Brian Keegan: Businesses approaching Brexit looking for opportunities may do well in the long run
For the past several months, the challenge for Irish business has been surviving the enforced lockdown due to coronavirus.
But, just as business starts its slow and uncertain return to more usual levels of activity, the issue of Brexit comes back into sharper focus. Brexit cannot be ignored by any Irish industry involved in supplying or purchasing from the UK, or which is reliant on materials coming via a UK supply chain.
The signals are not good that any form of comprehensive trade agreement will be arrived at between the British and EU authorities by the end of the year.
Germany’s six-month presidency of the EU kicked off last week with warnings that there might not be a deal with the UK.
Last week, too, the EU Commission thought it necessary to put in place special arrangements for Irish food producers using the UK as a land bridge to export to Europe after Brexit.
Without a trade agreement, default customs duty rates kick in when goods move from one customs regime to another.
The default tariffs on imported foodstuffs can add anything up to 40% or more to the cost to the consumer. Clothing attracts a 12% tariff. Other products have zero or token tariffs in the order of 2% to 3%.
Irrespective of the outcome of the EU/UK trade negotiations, a protocol to the Brexit withdrawal agreement describing how the North will interact with the rest of Britain and with the rest of Europe will apply.
The protocol is set to run for a period of at least four years and its primary purpose is to eliminate border controls on the island of Ireland.
To do so it permits unique customs rules for the North to allow it be part of both the British customs regime and the EU customs regime. If the current trade talks between the EU and the UK fail, the North could be the least affected of all the regions of Europe when it comes to EU/UK trade.
The protocol is short on detail. Tariffs are taxes, and taxes cannot work without declarations and controls. The protocol is silent on how these might work in practice, and an official policy paper from the UK government, issued in May, does little to clarify what revised customs arrangements are to be put in place.
Research published last month by the University of Liverpool, entitled ‘The Protocol on Ireland & Northern Ireland and the EU Withdrawal Agreement’ speaks of a “contagion of uncertainty” among business people and representative groups in the North, which were surveyed.
The researchers confirm many of the issues already known – that there was insufficient research on East-West trade before concluding the protocol and that businesses are very concerned about disruption and resulting additional costs to their supply chains and cross-border operations.
But, the report also suggests that businesses in Britain are signalling that they may withdraw from the market in the North.
They may also step back from using the North in their supply chains due to administrative costs and diverging standards.
The research team also highlights that UK immigration policy may undermine migration into the North.
Following the grinding negativity of the lockdown, businesses which approach Brexit seeking opportunities may, in the long-run, do well.
Cross-border trade with the UK will not cease simply because it becomes more difficult.
There are undoubtedly opportunities accruing to any industry which can use the arrangements within the Northern Ireland protocol, once these are finalised, to gain a foothold into the large UK market.
