Willie Penrose (Longford-Westmeath, Labour) | Oireachtas source

I am happy to make some comments on behalf of the Labour Party, although I know my colleague and the Tánaiste, Deputy Joan Burton, contributed earlier. This is one of the most important debates we will have in this Dáil, focusing on the Brexit referendum and the implications for Ireland in the event of the British people voting to withdraw from the European Union on 23 June. We can clearly identify the issues that would arise for us as a result of a Brexit, as the Minister, Deputy Flanagan, did so eloquently, but it would be exceedingly difficult to put in place precise contingency plans. It would, effectively, amount to guesswork in the context where there will be at least two years of negotiation. It will probably be three years or more, going on what Greenland had to go through. It will be a considerable period and some people have said it will take five years to negotiate the exit strategy. Subsequent negotiations will exercise people's minds for a considerable period.

The negotiations will be complex and will have to be conducted on a pan-European basis to work out the relationship between the EU and UK. Complexity is not even an adequate description of what will follow. Our Government will have to develop a new relationship for this country with regard to trade and Northern Ireland, as noted by Deputy Brendan Smith, and all of this must be thrashed out with other member states. The economic effect of Britain leaving the EU would be substantial and the ESRI report, Scoping the Possible Economic Implications of Brexit on Ireland, is an excellent body of work. Dr. Edgar Morganroth, the lead author, and his colleagues analysed the impact and done a very worthwhile job. The ESRI estimates that trade between Britain and Ireland could fall by 20% if Britain leaves the EU and Britain is the main export market for indigenous firms, particularly in the food sector. Approximately half our exports go to the UK. Outside the EU, Britain could impose tariffs on Irish imports. The report considers all of this.

Our overall dependence on the UK for trade has lessened since accession, as it accounted for more than 50% of overall trade then. Nevertheless, it remains extremely important to the Irish economy, especially if one considers the totality of services, merchandise, exports and imports together. This arises from the sheer size of the United Kingdom, which has the third-largest population in the EU at 65 million, with a projection that over the next generation it will rise to approximately 74 million people. It is projected to be the largest population over the next generation if things remain on their current course. It is the second-largest economy in the EU, with Dr. Morganroth estimating that a Brexit would reduce total EU GDP by 18% while leading to a population reduction within the EU of 13%. These are significant figures when we consider trade and economic interactions between countries, particularly in the context of us still having significant business with the EU.

Another aspect requiring careful analysis is the fact that Irish exports to the UK are concentrated in specific sectors, such as food and beverages, pharmaceuticals, financial and business services, as well as optical and electrical equipment. These are critical areas, and, as I noted, outside the EU Britain could impose tariffs on Irish imports. Irish food producers would have to seek other markets for exports and they would probably have to reduce prices, leading in turn to downward pressure on prices paid to farmers for beef and milk. People have today indicated that Ireland and Britain exchange more than €1 billion in goods and services each week, and Irish exports to Britain this year are worth more than €1.2 billion per month. A 20% loss of exports to Britain would cost €240 million per month or €2.8 billion per year. Those are the figures.

It is apposite to point out that Brexit would be more likely to have a negative impact on Irish-owned firms. Our indigenous companies have historically depended on the UK market and do so to this day. Dr. Morganroth points out that Irish firms export just over 50% of output, whereas non-EU foreign-direct investment firms export virtually all their output. The important point is that of the 50% of output exported by Irish firms, more than 40% goes to the UK market, whereas only approximately a tenth of the non-EU firms' output is placed on the UK market. This arises for a number of reasons, including history, commonality of language, proximity to market and the close relationship in the legal systems operating in each jurisdiction, especially with regard to contract law. There are also similar consumer preferences.

On the other hand, there are significant levels of merchandise imports from the UK. That is no surprise as there are important UK retailers operating in the Irish market. In the event of Brexit, the possibility of import tariffs and border controls would clearly add to the cost of imports, with an obvious effect in high prices to be paid for goods by the Irish public. That is another aspect that would have to be examined in due course.

As the Labour Party spokesperson on agriculture and food, it is important that I set out our view of the possible and indeed likely implications for the agricultural sector in the Brexit context. I am aware the Irish Farmers Association and other farming organisations, as well as the advisory and research body, Teagasc, have made comprehensive observations on the implications for the future trading relationship, both internally and externally. The trade links with the UK are well understood, as I noted. The UK has been home to 43% of exports from Irish firms. It was worth over €14 billion in 2014 and €15 billion in 2015. The UK represents huge high-value markets. The combined trade between the UK and Ireland supports over 400,000 jobs, half of them in Ireland.

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There is still a very special relationship between the UK and Ireland in terms of agriculture and the agrifood industry. In 1973 some 70% of all Irish food exports went to the UK, while in 2014 the figure was 42%. While Ireland is diversifying into other geographical markets, the UK remains extremely significant.

As stated on previous occasions, the UK is still a highly important trading partner for Ireland. Some €1.1 billion, or 50%, of our beef exports went to the UK market last year, as did €1 billion, or 33%, of our dairy exports and €330 million, or 60%, of our pigmeat exports. On the other hand, UK agriculture depends upon the EU, with seven of the top ten countries for UK food exports - Ireland, France, the Netherlands, Germany, Spain, Belgium and Italy - being member states. Nine of the top ten countries for UK food imports - the Netherlands, France, Ireland, Germany, Spain, Italy, Belgium, Denmark and Poland - are also EU member states.

In the event of a Brexit, we must speculate upon the shape of future trading relationships. These would not be known for between three to five years because this will be the first exit negotiated under Article 50. When Greenland exited, the process took three years. The question is whether the UK will, like Norway or Iceland, negotiate a relationship as a member of the European Economic Area, with access to the Single Market and an obligation to pay financial contributions but with no seat at the decision-making table and with much of its agriculture and trade subject to restriction by quotas. Will it negotiate a separate free trade agreement, FTA, with the EU as Switzerland and Canada have done? Will it leave the EU and Single Market and apply to become a member of the World Trade Organisation, WTO, and become subject to the latter's rules, with tariffs on products and non-tariff barriers? Will the UK leave the EU but not the Single Market?: All of these questions arise. There is also the question of whether Ireland be allowed to negotiate a special trade relationship with he UK. Brexit could mean a jeopardy for trade deals as there could be new significant tariffs or the application of new international trade agreements in respect of non-tariff business such as import licences, origin of sale sources, etc. Let us make it abundantly clear: the reintroduction of these barriers or tariffs would increase costs and reduce the competitiveness of Irish exports. Ultimately, their reintroduction would also have an adverse impact on the attractiveness of the UK as a destination for Irish agrifood exports.

In view of the shared land border between Ireland and the UK, there is significant all-island co-operation and co-ordination on animal health issues. If different regulatory regimes were to apply in the UK and Ireland, there would be changes to the trading relationship between the two jurisdictions and there would be a risk of regulatory divergence arising in a sector in which co-operation is absolutely critical. It is no surprise that a UK exit from the EU would have a huge impact on the agrifood sector. It must be remembered that Ireland exported almost €5.1 billion worth of agricultural food products last year.

It is projected that there will be huge population growth in the UK - from 65 million now to 75 million or 77 million - in the next 30 years. On that basis and were it to remain, the UK could become the largest country in the EU from the point of view of population. That is an important point.

Another significant issue that would arise post-Brexit relates to the exchange rate and, in particular, the depreciation of sterling. This is already an issue for businesses. A drop in the value of sterling of up to 8% or so since the start of the year has given rise to a real challenge for Ireland's export-led businesses. It is estimated that there is likely to be a further significant weakening of sterling of 15% or more post-Brexit. This would represent a significant dent in Ireland's cost competitiveness and would clearly have a negative impact on our GDP growth.

Brexit would also have a negative impact upon the EU budget in the context of to the UK's contribution thereto. Questions would arise as to how this would affect the budget relating to the CAP. Any reduction in the latter would have a knock-on effect for our farming community. Ireland currently receives €1.5 billion annually through the direct payments system and the rural development programme.

Many Deputies referred to border controls. This matter has been the subject of debate between strong advocates of Brexit, such as the UK Secretary of State, Ms Theresa Villiers, and former UK Chancellor, Mr. Nigel Lawson, particularly in the context of how such controls would operate post-Brexit. A recent important and informative article in The Irish Timesby two distinguished academics, Sylvia de Mars and Aoife O'Donoghue, highlighted the fact that since the foundation of the State in 1922, the position of Irish citizens in the UK and that of citizens of England, Scotland, Wales in Ireland has been unique, with nationals from each treated virtually identically to citizens. The article also points out that a very special relationship exists between the countries to which I refer and asks how a UK withdrawal from the EU would impact upon this. It also asks how that special relationship would fits within current EU rules. Deputy Brendan Smith referred to the fact that the Northern Ireland Secretary, Ms Villiers, has asserted that in the event of a Brexit, border controls between Ireland and Northern Ireland would remain unchanged. It is difficult to understand how she can maintain that stance. The common travel area has been in operation since 1952 and it enables UK and Irish national to be treated virtually identically in both states and to enjoy access to employment, social welfare, health care and voting rights, as the Minister, Deputy Flanagan, indicated. Aoife O’Donoghue and Sylvia de Mars forensically explored the position and concluded that the common travel area still matters and is the main reason that Ireland and the UK opted out of the Schengen Agreement, which encompasses all other EU member states as well as Norway, Iceland, Switzerland and Lichtenstein. The learned authors to whom I refer made clear that if the UK fully withdraws from the EU, Ireland would face difficult choices. They also indicate that if Ireland joined Schengen, the EU would determine how Ireland–UK border would operate and that this would mean that the Union would also determine how UK nationals would gain access to Ireland, whether as residents or visitors. Aoife O'Donoghue and Sylvia de Mars also ask whether, if Ireland were not join Schengen, the common travel area would survive and if so, would this suit the UK. They state that EU nationals with the right to reside in Ireland can become Irish citizens and gain access to the UK that way and that this would give credence to the argument made by others that uncontrolled migration arising as a result of the special relationship would occur and, therefore, might necessitate the implementation of specific border controls.

In their excellent thesis, Sylvia de Mars and Aoife O’Donoghue argue, quite logically, that Ms Villiers argument to the effect that the possibility of illegal migration through Ireland could be dealt with by the UK authorities after they arrive does not stand up to scrutiny by virtue of the fact that EU nationals who have a right to reside in Ireland can become Irish citizens and can lawfully travel to the UK under the common travel area arrangement. Most importantly, they also point out that following a Brexit the UK-Irish Border would represent an external border to the EU as a whole and that Ireland's membership of the Union would require it to protect the latter's borders. The authors pose the question as to which relationship Ireland would prioritise in the event of Brexit, that with the 27- member EU - with its Schengen areas - or that with a stand-alone UK? The authors of the article in question have skilfully got to the nub of this particular problem and have raised questions as to the correctness of Ms Villiers analysis.

Brexit would also have profoundly negative consequences for Ireland's energy market. An all-island electricity market has existed since 2007, and interconnection between Ireland and Northern Ireland is particularly important for the North, which relies on electricity imports from Ireland to make up for insufficient local electricity generation capacity. If the electricity market in Britain remains independent of the rest of the EU, then interconnection with Britain only would leave Ireland vulnerable to any problems in the British market. In such circumstances, enhanced interconnection between Ireland and the rest of the EU could provide a useful but costly diversification and reduce risk for Irish consumers. If the UK left the EU, it would no longer be subject to the latter's rules on climate change policy and renewables. This would reduce the likelihood that the UK would reopen discussions on trade in renewables. There are significant issues which must be addressed in this regard.

This is not to say that everything is all right with the European Union. As previous speakers pointed out and as most of us are award, there are significant areas in respect of which the possibility of reform should be examined in the context of the EU. We need a more reformed Europe which is more open and democratic and less intrusive and interfering. For example, Ireland must comply with EU rules for procurement and tendering and this precludes many of our small and medium-sized companies from competing for contracts for services and supplies. Ireland has supported some of Britain's demands for EU reforms. In my opinion, we could be even more supportive in this regard. The EU treaties provide for a multi-speed Europe which should enable member states to opt out of certain policies while remaining committed members of the Union. There is some merit in the argument of those who support Brexit that some EU policies may have gone too far in limiting the sovereignty of member states. The solution to this is a reform of EU policies and institutions. It would be better for Britain and Ireland if the former remained in the EU and continued - with strong support from Ireland - to seek those fundamental reforms. A focus upon mutual solidarity is paramount at this point.

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