joint programming involves donors agreeing a single strategy in a recipient country so that there is greater coherence between donors and developing countries have fewer donors to handle, that is, they speak to one person.
Third, Brexit will have a major impact on the budget. The UK contributes approximately £1.3 billion, or 15% of the EU's aid budget. It means that there could be a 15% decrease in the budget for 2019 or remaining member states could choose to fill the gap by increasing their own contributions. The UK spends approximately one third of its aid through the European Development Fund, EDF, which is the mechanism for spending money in ACP states, and £83 million via EU trust funds to tackle the root causes of migration. It is a shareholder in the European Investment Bank, EIB, which provides loans to developing countries, and supplies one fifth of the EU's humanitarian budget. These figures are worth bearing in mind.
What might a future relationship between the EU and UK look like? It is possible for the UK to continue contributing. Since the EU trust funds are open to all international donors, the UK can channel funding through these. It has been announced that the EIB will change its rules to allow the UK to remain a shareholder. If the EDF remains off budget, there may be scope for the UK to continue channelling money through it, but it is not clear whether the EDF will remain off budget.
From where I sit in London and given the tension, the atmosphere and the attacks by the press on aid and the EU, it is hard to believe that the UK Government will want to continue spending money through the EU even if it is the best possible option. It is a toxic affair in the UK. It is likely that the UK Government will choose to redirect that money through bilateral channels and other multilateral channels, for example, the World Bank.
Where can Ireland play a more influential role in the EU as a result of Brexit? It could choose to channel more of its aid through the EU. A report of an OECD DAC peer review of the Irish Aid programme was published in 2014.
It found its multilateral spending could be more strategic as much of the aid was going to UN agencies which shared few priorities with the Irish Aid programme. Perhaps channelling more money through the European Union might be a way to offset the cuts as a result of the United Kingdom leaving. It might be a way to influence other member states to increase their funding through the European Union.
Ireland could push for maintaining a focus on Anglophone developing countries which stand to lose out as a result of Brexit and which are among Ireland’s priority partners. Several processes are under way such as the Multiannual Financial Framework negotiations, the post-Cotonou agreement and the adoption of the new EU development consensus, on which Ireland could have an influence. Ireland could build on its existing strengths in combating hunger and under-nutrition and increasing resilience, for which it is renowned. During its EU Presidency the Irish Government made good advances on these issues. It could work with member states which share similar interests such as Italy to make a more influential push in the EU forum. Ireland is recognised for having a strong whole-of-government approach and good policy coherence on the issues of hunger and resilience. It could share some of the lessons learned with the European Union and other member states.
Ireland could carve out a niche for itself in building on its domestic experience. It could be more influential in peaceful conflict resolution processes such as in helping design processes and providing advice along the way. It is already active in this area through the EU trust fund for Colombia which supports the peace process. Migration is another such area.
It is interesting to note that the Minister of State's portfolio includes the diaspora and international development. Useful lessons for developing countries could be shared on matters such as sending remittances, sharing knowledge and skills back home, contributing to the development of the country of origin, harnessing the global diaspora network and addressing barriers to a return. Fiscal consolidation and economic recovery in response to shocks is another area in which Ireland could share its experiences. Many of its partner countries have economies which rely heavily on commodities and are subject to external shocks and volatile markets. Ireland could share lessons from its experiences in dealing with the financial and banking crisis.
Ireland may want to push for the achievement of the 0.7% aid to GNI target. If so and if it wants to be a credible vocal player, it will need to increase its level from 0.32% in 2015.
Dublin could become a major civil society hub. London is currently a hub for many NGOs which might want to relocate in order that their staff could continue to work without needing a visa and access EU funding. Dublin is an alternative with several advantages such as the fact that its working language is English, that it is eligible for EU funding and cheaper than London. Being such a hub would help to influence policy-making and international decisions, as well as having a core of expertise knowledge.
Mr. Sorley McCaughey:
There has been much speculation in the media about the potential for UK-based financial sector firms to relocate to Dublin, as well as speculation that the United Kingdom might cut its tax rates to improve competitiveness, starting a renewed race to the bottom in corporation tax rates globally. While the Irish Government considers its response, we would like to highlight the significant impact of our financial regulation and taxation practices on developing countries.
This is of concern to many of our members working on tax justice. UN figures show developing countries lose more than $100 billion annually through tax dodging, more than they gain in aid. It is imperative any potential changes which may be made to Ireland's tax or regulation practices in response to Brexit first be examined for their impact on developing countries. Such policy changes have the potential to undermine the work of Irish Aid and our overseas programmes.
While Ms Raphaëlle Faure has highlighted areas in which Ireland is doing well in maintaining policy coherence, we are doing less well in and around taxation and Irish Aid commitments. It is essential Ireland remembers our commitments to which the Government has signed up. The implications of these tax policies and practices on developing countries need to be built into our regulatory process.
If there is a significant relocation of international financial sector firms to Ireland, the Government needs to recognise the necessity of enhanced regulation and oversight of our tax policies. It should start planning for this now. This should include enhanced political oversight, ideally through the Committee of Public Accounts, which should at a minimum be granted powers of oversight regarding the tax ruling system.
Ireland's attractiveness to those companies which may wish to relocate here in the aftermath of Brexit is predicated on our continued good relationship with the EU. However, the Government's current stance on the EU's tax reform agenda undermines this impression. Brian Hayes, MEP, even went so far to suggest EU tax harmonisation was an issue which could lead to Ireland leaving the EU. While not expressed in such strong terms, the Government's opposition to important transparency initiatives, like public country-by-country reporting and the introduction of a publicly accessible register of beneficial ownership, places it firmly against the growing consensus across Europe to promote transparency around tax issues.
Ms Vikki Brennan:
The UK’s notification to leave the EU has now launched a two-year negotiating period. Thousands of issues and deals will be hammered out over the next 24 months, including a review and rewrite of all trade deals. Free trade was guaranteed when the UK was part of the EU and its customs union, but this may not be the case in the future.
The British Prime Minister, Theresa May, said she wants to secure full access for UK companies to the Single Market. Proudly Made in Africa has called on her Government to prioritise trade deals with developing nations to ensure no worse conditions in market access for some of the world’s poorest countries. The UK can significantly reduce uncertainty for traders in sub-Saharan African countries by committing to maintaining zero-tariff and zero-quota trade.
If a deal cannot be hammered out, the UK would fall back on World Trade Organization’s rules and tariffs. This would mean value added products, such as beverages, fruit, confectionary and clothing, the products which have the most power to lift communities out of poverty when traded, will be some of the hardest hit in terms of the WTO-set tariffs.
Proudly Made in Africa asserts that Ireland is best placed to capitalise on these uncertain times by becoming a hub for sub-Saharan imports. This would contribute to the State fulfilling its commitments on two-way trade with Africa, advance the SDGs, sustainable development goals, and meet its own goal of building new alliances and export markets. The fear of losing the UK as our largest export market could be mitigated by finding these new partners and diversifying trade with them.
We could trade more with nations that are not only really eager and ready to trade, but which need desperately to do so to improve their development.
The overall message is that it is imperative that Ireland upholds its commitment to two-way trade with sub-Saharan Africa. A more cohesive approach is needed to the published works such as the contingency framework and the island connective strategy, which pushes for imports as well as drives exports. A focus on non-indidgenous imports to Ireland especially from developing nations presents no major competition to Irish exports. A simultaneous focus on imports as well as exports from Ireland enables our exports to enjoy reduced logistics, speedier lead times and increased goods movements and stimulates industry and job growth, both for Ireland and its trade partners. For developing nations, increased trade complements Ireland's aid programme and further progresses our own development aims sustainably.
Brexit presents an opportunity for Ireland to establish itself as an entry point to the EU and a consolidation point to the USA for tariff-free goods from sub-Saharan Africa. Ireland is best placed to be a leader in this area having already established MNC networks and receptive Ireland-based diplomatic missions from sub-Saharan Africa as well as an increasingly broad embassy network in Africa. We have the largest African cargo operator with a hub in Dublin and we also have the largest operator looking to make a hub. We have Shannon and everyone is watching to get an export route to the USA. Ireland is best placed to provide it. Targeting the growth of African value-added imports to diversify trade away from the traditional basic agricultural products will facilitate faster wealth creation in developing economies through the trade of increased value items. That means the development targets to which Ireland has committed have a chance to be realised.
It is very timely to have the witnesses here today because we are becoming increasingly aware of the implications of Brexit which certainly were not dealt with before the referendum was held in the UK. Increasingly, we are seeing that more and more areas are affected. It is good that we are looking at the humanitarian aid aspect. When I had my few minutes to speak during the Brexit debate on Tuesday, I made a couple of those points. There is no doubt that humanitarian aid is under threat, including in relation to it being diverted towards migrant control, which is the way I would put it. There are questions around the EU's development fund and the trust fund and the way they are being used. The EU is now forging relations with countries with very dubious human rights issues in a way in which it would never have done in the past. We now have Brexit undermining things as well.
Under the last two Tory Governments in Britain, we saw an increasing privatisation of aid. It moved further away from being untied aid. I would like Ms Brennan's opinion on whether aid was connected more and more with private finance. When it comes to trade deals, Ireland has been a much stronger voice in its criticism of economic partnership agreements whereas the UK was not a lead on that aspect. I would like comments about how trade deals are now being considered in a way which is not respectful of human rights. There is an opening for the UK now that it is out of the EU, of which the EU has criticisms, to have a free-for-all in the trade deals it makes. Tensions are increasing. What are the witnesses' opinions on that?
Mr. McCaughey said we were seeing a growing consensus in Europe on transparency in tax. While Ireland has committed to country-by-country reporting, it has not committed to public country-by-country reporting. How can our voice be stronger on that here?
Some of the witnesses' organisations have British and European dimensions. Are they working on a collective voice on these issues? What is the importance of that?
The witnesses are very welcome and I thank them for their presentations. As Deputy O'Sullivan said, it is very timely that they are here particularly having regard to the developments in Britain and its exit from the EU.
My questions relate mostly to the steps Ms Faure outlined which Dóchas is taking to counterbalance the loss of funding it faces as a result of Brexit. How will Dóchas be directly affected by the loss of Britain from the European Union? While some of it was outlined, it is vital that we get more detail, given that Britain's exit will likely mean an increase in the contributions of remaining member states. How much more does Dóchas consider Ireland should pay for the next year? What steps should be taken to forge new alliances with EU member states to lessen the impact of Brexit?
Ms Suzanne Keatinge:
I will respond briefly to the idea of having a collective voice on these issues and on what Ireland might do to close the funding gap. As we have said, this is only the start of the process. At this stage, we are very much at the beginning of the conversation. I attended the UK national platform conference last week and noted a real energy among the other national platforms to start working much more closely on this issue. Having heard what is going on in the United Kingdom, this is about making the case for aid in an environment in which public trust in our sector is really struggling. To reinforce that idea, we need to work with a collective voice, but we also need champions to ensure aid will not be pushed aside. We need that championing of the importance of international development. As to whether Ireland will step up to the mark in the provision of finance, that is what we would welcome. We are at a figure of 0.3% of GNI in ODA and have to see the trend increase. We ask for this to happen quickly, albeit in a measured way. It is about having practical dialogue with members of the committee and others to determine how we can make it happen. The budget process is coming up in October and we need to see progress made in that context.
Ms Raphaëlle Faure:
On UK aid and where it is going, I could not agree more that a great deal of the focus has been on economic development. The last strategy which came out in 2015 was written by the Treasury and the first objective listed was to provide aid in the national interest. As such, there is a drastic shift. If we look at how much of the aid is channelled and paid to UK contractors as opposed to contractors in developing countries, the figure is over 80%. There is potentially a question of tied aid. More and more UK aid is being channelled by Departments other than the Department for International Development, DFID. Figures were issued yesterday which showed that the DIFD was only providing 74% of UK aid, whereas the figure used to be 88%. That is a shift, whereby a great deal of UK aid is now being disbursed by business Departments. As such, the Deputy has identified something that is happening.
As to whether the United Kingdom was a critical voice on economic partnership agreements and what will happen in the future, the United Kingdom does not yet know what its trade position will be after Brexit. My colleagues would say that, in the first instance, the United Kingdom should endorse the deals with the European Union in order that no country would find itself without a deal and unable to export to the United Kingdom with a giant increase in tariffs all of a sudden. However, it is not clear what the United Kingdom will do and it is not clear from where I am sitting that the UK Government has an idea yet of what it will do.
Mr. Sorley McCaughey:
On the transparency agenda across Europe and Ireland's role in it, there is unquestionably a move towards greater transparency and demands on multinational companies to be more transparent in their activities and that can only be good. The more we know about companies, the more we can hold them to account. The more investors know about companies, the more they can make sound investments and not get a nasty surprise somewhere down the line. Ireland is playing a role which is slightly unclear. There is support for the principle of country by country reporting which requires companies to report on their activities in each of the jurisdictions in which they operate.
It is only then that one can see the full spectrum of their activities. They do not want that information to be publicly accessible. If we have learned anything over the past few years it is the important role that the media, civil society and other groups play as watchdogs over the activities of multinational companies. It is insufficient for only Revenue authorities or State bodies to have access to this information because we know, quite clearly, that it has not been enough. It is very important that the information is publicly accessible. What is being proposed at the moment, and to which Ireland is committed, is a form of country-by-country reporting that is private and that the information is shared on the basis of existing bilateral tax treaties. The latter will not benefit developing countries because they do not have bilateral tax treaties. Therefore, they will be unable to get the crucial information that allows hem to identify instances of illegal or dodgy practices by multinational companies. From the perspectives of a developing country, civil society and media it is essential that the information is made public.
The issue of transparency is connected to something that I wanted to raise as part of this discussion. I refer to the issue of establishing a body that would consider the issues of transparency, fairness, human rights as well as maintain Irish competitiveness and house that in some kind of State body along the lines of the NESC. The NESC has many of the functions of a body that could address many of these issues. The characteristics are as follows. An ability to commission research to address some of the data gaps that are missing from the activities of companies. An ability to advise the Government on what the reputational issues are of certain practices. What the legality of a matter is one thing. What is the reputational impact of certain tax practices is another matter. I would like the committee to consider where a body as outlined can be housed, what it might look like and what its functions might be.
I welcome the witnesses here this morning. Earlier Senator Black asked me whether this was the Brexit meeting. There is another Brexit meeting going on and, increasingly, it dominates our lives. It is hard to believe that only a fortnight has elapsed because every day something new seems to emerge about Brexit. The humanitarian aid sector is one of the areas that have been overlooked by Brexit and its effect on EU action, particularly in terms of international development. I thank the speakers for the presentations.
In terms of finances, considering that Britain contributed up to 15% of the EU's development budget I imagine that there will be a reduction in the budget. I do not see how it can be any other way when the remaining member states have no appetite for increased contributions. This debate is happening at the same time as the EU is talking about forcing EU countries to spend more on military expenditure. A 15% cut is huge and expenditure on military is one area that can be examined to make up the difference. What practical effect do the witnesses think these measures will have on the EU's development projects?
Do the witnesses share my concerns about migration management? Many EU countries has tried to use aid funds to deal with migration development management in front-line states rather than deal with the root cause of the refugee crisis which are war, poverty, oppression, climate change, etc. Are the witnesses concerned about the clear change in direction by many of these countries? Do they believe that the EU is more likely to shift aid aimed at tackling root causes to schemes in front-line states after Brexit?
Mr. McCaughey mentioned the tax situation and I share his concern.
He mentioned a UN document that shows developing countries lose more through tax dodging than they gain in aid and the sum involved is €100 billion annually. I will use the analogy of us shoring up the dam but there is an excessive flow of water underground. I agree with him that Ireland's tax regulations and practices have had a significantly negative effect on developing countries in the form of robbing them of legitimate taxes. I also agree that we need parliamentary oversight.
I note the Finance Act commits Ireland to country-by-country reporting in terms of multinational companies. Dóchas noted that the Government is opposed to the measure. I ask the witnesses to provide further information on this point and identify how it could benefit developing countries.
There is a growing realisation internationally that Ireland has a damaging tax system and that some companies have used Ireland as a tax haven. Do the witnesses believe the tax situation here has undermined Ireland's status and perception internationally?
I am concerned about transparency. I have raised the issue here and in other fora. As we are discussing the EU and international development, I wish to express my concern about the European Development Fund. I have raised the matter with the Minister for Foreign Affairs and Trade and various other European representatives. I am still unclear about how Irish money is spent under the EDF. It is much easier to track Irish Aid spending and to hold it to account when necessary. The EDF was striking with its lack of accountability and transparency, not to mention the difficulty in having a fund that is supposed to be based on the foreign affairs' policies of 27 member states. Some member states are diametrically opposed in terms of their policies on foreign affairs. I understand the logic of having a global fund to fight malaria or AIDs, for example. It is supposed to be an aid programme but it has been linked to foreign policy. I would like to hear the views of the witnesses on this matter.
I was struck by what the witnesses said about peaceful conflict resolution processes and ask them to expand on the matter. Colombia was mentioned. I am conscious that my late friend and colleague, Martin McGuinness, was involved in some of the meetings in Cuba and the positive role they played in the agreement that is emerging. I am also conscious of the transition from conflict to peace and of the huge number of people who have been assassinated and of a huge amount of work that remains to be done.
There are other conflicts around the world where people have sought the help of Ireland - for example, the conflict and decommissioning in the Basque region. I refer to how the old situation in Ireland compares with the current one in the Basque region and to the difficulties in the Basque region because the state has refused to get involved. India and Pakistan are still fighting over Kashmir and there are conflicts in the Middle East. People say these conflicts will never be resolved but people said the same about the conflict in Ireland. Can the witnesses identify areas where Ireland can be of help? The witnesses have mentioned the unique experience Ireland has in terms of conflict resolution. How do they see our role developing?
I thank all the witnesses for their interesting and eloquent presentations. It is true to say that the impact of Brexit on development aid and general policy has been overlooked. It is important that we consider this matter along with all the other areas that will be impacted by Brexit. The witnesses have clearly conveyed the message to link the impact of Brexit with the need for Ireland to increased its spending on ODA to the target of 0.7%.
I like the way this has been linked with the post-Brexit climate and the need for us to step up and become a more leading advocate. We get this message and I ask the Chairman to pass it on.
I am interested in focusing on the practical impact of Brexit on EU development programmes on the ground in recipient developing countries. How do we ensure minimal impact of the loss of UK funding to these programmes? There is a mixed series of signals on this. The UK opposed joint programming. I worked briefly on a Department for International Development, DFID, funded programme many years ago in China, and my sense is the DFID has maintained a very independent position on aid. Deputy O'Sullivan spoke about the DFID policy of privatising aid, but my sense was the DFID always kept a very separate aid identity to the EU and that the UK, perhaps more than any other country, maintained a very separate aid programme to the EU programme. It makes me wonder in terms of the impact for recipient countries, will the impact be minimised if the DFID keeps up its own spending even if it no longer channels it through the EU. Ms Faure pointed out that some programmes are ongoing and funding may be continued, and there is some indication there may be transitional funding from the UK into programmes running up to 2020. There is some potential there to minimise impact for recipient countries and that even if the EU budget is reduced the same money will go to developing countries. How can Ireland work with the DFID to ensure this remains the case? Even if we see EU funds reduced, can we ensure the impact is not felt in developing countries and they still get the money through other means? This is very important given our role as the country closest to the UK.
We have worked very closely with the UK. We also work a lot with Anglophone countries. How do we see new alliances forming after Brexit between Ireland and other EU countries in terms of channelling aid? Ms Faure mentioned Italy has similar interests to us with regard to famine relief. This would be interesting to explore. I note in other commentary many people see Spain as becoming a much more leading player in the EU when Britain leave, and that Spain will be elevated into the top ranks alongside France and Germany. If this happens will we see potential there for greater emphasis on Latin America? Clearly Ireland has very strong links with Latin America. Eamon Gilmore is the EU envoy in the peace process in Colombia. There is much potential, I would have thought, for Ireland to work with new allies such as Spain and possibly Italy in developing aid policies at EU level.
Ms Brennan spoke about increasing trade with sub-Saharan Africa. We had a very interesting presentation from the Association of European Parliamentarians with Africa, AWEPA, some weeks ago about various areas in which there is real trading potential. Will Ms Brennan expands on particular countries with which we might see relationships? Ireland has particular priority countries in Africa and we have embassies and consulates with which we could work. Ms Brennan spoke about value-added imports from Africa and I ask her to expand on this.
My colleagues have covered many of the issues. We do not know what the outcome of Brexit will be. It will have a huge impact on Ireland. As has been stated, if the referendum was rerun it might be a different outcome. We are all in new territory and we do not know where it will lead.
The UK is a huge contributor to overseas development aid and always has been. I am sure it is one of the things that will suffer in Brexit. Ireland contributed €147 million in the past year. To pick one country in Africa, the Ivory Coast, its projected growth this year is 9%. Much of this is down to projects over a number of years, which have been funded by the EU. It plays a huge part in African countries. This funding gets them on their own feet and gets them trading.
President Trump speaks about decreasing US overseas development aid. It is a huge contributor. He will also reduce the budget to the UN. Will the witnesses comment on what impact this will have? Are they aware of his proposals?
I apologise for being late. I was delayed and I did not have an opportunity to listen to the presentations. I am particularly interested in the situation in Somalia, which I visited more than 20 years ago when we had troops there. Reading the report from Dóchas, the very minimum that seems to have happened is it has remained stable or has gone backwards. It is horrifying. When I came home from Somalia, and I say this in all sincerity, because I had never in my life seen such poverty I said if anybody speaks to me about poverty in Ireland I would scream. I could not explain to people what I saw. Children in an orphanage received one bowl of rice per day.
Before the witnesses respond, the Brexit committee of the House of Commons chaired by Hilary Benn MP, met us, and even though our meeting that day was very focused on relations between Ireland and Britain on this island, the Good Friday Agreement and the unique position of Northern Ireland, I also mentioned overseas development aid. We are aware of Mr. Benn's contribution in the past as a Minister. I specifically raised with him the need to have quota-free access to the British market for the least developed countries. It is an issue that needs to be amplified as much as possible because it is critical. I hope Britain will maintain its overall budget and funding for overseas development aid. Even if this were to happen when it has gone from the EU, it would not be possible to spend the money in a very progressive manner if there are not transitional arrangements between Britain and the EU to continue programmes in which Britain is already involved. Have the witnesses advocated strongly on the possibility of having transitional arrangements to continue specific programmes?
Ms Vikki Brennan:
To address Deputy O'Sullivan's question on the trade balance, my predecessor, Conall O'Caoimh, published a report two years ago when Ireland confirmed two-way trade was on the agenda. The trade balance had been 60:40 in favour of Ireland but at the time of publication it had got worse and was 80:20 in favour of Ireland. I do not have today's statistics, but this is where we are at roughly and it is where it is increasingly likely to go without a change.
Senator Bacik wanted to know about expansion in trade, priority countries and categories in sub-Saharan Africa. My background is the fashion sector. I was brought up through the ranks at Primark and spent a lot of time in London. The priority country for the fashion sector in Europe at large is Ethiopia. At present, I do not believe we have an ambassador sitting there. We were in the embassy in Addis Ababa two weeks ago. To be a linchpin of trade with Ethiopia, because everyone is speaking about it, we need to have strong representation there. The other embassies we visited in east Africa and the rest of sub-Saharan Africa are outstanding.
There is a trade attaché sitting in Kenya in a new role, and that is wonderful. That needs to be supported more. The message needs to travel to those people we have on the ground in sub-Saharan Africa that imports to Ireland are as important as exports from Ireland, because two-way trade makes financial sense. It creates jobs on both sides. It is a no-brainer.
In terms of the categories, garments and leather, with finished products, not rolls of fabric, there is huge investment going on in Kenya, Uganda and Ethiopia on cut, make and trim, CMT, units. What needs to be supported is the full value chain-up. We do not want any more polyester to be imported from China and Turkey. There are facilities there for it to be done there, therefore the whole industry should be supported. The garment sector is one thing. Africa is quite well known for leather. It comes from a pastoral society, where people are killing their livestock for meat to sustain themselves. They also make an income from selling the hides, so if we could generate a better industry on leather then there is a very good export market there. East Africa is the hub for that.
In terms food there is coffee, tea, dried fruits, snacks and chocolate. Madagascan chocolate is the finest in the world. The key is to stop importing burlap sacks of green coffee and tea leaves. What we want is for those products to be bagged in Africa, because the net effect of that is that the producer can earn seven times the amount by doing that, rather than just exporting the raw leaves or beans. That is the message. The multiplier effect of trading and value addition is obvious and plain to see. With regards the priority countries, the network that has already established and is ready to go is based in East Africa.
Ms Suzanne Keatinge:
I thank the committee for all the questions. I will not dare answer all of them, but the main point is that with Brexit there are huge opportunities as well as challenges, and over the next while we need to drill down and look at some of those details so that we can maximise the opportunities. When looking at it from Ireland's perspective, the key issue for me is that Ireland will have to focus much more in terms of who it is working with in Europe. It is not just about money - it is very likely that development funding is going to go down. More importantly, there is a real fragmentation among the leadership which says that aid is needed for the poorest of the poor. It is in leadership, in stepping into the gap around policy, that Ireland really has an opportunity. There needs to be much more focus in working with like-minded countries at EU level.
In terms of the countries and the issues we can work on, there is still a need for much more focus. We talked about conflict, peace and negotiation. Even Irish Aid would acknowledge that they are spending a huge amount of humanitarian aid in the likes of South Sudan, but that is not going resolve the issue. Where is the political engagement? How can we get more involved in terms of aid, development and political engagement? Those are the kind of things that we need to tease out and look for some focus on over the next few years.
On President Trump, we can perhaps come back to the committee with specifics. I met with my colleague from the US recently, and it is true that the US aid budget is going to see a decrease of 25%. More importantly, the US is a huge contributor to the United Nations, and almost overnight that funding will disappear. Who is stepping up to the plate? Some countries are stepping up, but there are never enough. We will have a huge financing and funding gap there. The policy direction and influence is the worry there, but it is too early to tell what that looks like. Perhaps that is something we can come back to at another time.
Ms Raphaëlle Faure:
I want to make some points on the financial effects and the effects on the ground of a cut EU aid budget. There is a risk that the EU is going to cut budgets in every sector, salami slicing so that everyone will see less money. Perhaps there is an opportunity for member states to push for a better focus, so that in areas where the EU is not so good they stop funding and find someone else to take over so that it can focus on areas where it has a comparative advantage. That might be a way of avoiding the salami slicing.
I was in Brussels a few weeks ago and heard that the external action envelope for the next seven year budget is likely to increase because of the worries around migration. Despite a cut from the UK leaving there might still be more money available for that. Whether the money goes to the right causes is another question, but the budget on external action and therefore aid might be greater than it has been during the current multi-annual framework.
Will more EU aid go towards bad deals, like deals around migrations and compacts with dodgy countries? I am not sure that the UK leaving will change that very much. The UK was not that big a player in the migration talks - other member states lead on that. I am not sure that we will see a big difference with the UK leaving. The UK will still be able to contribute to things like trust funds, for example the trust fund to tackle root causes of migration. A contributor is part of the board, and members of the board are entitled to decide where the money goes and how decisions are made. There is potential for the UK to retain a voice in those frameworks.
The European development fund is a good fund to contribute to. It is a fund that countries contribute to voluntarily, and can chose to increase or decrease how much they provide to it. It has had excellent feedback this year from the Department for International Development, DFID, in the form of the multi-lateral aid review. The European development fund got one of the best scores, so in the DFID's view it is one of the best ways to channel money. It also goes under the scrutiny of the accountability mechanisms of the EU, like other development funds. Funding is looked at closely.
In terms of ensuring minimal impact on the ground because of the UK leaving, the UK leaving the EU does not mean that it will stop spending money in those countries. There needs to be good collaboration and good co-ordination to divide labour and to make sure that we do not start duplicating efforts, and to make sure that the UK retains a place where it is currently doing good work. It will be a question of continuing dialogue, especially on the ground, and trying to make sure that not too much changes for the developing countries as a result.
Discussions are ongoing regarding transition funding. The UK is committed to spending on programmes that will go beyond 2019. In theory it should continue funding those because it has an obligation. When one hears the talks about the divorce bill and the different views in circulation one wonders whether the UK is going to pay, but in theory it has a commitment to doing that, and it should.
In terms of alliances with countries like Italy or Spain and whether that might mean more focus on Latin America, Spain is already quite influential in getting money to Latin American countries, especially from the European Parliament. That is likely to continue to progress.
Ireland is part of a like-minded group of donors which was lead by the UK in the EU until now, but there is no reason why this group should stop existing and stop carrying the progressive message it has carried until now. There is potential for Ireland and the other donors, such as Denmark and the Netherlands, to continue pushing those ideas forward in the EU.
Mr. Sorley McCaughey:
Deputy Crowe asked about contributory country reporting. It is very important for developing countries that this information is publically available. Developing countries suffer the most from multi-national tax dodging, but they have least ability and capacity to access the information, therefore the information about what companies are doing in each of the countries in which they operate needs to be publically accessible.
The issue of reputation is fundamental to the Brexit discussions and Ireland's understandable efforts to attract some of the financial services that are based in London to Ireland. With that comes the potential for great reputational damage. Some of the companies that we have been courting include HSBC, which has a reputation that belongs in the Al Capone era. Many of the companies that Ireland is courting are based in financial services, and many of the ways in which they organise their organisations lead directly to tax avoidance practices. There is not sufficient data around the practices of these companies to be able to ascertain definitively whether they are engaged in the kind of tax dodging that will impact on developing countries. We need greater transparency around things like trade in services, which are management fees and the like, which is often used as a vehicle for tax avoidance.
A similar point can be made about the use of special purpose enterprises, which are financial vehicles that are regularly used by companies to avoid tax. Brexit will increase the likelihood of companies coming to Ireland and using such vehicles to avoid tax, potentially in developing countries. That is why I was talking about the need for the establishment of a body that looks at issues like reputational damage, the maintenance of competitiveness and human rights. This new body could be housed under the National Economic and Social Council, NESC. At the very least, it needs to have the functions and characteristics of NESC.
I thank Mr. McCaughey and the other witnesses for their presentations and for highlighting issues that have to be of huge concern to all of us. I assure them that we will discuss those issues as we work on the formulation of our report on Brexit. I do not doubt that we will have further dialogue with the witnesses in the near future. They can be assured that this committee will be very conscious of the concerns they have laid out clearly this morning.