Willie Penrose (Longford-Westmeath, Labour)
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48. To ask the Minister for Agriculture, Food and the Marine if he has assessed the effects of a British exit from the European Union on the food and agriculture industry, his progress in developing potential trade arrangements and minimising the disruption and negative impact on Irish producers and consumers; and the options for agriculture and the agrifood sector, given the extensive trade links between the two economies and the role of the European Union’s Common Agricultural Policy. [14854/16]

Michael Creed (Cork North West, Fine Gael)
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The UK is by far our largest single trading partner. According to CSO figures, in 2015 we exported almost €5.1 billion worth of agricultural products and imports from the UK were worth €3.8 billion. The prospect of a UK vote to leave the EU therefore has serious implications for the agrifood sector. That is borne out in the reports that have been produced in recent months on the potential impact of Brexit on Ireland. An ESRI report last year estimated that the potential reduction in bilateral trade flows could be as high as 20%, with an even higher impact on agriculture, food and beverages. Teagasc, at the request of my Department, carried out a deeper analysis on the Irish agrifood sector. It found that, depending on the assumptions made, the minimum impact could be a reduction of 1.4% or €150 million per annum in the value of Irish agrifood exports, with a possible worst-case scenario involving a reduction of more than 7%, or €800 million, per annum. However, it is important to note that there would be no dramatic change straight away and that the actual impact of Brexit would depend on the post-exit relationship that will have to be negotiated between the EU and the UK, should the UK decide to leave. The Treaty on European Union provides for a period of two years of negotiations, with extensions possible where agreement is not reached in the initial period.

My Department has been considering the likely arrangements to be made in the event of an exit vote. There are four main areas from an agrifood perspective, namely, tariffs and trade arrangements, the EU budget, standards and customs controls. Potential differences in tariffs after a UK exit could restrict trade in both directions and affect traditional supply practices, particularly for raw materials. Once the exit negotiations have been completed, the UK would be free to negotiate free trade agreements with other third countries. That is particularly relevant in relation to meat imports from South America.

The UK is a net contributor to the budget and a UK exit could result in a loss of the UK contribution of between 5% and 10%. Given that the Common Agricultural Policy, CAP, accounts for some 37% of the EU budget, we could expect additional pressure for further contraction in CAP funding in the years ahead. Currently, the EU operates a common regulatory regime and the rules of the Single Market allow free movement of goods between member states. While the EU and the UK may wish to keep such arrangements in place for as long as possible, deviations between UK and EU standards could give rise to trading difficulties and additional costs.

Willie Penrose (Longford-Westmeath, Labour)
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I congratulate both the Minister, Deputy Creed, and the Minister of State, Deputy Doyle, who are both excellent and well deserved appointments. Both Ministers have served long apprenticeships and I have worked with them on the agriculture committees in recent years. As Labour Party spokesperson on rural affairs and agriculture, I look forward to working constructively with them.

Is it not clear that the impact of Brexit will be significant? As the Minister said, the ESRI report referred to a reduction in trade of 20%. Greenland is the only country to leave the Union under an Article 50 procedure and it took more than three years. I have no doubt discussions following Brexit would take us into 2020. The negotiations would take longer than two years so we would have such a period of negotiation. Is it not the case that following Brexit, if the UK were outside the EU, tariffs could be imposed on Irish imports which would lead Irish food producers to seek out other markets for exports? That would likely result in reduced prices, which in turn would lead to downward pressure on prices paid to farmers for beef. That would be very significant. A total of 50% of beef exports currently go to Britain, worth €1.1 billion. Dairy exports, which are almost one third of our exports are worth almost €1 billion.

Moreover, as Deputy O'Keeffe will be aware, 60%, or €330 million worth, of Ireland's pig production goes to the United Kingdom, so that would have a huge impact. Is it not the position that there is no current provision for negotiating a special deal between Ireland and the United Kingdom in the event of a Brexit? Would this be important? As the Minister noted, the potential for the United Kingdom to negotiate external trade agreements with third countries would be a huge risk for Ireland. Would this not lead to displacement of Irish products on the UK market and have a significant negative impact on the Irish food industry?

Michael Creed (Cork North West, Fine Gael)
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I thank Deputy Penrose for his remarks. Agriculture always has been close to his heart, and I look forward to working with him.

Brexit is an issue of enormous concern for the agriculture sector in particular and is exercising the minds of the whole of Government. While people ask themselves what they can do without being seen to meddle, there are 140,000 people in the State who are entitled to vote in that referendum, and many of us know people in those communities and should reach out to them. When the Mercosur trade agreement did not have an initial offer on beef, people breathed a sigh of relief. However, that achievement would pale into insignificance were the UK to leave the EU and be in a position to negotiate bilateral trade agreements with South America. This is possibly one of the first things the United Kingdom would attempt to do, and the Deputy rightly points out that slightly less than 50% of Ireland's beef exports are on supermarket shelves in the United Kingdom. This encapsulates the scale of the potential crisis we face.

As I stated, this issue is exercising the whole of Government. My Department is feeding into a group within the Department of the Taoiseach that is assessing risks and strategies to deal with this issue. As Deputy McConalogue would be aware, a lot of milk is gathered in Northern Ireland to be brought south of the Border for processing. Given that this milk would now be crossing the border between the UK and the European Union, were Brexit to take place, issues would arise regarding border controls and so on. The Deputy raises an issue of enormous economic concern, a matter of which the Department is acutely aware.

Willie Penrose (Longford-Westmeath, Labour)
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Another potential impact is divergence of animal health and phytosanitary regulations, which are very important in terms of co-ordination and co-operation on animal health between Ireland and Northern Ireland and between Ireland and the European Union.

I ask the Minister also to consider the subject of energy supply. The cost of energy would loom large in the event of Brexit because Ireland imports 89% of its oil and 93% of its gas requirements from the United Kingdom, and in Ireland the agriculture sector spends approximately €500 million per year on energy. Would this not inevitably lead to increased production costs, which in turn would reduce our competitiveness? This would be a huge issue.

In the event of Brexit, Ireland would also lose an important ally in the European context for arguing its case. The Minister is correct in stating that 37% of the budget is devoted to the Common Agricultural Policy, CAP. As Britain is a net contributor, this is likely to have a significant negative impact on future spending on the CAP, particularly from 2021 onwards. This will be the kernel of the issue that people may not realise.

Michael Creed (Cork North West, Fine Gael)
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There is absolutely no upside for this economy of a Brexit, and the Deputy has listed a series of risks, including the issue of energy supply. There are existing cross-Border interconnectors and so on, and all of these arrangements would come under the microscope in the new dispensation that would apply. I refer to the uncertainty that would follow in the context of two years of negotiations, which would halt investment and damage confidence and would lead to fluctuations and currency movements that would create greater disadvantages for products from Ireland. I will take up with my Cabinet colleagues the issue of energy supply in particular.

The Deputy also raised the issue of animal and plant health regulations and standards. It would obviously be open to the United Kingdom to change the standards.

Willie Penrose (Longford-Westmeath, Labour)
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Yes.

Michael Creed (Cork North West, Fine Gael)
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While there is an expectation that they may remain the same for some time, there will at least be a once-off requirement for veterinary certification if there is a change. These are all additional costs that will place Ireland's products at a disadvantage relative to other similar products on supermarket shelves in the United Kingdom. As I stated, there is no upside to a Brexit, and I implore all parties in this House that share the view that Ireland's interests are best served by the UK remaining in the European Union to reach out to those communities that are entitled to vote in the referendum.