Background
Even before the referendum result in June of last year, the implications on the Irish economy were discussed and debated at great length. In November 2015, the ESRI suggested that the overall impact was likely to be focused on the trade relationship.
This same report identified four key areas in which the implications were likely to be at their most significant; Trade, Foreign Direct Investment, Energy and Migration. Professor Alan Barrett, Director of the ESRI, highlighted these areas further in his address to the Dáil Symposium on European Union Affairs on 22 September 2016, adding that the UK’s withdrawal from the EU may also have an impact on the EU’s centre of gravity and overall economic policy potentially shifting to more protectionist positions advocated by France and Germany.
Based on 2015 data, the United Kingdom represents 13.79% of the total GDP of the EU and is thus its third largest economy.3 On a wider scale, the UK was the fifth largest economy in the OECD at a value of 5.19% of the OECD’s total GDP, with the three largest economies in the EU only surpassed by the United States and Japan. Ireland’s economy is, by comparison, valued at 1.61% of the Total EU GDP and 0.61% of the OECD’s.
The table below shows the position of the United Kingdom relative to other selected EU economies.
[Omitted]
Source: OECD
This highlights the importance of the UK as a known ally. Accordingly, the identification and development of new alliances is now of critical importance to Ireland as the UK leaves.
Hard Brexit versus Soft Brexit
The Committee set out to examine the implications on the economy in the contexts of a “hard Brexit” and a “soft Brexit”. What these terms actually mean and the impact of the UK’s withdrawal is the subject of much debate. The UK’s withdrawal could have an impact of up to 3.5% of Ireland’s GDP, which the Committee heard could amount to €9 billion. At previous events, Members of the Oireachtas heard that a drop of one to three percentage points could be worth €7 billion to the Irish economy, with the economic models used for forecasting generally underestimating.
Hardest Brexit
– The withdrawal of the UK from the EU without any agreement on withdrawal, the future EU-UK relationship or trade;
– No membership of the European Single Market or Customs Union;
– No agreement on citizens’ rights; and
– The forfeiture of commitments made to the current Multiannual Financial Framework (the EU Budget) and other programmes and projects.
The hardest Brexit of all would be the UK leaving the EU without any formal agreements, with such a result generally accepted as having a potentially adverse impact on Ireland. The absence of a trade agreement would mean the application of WTO (World Trade Organisation) rules, which the Committee was told could lead to tariffs of up to 50% on some products. This would most likely involve the application of customs posts and border checks on goods in and out of the UK. Still extremely difficult would be the UK leaving, with a formal agreement that stipulated withdrawal from membership of the Single Market and the Customs Union.
A hard Brexit seems to involve the establishment of a hard border and the application of tariffs in such a way as to adversely impact particular sectors and cross-border trade. It may not necessarily be one involving an impact on the CTA (Common Travel Area), which applies to travel and social rights of UK and Irish citizens. Therefore, maintaining the CTA will not mitigate the impact of a hard Brexit in terms of trade as the CTA only concerns the movement of people and not of goods.
Soft Brexit
Even if there is an agreement on citizens’ rights and the financial commitments of the UK to current EU programmes, the removal of trade and economic barriers through a comprehensive trade agreement is still very important. While this should be balanced, ambitious and far-reaching, it should not amount to access to the Single Market and should take a sector-by-sector approach and to include a transition period of a number of years.6
Softest Brexit
– An agreement on withdrawal and the future relationship with minimal impacts on the Common Travel Area and trade flows.
– The UK retaining membership of the Single Market
– The UK remaining as a Member of the Customs Union
– The British Government maintaining contributions to the EU Budget
– Allowing a compromise on freedom of movement and safeguarding acquired rights
A number of models for a soft Brexit have been described by experts, policy makers and the media:
Possible Models for a Soft Brexit
- ‘Norwegian model’ – This involves EEA (European Economic Area) membership, membership of the Single Market, allowing freedom of movement and maintaining contributions to the EU Budget. It also involves the application of EU rules and laws
- ‘Turkish model’ – This involves membership of the Customs Union and applying a common external tariff except for certain goods.
- ‘Swiss model’ – This involves the negotiation of a number of agreements depending on which areas of cooperation the UK wants to keep, noting that this approach has been discontinued between the EU and Switzerland.
- ‘Canadian model’ – This approach involves the conclusion of a comprehensive trade agreement similar to the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU.
EEA membership allows for access to the Single Market, with the acceptance of the principles of freedom of movement of persons is clearly problematic for the UK as control of movement of people was a key issue in the UK referendum. To bear in mind, the EEA model does not cover agricultural products. EEA members are obliged to apply the acquis communautaire; that is the body of European legislation, case law and common policies, such as transport, competition and company law.
This model excludes agriculture and fisheries, but there is a commitment to the liberalisation of agricultural trade subject to separate agreements.
Membership of the EU Customs Union, i.e. the ‘Turkish model’, may also offer a solution, but again, this does not apply to agricultural products, services and public procurement. While the EU has indicated a preference for a framework agreement, some elements of the Swiss model could be adapted to ensure a sector-by-sector approach including agriculture.
Under the ‘Canadian model’, CETA eliminates nearly all tariffs between Canada and the EU, with restrictions on some food items. as CETA does not cover the “passporting” of financial services and if a mixed agreement, any agreement would have to be ratified by all Member States as per their own requirements.
A soft Brexit is currently considered unlikely by some as control on immigration is thought to be a red line issue for the UK. The Conservative-led Government has indicated a wish to negotiate trade agreements with third countries, which could mean full withdrawal from the Single Market and the Customs Union.
Without a new free trade agreement in place between the EU and the UK then trade between the UK and the EU would be subject to WTO rules. Under this, the UK could not offer a 0% tariff to the EU without offering it to other third countries.
But negotiations could last 2 years, positions can change as the practical implications emerge and the results of the UK General Election on 8 June may result in a greater potential for a softer Brexit, or at least the UK remaining a member of the EU Customs Union.
Visible and Potential Impacts on Business
Currency fluctuations have impacted some sectors more than others. In the immediate aftermath of the election result, the Pound Sterling plummeted in value, falling from €1.30 on 23 June 2016 to just under €1.20 on 24 June. Currently, the value of Sterling is in the region of €1.15 to €1.20, falling to as low as €1.1068 in October 2016.12 This had a significant impact on those sectors relying on fixed costs for the sale of goods to the United Kingdom, particularly businesses in the agri-food sector.
The Committee heard of the many services available to businesses in Ireland to prepare for Brexit. Enterprise Ireland (EI) and the Small Firms Association focused particularly on this point. Concerns were raised about the number of businesses that are not EI clients and may not have prepared in any way yet. The Committee heard that a number of firms have no Brexit contingency plans in place and the Committee recommends that all Brexit tools and resources formulated by state agencies be rolled out to all small and medium enterprises registered in Ireland and a communications campaign be undertaken.
The Committee has concerns regarding the economic impacts on Irish businesses and heard a number of possible effects, including:
– UK-Ireland trade could decline by as much as 20%;
– As many as 40,000 jobs could be lost;
– The decline in Irish GDP could be as much as 3.5% in subsequent years;
– WTO tariffs could have the greatest impact on food and agri-business and have the effect of increasing the cost to consumers. The Committee heard that the cumulative value of trade in the food and drink sector between Ireland and the UK is valued at as much as €12 billion;
– The number of visitors from the UK to Ireland has declined by 4% in 2017, which is equivalent to approximately 141,000 visitors (this is possibly linked to currency fluctuation).
Central to economic concerns were serious worries over the establishment of a hard ustoms border between Ireland and Northern Ireland, which the Committee heard, has the potential for major economic and logistical disruption. This could result in Irish food companies moving operations to the UK simply to avoid tariffs and make their supply chains work.
The Committee heard that there is a potential negative impact on the tourism sector, as well as the retail and hospitality sectors. The current decline in tourism numbers is already further impacted by visitors reducing their length of stay, spending less, changing accommodation type and reconsidering travel options following the referendum result. In retail, the Committee heard some Irish-based retailers are already substituting cheaper imports from the UK for Irish products and that campaigns to encourage the purchase of Irish goods will be critically important.
The imposition of customs posts and duties is likely to affect some sectors more than others. As stated above, the agri-food sector is a key concern. This is particularly in light of the possibility that the UK will conclude trade agreements with third countries that could undercut Irish products in terms of price and in standards. It has been suggested that if a customs regime cannot be avoided, it would be extremely difficult to protect Irish exports of agricultural products.
As a solution, a free trade agreement between the EU and the UK for vulnerable sectors, including agricultural products, should be a primary consideration.
Revenue and Customs
While the Committee was unable to cover the area of customs in depth it does note the engagement of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach (JCFPERT) on the issue on 25 May 2017.
Following the withdrawal of the UK from the EU, including from the Customs Union, the UK will be considered a third country for customs purposes, requiring a number of additional procedures for any export and import of goods. The customs process involves the completion of an import or export declaration, which must be lodged either by a clearance agent employed by the business, or by the business itself if it has authorisation.
While the JCFPERT heard that planning is very important to make the process operate smoothly,there are a number of challenges and changes to the current practices, including:
– A requirement to lodge customs declarations on all imports from and exports to the UK;
– Declarations lodged must be correct to ensure compliance, minimise risk of delays and avoid additional charges;
– Streamlining customs processes, particularly for areas such as the agri-food sector;
– Building cash flow considerations into any future business model; and
– Customs tariffs will depend on whether a free trade agreement is concluded.
Customs is a competence of the EU under the Treaties and is governed by the Union Customs Code, and any tailored approaches for EU-UK trade would need to be negotiated between the EU and the UK.
The volume of trade is one of the most significant challenges. At the hearing of the JCFPERT, the Chairman of the Office of the Revenue Commissioners, Mr Niall Cody, stated that 1 million roll-on roll-off units arrive at our ports each year, over 90% of them from the United Kingdom and that 1 million HGVs and 1.3 million LGVs move in each direction between Ireland and Northern Ireland annually.
Many small companies in Ireland whose only export activity is to Northern Ireland or other parts of the UK will be unfamiliar with any of these procedures and will have to learn how to interact with complicated customs procedures for the first time.
As noted in Chapter 8, significant infrastructural challenges arise concerning the management of trade and possible reorientation of transit routes towards the continent post-Brexit. This could involve catering for a higher number of services.
Potential Solutions
Trade
– The establishment of a Common Trading Area on the island of Ireland as part of a future EU/UK Agreement.
– That Ireland does not sign up to any EU/UK transitional agreement post-Brexit that does not include a lengthy period of phasing in any new customs and tariff arrangements on the Island of Ireland that may occur.
– The conclusion of a far reaching, comprehensive trade deal, with minimal trade barriers.
Foreign Direct Investment
– Ensuring that the Central Bank of Ireland is competitive with other EU and Eurozone Central Banks in assisting regulated institutions seeking to locate in Ireland with well-resourced support and information on Ireland’s financial regulatory regime. The Committee also recommend that the Central Bank of Ireland consider how, without jeopardising its independent regulatory function, it could assist the IDA in their role of attracting foreign direct investment into Ireland arising from Brexit.
– The provision of further capital projects, including in the areas of transport, education and housing, in order to equip Ireland to compete for new opportunities resulting from and after Brexit.
State Aid / Fiscal Solutions
– Ireland should seek to work with other affected EU partners to negotiate an enlargement of the General Block Exemption Regulations in the area of state aid to assist those sectors likely to be most adversely affected by Brexit due to both proximity and trade reliance. In certain sectors, this could include a large state aid exemption regime of the form undertaken during the 2008 Financial Crisis.
– A derogation from fiscal rule requirements could also be explored to allow for the required capital expenditure on adapting and expanding infrastructure, housing and support services.
– The utilisation of funding from the European Investment Bank to alleviate the need for additional fiscal space for capital projects.
Financial Services
– The Committee recommends that the Department of Finance commission an independent review on the opportunities and disadvantages of the UK losing its passporting rights within the Single Financial Markets with particular focus on the potential impact and opportunity for professional services in Ireland. This review should form the basis for a renewing and amending the “Strategy for Ireland’s International Financial Services sector 2015-2020.”
– It is essential that Ireland supports a lengthy transitioning period post-Brexit for the UK’s potential loss of passporting and access to the Financial Single Market.
Supports for Businesses
– Campaign to increase awareness of services that state agencies provide to all businesses.
– The supports and tools provided by state agencies should continue to be rolled out to all businesses and efforts should be made to make all relevant businesses aware of supports.
– There is a need for an aid package for businesses already impacted by Brexit, particularly those businesses with low profit margins impacted by currency fluctuations.
– Funding to allow exporters who are not EI clients to prepare a Brexit plan should be explored.
Transit and Movement of Goods
– A pre-clearance model for goods may function as part of a solution, whereby trucks and drivers can pass through the UK land-bridge without incurring duties or checks.
– A system of pre-registering loads online and tracking using GPS or number plate recognition is a possible solution for trade with Britain and Northern Ireland.
– Anti-abuse measures need to be put in place, including mobile spot-checks of goods.
Strategy
– The Department of the Taoiseach Interdepartmental Brexit group should include officials from the Central Bank of Ireland, as was the case during the Financial Crisis when similar interdepartmental groups existed.
– The interdepartmental group needs to be sufficiently resourced so that it can shadow the UK Government’s Department of Exiting the European Union in ensuring that Ireland take the challenges and opportunities posed by Brexit as seriously as our nearest and most important trading partner.
– The interdepartmental group should work more closely with a wider consultative group of stakeholders’ right across the industry and society sectors concerned about Brexit.
– This group should be mandated to publish a post-Brexit Ireland White Paper before the end of 2017, so that citizens, businesses and future investors in Ireland would see precisely how it intends to manage its economy no matter what the outcome of the EU/Brexit negotiations.”.
Continued EU Membership
Although considered unlikely, the UK could revoke its notification to withdraw from the EU. The Committee heard from Former Taoiseach, Mr John Bruton, that Article 6.8 of the Vienna Convention should be considered and that the EU negotiating team should keep the door open for the United Kingdom to change its mind.
The Committee heard that the UK public may see merit in this as it could demonstrate differences or potentially provide an alternative to any final agreement..
Trade
The Committee heard that the risks and uncertainties associated with Brexit highlight the importance of stability-orientated policies, most notably in the area of public finances and financial system stability.
Given the cultural and economic connectedness of the UK and Ireland, the importance of a free trade agreement was highlighted and the Committee heard that a free trade agreement with minimal trade barriers is the goal and that competition must underpin any new relationship.
The Committee also heard that arrangements between the EU and the UK that accommodate either no tariffs, a minimal number or a low level of tariffs would mitigate the negative impact. A number of possible solutions were discussed during hearings and in documents considered by the Committee. These include the establishment of a Common Trading Area, a slower introduction of tariffs along the border and a phasing-in arrangement of the final agreement between the UK and Ireland. Expanding trade links with other EU and non-EU countries was also put forward as a means of mitigating the impact of Brexit.
Following the United Kingdom’s withdrawal, a transitional arrangement could apply, in order to allow the EU and UK economies to adjust to the agreement. The Committee heard that a different phasing-in or differentiated transitional arrangement could apply to Ireland, i.e. phasing-in at a slower rate.
Foreign Direct Investment
In September 2016, Members of the Oireachtas heard of the benefits of Foreign Direct Investment (FDI) to Ireland, with the following figures highlighted:
– FDI contributes €130 billion in exports from Ireland;
– FDI also contributes €9 billion in payroll per annum in Ireland;
– The majority of corporation tax comes from FDI;
– Multinationals directly employ 187,000 people; and
– With the multiplier effect, at least 318,000 jobs are dependent on FDI.
FDI has increased in recent years with some 19,000 jobs created in 2015. It seems that infrastructure in Ireland is a key concern for UK-based companies considering relocation. The Committee heard that there is a need for public investment to be significantly increased in transport, education and housing if demand from relocating companies is to be met.
On the issue of investment, the Government has indicated preparations for a ten-year capital plan. At his speech to the Institute of International and European Affairs, then Taoiseach Enda Kenny TD highlighted this, stating that the Government is:
“already in active discussions with the European Investment Bank, which recently opened an office here in Dublin. I am confident those discussions will lead to significant further EIB investments in Ireland.”
In the same speech, the then Taoiseach highlighted the need for investment in roads, public transport, energy, water, schools, higher education, hospitals and health services. Reference was also made to Ireland’s ports and airports.
The Committee believes that availing of funding through the European Investment Bank may alleviate the need for additional fiscal space to support capital projects.
State Aid and Fiscal Rules
In the event that further infrastructure and supports are needed, it may be necessary for the Government to explore ways in which businesses may be supported. The Government has outlined a number of measures in its 2017 Budget document. However, these measures must conform to existing state aid rules. In addition to state aids, infrastructural projects, such as transportation and educational supports, may require additional derogations from EU fiscal rules. This issue, in the context of housing, is detailed further in the Report of the Dáil Committee on Housing and Homelessness in June 2016.
A separate arrangement for Ireland on the application of State Aid rules following the United Kingdom’s withdrawal could serve to aid those companies that are most affected. The Committee heard that the state aid rules are built upon the good functioning of the Single Market, but it was noted by the Committee that Brexit represents a fracture in the Single Market and that an element of additional expenditure may be required to help Ireland adapt. For example, this may include tax breaks to companies involved in capital expenditure or providing additional supports to those whose operations have been disrupted by Brexit such as training and new market advice.
With Ireland recognised as the Member State likely to be most affected by Brexit, the potential effects should be explored with a view to making a case for a temporary derogation from state aid rules. Similarly, a temporary derogation from the Stability Support Mechanism, as the withdrawal of the UK and its impact on Ireland is an exceptional circumstance, could serve to provide additional capital and current expenditure, particularly for infrastructural projects such as adapting ports and providing serviced land for housing. However, this would impact on the amount of borrowing the State would need to make.
Financial Services
The Committee heard that a key impact of Brexit is that providers of financial services into and out of the UK could lose what are known as “passporting” rights. This essentially means that a provider of financial services licensed in one Member State can, under certain conditions, provide those services in all EU Member States.
The Committee heard that in the financial services sector, the Central Bank maintains a supervisory and regulatory role.The promotion of Ireland (as a possible alternative to the UK) is within the remit of IDA Ireland. The Committee believes that an element of coordination and involvement from the regulator and IDA Ireland could assist in ensuring that Ireland is in the best possible position to attract FDI in the area of financial services.
In the area of insurance, the Committee heard of the need for Irish companies to access the UK market in a similar manner to the agri-food sector. Insurance Ireland suggested an approach based on approval in principle, referred to as grandfathering, which is based on the good standing of a regulatory authority.
Grandfathering, or regulatory grandfathering, is a mechanism that recognises a business’ record in a comparable regulatory jurisdiction, and the approval process that would have applied to that business in that jurisdiction. The Committee heard that a joint grandfathering
arrangement between the UK and Ireland could facilitate a regulatory corridor that would allow for rapid approval of Irish entities seeking to export their services to the UK.
Supports and Expenditure
The Committee heard that businesses should prepare for a hard-Brexit but also heard that while companies are alerted to the challenges posed by Brexit, not all of them have taken action and some witnesses expressed worry that many businesses have not prepared at all. The need for companies to put resources into markets outside the UK has been highlighted previously and that point was made again.
The Committee heard that toolkits and advice notes have been prepared for businesses to help with preparations for Brexit. A scorecard has been produced by Enterprise Ireland and the Committee encourages businesses to avail of this in order to aid their own understanding of the level of preparations required.
The Committee also heard that funding was made available to Enterprise Ireland clients to prepare Brexit plans and that providing similar funding to businesses not represented by EI should be explored. The Committee heard that companies should now move to Brexit-proofing their business.
The impact of Brexit is differentiated by sector. Some sectors rely almost exclusively on trade with the United Kingdom, most notably the agri-food sector. For others, it is a minor part of their businesses. The Committee heard that aid packages to assist businesses in adjusting to Brexit should be considered and the Committee believes this should be explored.
Competitiveness
A number of witnesses underlined the importance of making Ireland more competitive. This does not just relate to access to the EU markets, language, education and so forth, but also to cost competitiveness, the ability to enforce a contract and the ability to obtain construction permits.
The Committee heard that initial reforms could be focused on the cost of doing business in Ireland.Taxation and regulation were identified as matters of national competence. The Committee heard that any measures introduced should not result in additional increases to the cost of doing business and the Government should also examine current legislation to reduce business costs. The Committee heard that one example that could be explored is Ireland’s excise duties, which are among the highest in the EU.
Transit and Movement of Goods
While a number of possible options in the context of Free Movement of Goods between the UK and Ireland are considered below, a number of practical arrangements for border controls and transit were also put forward. The ideal would be the UK remaining within the Customs Union and the full preservation of the CTA. A comprehensive free trade agreement that eliminates most, if not all, tariffs and customs could minimise damage. However, the Committee also heard some solutions for supporting customs controls if they need to be imposed, including
:- A pre-clearance model for goods travelling as through-traffic via the UK land-bridge;
– A pre-registration system for loads;
– Mobile spot checking for the origin of goods; and
– The use of number-plate recognition and GPS tracking of vehicles all offer possible solutions.
On 25 May 2017, the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach heard that Revenue is “looking at the latest technology to provide us with a system that can clear goods in seconds and facilitate their free flow”,
Strategy
The Committee heard a proposal from one of the business representative groups, (Mr John McGrane from the British Irish Chamber of Commerce) that there may be merit in forming a tight, well resourced collective of business representation.38 The Committee believes that an expanded joined up approach that involves the relevant stakeholders has merit and suggests that the relevant Departments will know how best to engage.
Trade Solutions specific to Northern Ireland
Earlier in this chapter, the consequence of a hard versus soft Brexit is discussed for all EU-UK Trade and the Single Market. The following scenarios, which are specific to Northern Ireland, could mitigate the impact of Brexit for trade between Ireland and Northern Ireland.
Summary and Potential Solutions – Trade
EEA+ Model
– This option involves Northern Ireland joining the EEA, with additional agreements covering areas not covered by the EEA Agreement, e.g. agriculture. This has been discussed in detail by the European Policy Centre.
Common Trading Area
– This could take the form of a formal trading area that is put in place between the United Kingdom and Ireland, but if a free trade agreement is put in place between the EU and the UK this may not be necessary.
An Enhanced Role for the British-Irish Intergovernmental Conference
– The Committee believes an enhanced role for British-Irish Intergovernmental Conference (in considering and identifying regulatory changes that could create barriers to trade between Ireland and the UK) could be developed. This could focus on barriers to trade not related to tariffs and customs and strengthen the East-West component of the Good Friday
Agreement.
German Model – Protocol allowing all-island trade
– This solution is based on a trade arrangement between East and West Germany before its reunification in 1990 and referenced in the Treaty of Rome. Under the ‘German model’ trade on the island of Ireland would be considered as all-island trade and within the one economy.
This would correspond to the all-island economy currently in place across a number of sectors but how this would comply with subsequent treaties to the Treaty of Rome will need to be further explored.
Solution 1: EEA+ Model
The Committee considered a number of examples concerning the free movement of goods. In relation to Northern Ireland, the Committee heard that there is some potential in the EEA+ model. This is an enhanced version of EEA membership for Northern Ireland only, with additional agreements to cover integral sectors such as agriculture and fisheries, which is not alreadycomprehended by the EEA acquis.
In his appearance before the Committee, Professor Christopher McCrudden suggested that the EEA agreement is a good base upon which to build the remaining agreements considered necessary. The Committee believes this arrangement has potential, particularly during any transition period, if not feasible in the longer-term. This arrangement functioning as a transitional arrangement was also suggested by Lord Alderdice in his appearance before the Committee.
A disadvantage to this option is that Northern Ireland would have to make a choice on where border checks would take place and whether they would be east-west checks (i.e. undertaken when crossing the Irish Sea) or north-south checks (i.e. undertaken when crossing the land border). The Committee heard that a digital border may be difficult to enforce unless it is in the Irish Sea.
Solution 2: Common Trading Area
Former Taoiseach, Mr Bertie Ahern suggested a Common Trading Area for the UK and Ireland. While a Common Trading Area may result in a customs control being avoided between Ireland and Northern Ireland (North-South) or Ireland and the UK (East-West), it is important that a full analysis is carried out on both sides of the border, in order to determine if this is mutually advantageous. In keeping with the principles underpinning the Single Market, this could be confined to closed markets, where the production, manufacture and consumption occur entirely on the island of Ireland.
A common arrangement for goods where the UK and Ireland operate under different rules than the rest of the European Union was presented as a possible solution. While this may be more difficult to agree and enforce, this arrangement could be restricted to goods that are not re-traded to the rest of the European Union and vice-versa. The Committee heard that this scenario is unlikely to be favoured by the other Member States. Additionally, if a free trade agreement is put in place, this approach may not be necessary.
Solution 3: Trade Role for the British-Irish Intergovernmental Conference
The British-Irish Intergovernmental Conference (BIIC) may have a function in addressing non-tariff barriers and identifying possible issues in regulatory divergence between Ireland and the UK that may impact UK-Irish trade.
The Committee heard that the BIIC could meet monthly to consider the possible impacts of
proposed changes to UK or Irish law. This would allow an opportunity to respond to possible changes to standards, for example, that could adversely impact trade between Ireland, Northern Ireland and the rest of the United Kingdom. In cases of national competence, issues could be developed and solved by the UK, devolved administrations and the Irish Government. In areas of EU competence, Ireland could recommend that the EU consider the issues. The Committee heard that such a role would also strengthen the East-West elements of the Good Friday Agreement.
Solution 4: Protocol to the EU Treaties allowing All-Island Trade (German Precedent)
A precedent set by West Germany43 and East Germany prior to reunification was explored by the Committee. Following the agreement of the Treaty of Rome in 1957, the then West German government negotiated a protocol to this Treaty which treated trade between East and West Germany as ‘internal’ trade.
This status remained in place following the establishment of the European Customs Union and the Basic Treaty between East and West Germany in 1972. However, following reunification, the need for the protocol was obsolete as all German territories were subject to the Basic Law of the Federal Republic of Germany.
The Committee considers this precedent to be a potential solution for Northern Ireland following the United Kingdom’s withdrawal. Such a designation could be adapted to make reference to Northern Ireland as the territory not subject to Bunreacht na hÉireann, being the equivalent document to the Basic Law of the Federal Republic of Germany. The Committee also notes that this arrangement was in place before the creation of the Single Market, which dismantled many barriers to EU trade and put in place a significant number of harmonising, health and safety and other rules and before the creation of the Customs Union. It would therefore be necessary to explore in some detail how elements of this proposal could operate and be viable with these new structures in place. The Committee believes that elements of this approach could be adopted in any solution that safeguards all-island trade and believes that this should be explored.
This Article draws on Seanad Special Select Committee Withdrawal of the United Kingdom from the European Union Brexit: Implications and Potential Solutions June 2017. Irish public sector information is reproduced pursuant to PSI Licence; Conditions of Re-Use of Public Sector Information. The Legal Materials contain Irish Public Sector Information licensed under the Irish Licence which is at http://circulars.gov.ie/pdf/circular/per/2016/12.pdf.
