New report reveals 'negative impacts of Brexit on Irish economy in all scenarios'
Ireland's "unique exposure" to Brexit means it faces potentially devastating cuts in exports and production levels and a huge threat to jobs that could cost the country billions each year.
An independent study carried out by Copenhagen Economics for the Government paints a bleak picture where, even in a best-case scenario, Irish GDP will be 2.8% lower compared with an alternative situation in which, by 2030, the UK had not left the EU.
That European Economic Area (EEA) scenario, similar to the type of arrangement which currently operates between the EU and Norway and Iceland, would see a 3.3% drop in exports and a 3.5% fall in imports.
However, three other scenarios portray increasingly harmful scenarios, with the worst - a World Trade Organisation scenario, with the EU and the UK imposing tariffs on each other's goods in a classic 'hard Brexit' - slashing our GDP by 7% and resulting in a 7.7% fall in exports and an 8.2% drop in imports.
The report also rings alarm bells for some sectors which are the most exposed to the impact of Brexit, presenting a serious threat to rural Ireland. The report states that 82% of employment in agri-food, the beef sector and the dairy sector are outside Dublin - and all three face a Brexit impact to exports and production which far exceed the national averages.
According to the report:
*Brexit will have negative impacts on the Irish economy in all scenarios;
*Irish exports and imports of goods and services are predicted to be negatively affected by Brexit in all scenarios;
*Brexit will also impact Irish wages negatively for all skill groups.
In addition to the EEA and WTO scenarios, the report also looks at a Customs Union scenario - which assumes an EU-UK agreement that would mean duty-free trade for most products but some tariffs and border inspections - and a Free trade agreement scenario, broadly similar to the Customs Union outlook and with similar economic impact.
Areas of strategic importance include the agri-food sector, pharma-chemicals, electric machinery, wholesale and retail, and air transport and the report stresses that domestic policy responses can mitigate the impact of Brexit.
Agri-food, including beef and dairy, are where "the largest impacts occur" although other primary agriculture sub-sectors such as grains, fruit and vegetables, forestry and fishing will also be negatively affected.
Pharma-Chemicals could see production fall by 1% to 5% compared with non-Brexit 2030 levels, while production in electric machinery could drop by between 5% and 10%.
Wholesale and retail could face new costs in supply chains and will also be negatively affected by an overall drop in consumer demand resulting from Brexit, while air transport could face substantial challenges on routes to the UK.
"Of the scenarios analysed in this report, the EEA-scenario is the outcome that would minimize the economic loss (in GDP) for Ireland in the EU-UK trade negotiations," it said. "Measured relative to Irish GDP in 2015, the difference between the 'best' (EEA) scenario and the 'worst' (WTO) is €11 billion per year in 2015-level. In a hypothetical situation, where regulatory divergence for goods and services could be avoided and hence the Brexit impacts only related to tariffs and border costs, the theoretical loss to Irish GDP would be further reduced to around 1 per cent of GDP or approximately €3 billion in 2015 terms."
It said the best possible trade negotiation outcome for Ireland involves no tariffs, large quotas for agricultural products, low border costs, landbridge transit, low regulatory divergence, and low barriers for service trade.
As for domestic policy responses, it advises trade promotion that would help existing exporters to access new markets, enterprise policies to aid the transition from declining to growing sectors, and a focus on supporting skills "required by the unavoidable adjustments".
The full Ireland and the Impacts of Brexit can be read here.
