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

That is typical of Fine Gael.

I have had a long-held view, expressed almost three years ago, that while Brexit will take place in some shape or form, nevertheless, in 2026, ten years after Britain passed the referendum, we will still be talking about the process, ramifications and consequences for Europe, the UK and Ireland. I am more convinced now than when I first expressed that view that I will be broadly right.

The only certainty, after two years and ten months, remains the uncertainty attached to this whole process. It is our bounded duty to establish possible market priorities post Brexit and this debate is focused on that. Insofar as one can engage in such a cause or pursuit, our best efforts must be made to avoid a hard border at all costs. There will, nonetheless, be some ramifications and consequences for us.

We are all aware of the significant trade exposure of various sectors of the Irish economy in a European context and, in particular, the centrality of our trading relationship with the UK. Ireland's food and live animal sectors are substantially more exposed to the UK in comparison to any other EU member state so market diversification has to be a major priority. This must include product diversification and the development of new products which I know is part of the Minister's focus.

It is worth reviewing the statistics to get a focused view of the exposure of the Irish economy to Brexit. Irish exports to the UK were 37% of our food exports in 2018. Statistics on the exposure of the main sectors show 51% of beef exports, 56% of pigmeat exports, 79% poultry exports, 25% of all dairy exports but 50% of our cheese exports, 62% of prepared consumer food exports and 26% of our beverage exports are to the United Kingdom.

Copenhagen Economics estimates a 40% increase in trade costs in a free trade agreement scenario due to customs impact and regulatory divergence.

Some 850,000 trucks travel by ferry between Ireland and the UK each year, 45% of which contain perishable food and drink. The majority of Ireland's €4.5 billion food and drink exports to the EU 26 use the UK land bridge and the amounts of Irish meat exports are even larger. For fresh food and drink produce, the shortest crossing is critical. Ireland to Calais by the land bridge is a journey of approximately ten and a half hours but, if one has to travel to Cherbourg, the journey is approximately 20 hours.

Our priority must be to get an ambitious EU-UK future trade agreement which avoids tariffs, tariff rate quotas, TRQs, regulatory divergence and all that. We must avoid a hard border with Northern Ireland as part of the imperatives of the Good Friday Agreement. We must have state aid for stabilisation, competitiveness and some diversification to remedy what will be a serious disturbance in the economy due to the fracture in the Single Market and I will refer to that later. There will be an impact even if it is a soft border, particularly in exchange rates.

Custom burdens and regulatory checks, especially with animals, must be part of any future trade agreement. There will have to be mutual recognition of standards and custom codes. There will have to be collaboration in relation to veterinary and phytosanitary certification.

The transiting of goods across the UK land bridge is critical. How that is achieved will be very important and our input will have to be critical to a future trade arrangement taking into account the all-Ireland dimensions in relation to recognition of technical applications and the seamless system that is there.

There is a significant amount of work to be done. I realise that 25% of our exports are now going to non-EU countries and that is a significant increase over the past decade. It is all the result of a drive and necessity to develop new markets but they must be profitable. I note the number of trade missions that the Minister is going to embark upon this year in seeking to establish us in new and hopefully profitable global markets.

We are talking about agriculture and agrifood, a highly export orientated sector. We are trying to sell the produce of about 140,000 family farms across the country, predominantly grass-based enterprises. It is important to try and cultivate that and secure a competitive advantage over other grass-based enterprises. An average farm size is 32.5 hectares. The farms are much better than that down the south and the east coast. The Minister would probably not see many farms of that size but 32.5 hectares would be a big farm in the midlands, the north and the west.

There are almost 200,000 jobs supported by the agrifood sector, which includes food and drink firms, food manufacturing, wood processing, agriculture, forestry and fishing. We saw the immediate impact on the mushroom industry that Deputy Ó Caoláin referred to that arose when the exchange rates started fluctuating after the vote in June 2016. We are concerned about future tariff and non-tariff barriers to trade and we have not said much about the impact of Brexit on the EU budget. This will, of course, be a major factor in the ongoing CAP negotiations. If €10 billion, €11 billion or €12 billion is taken out and 40% of all EU spending is on agriculture, there will be some hole in the bucket which somebody is going to have to try and fill.

The last thing we want is a Brexit which sees the EU and UK aligned by WTO rules. We wish to see a soft Brexit with the UK staying in the Customs Union and Single Market, or at least a soft to medium Brexit whereby the UK might leave the Single Market and Customs Union but has a free trade agreement with the EU with no tariffs applying.

In that situation, the UK would be able to do some trade deals but we would love the UK to stay in the customs union and Single Market. Brexit has the potential to cause us a loss of our preferential market access to the UK. It is clear that Irish exports to the UK would decline, as would EU exports. Our exports to less profitable markets in the EU will have to grow considerably and we will have to sell our products somewhere if we are to maintain the same level of production. Competing on EU markets, which are not elastic to the point of consuming everything produced, will immediately result in a reduction in prices at EU market level. Ultimately, there will be a collapse in Irish farm incomes.

To use Disraeli's maxim, I am prepared for the worst but hope for the best. This is what we have to do. We must budget for the least worst outcome. There is a clear need for the implementation of exceptional mitigation measures because of our particular situation and unique circumstances. Tariffs are a tax on trade and commerce. These impositions will effectively destroy a significant volume of our agrifood exports to the UK. Tariffs are taxes. They are collected and go into central funds, be they Exchequer or EU. Clearly they have to be made available to defray the damage to exports and job losses. That fund should be available.

Paul Kelly of IBEC's food and drink sector is an excellent analyst in this area. He has done tremendous work. Some time ago, he argued there is a need for an adjustment fund of up to 5% of the current annual export sales to the UK. This level of funding will be required for three years to help Irish companies deal with Brexit and innovate, as the Minister said, and diversify into new markets. Further refined measures have to be brought forward to ensure landbridge access to continental Europe and the provision of sufficient capacity on direct sea routes. These are critical issues that I am sure the Minister and the Department are looking into.

It will only be in the event of an agreed Brexit or approval of the withdrawal agreement that the discussion to shape the future relationship between the EU and the UK will begin. Our priority will be to try to secure trade free of tariffs and quotas; the reduction to the minimum, if at all, of any regulatory divergence pertaining to food standards and phytosanitary controls; seamless alignment, particularly on an all-Ireland basis; mutual recognition of various agreements and authorities, particularly with regard to food safety; and minimising trade barriers and hurdles. This is the optimum objective.

Cushioning against sterling exchange rate fluctuations will be a top priority. In a no-deal Brexit scenario, one can anticipate a sharp fall or depreciation in the value of sterling, and this could be in the order of 10% to 25%. Sterling could be up to £1.10 against €1. A broad agreement along the lines of the withdrawal agreement being negotiated would see sterling depreciate by between 2% and 5%, or about £0.90 to €1. This is critical. There is a lot of work to be done. All we can do is pray that some sense prevails over there.

I get annoyed listening to people speak about what we can do. We can do our best. We have been caught up as innocent bystanders in a battle we did not cause. Very often, people state we could do this or do that. Everything is only speculation. The youngest child in a school has a better idea about what might happen than some of us here.

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