“Brexit is the Defining Challenge of this Generation”
Speech of Micheál Martin TD, Leader of Fianna Fáil,
Chartered Accountants Ireland
Dublin 16th February 2017
Any politician who says they know what they will be talking about in a week’s time is either an incurable optimist or oblivious to the world around them.
Whatever plans you make events can intervene and demand your attention. We’ve seen this during the past week where debate has been rightly dominated by revelations concerning one of our most important public institutions.
However there are also many much smaller issues which can rear their head and lead to breathless coverage which crowds out everything else.
This should be a major concern for us all because one of the most important and valid criticisms of politics in the decade before the recession is that we failed to properly consider or address long-term warnings. The space for reflection was closed as the focus instead went onto the issue of the day.
It is a hard fact that in the years leading up to the effective collapse of our banking system, Dáil Éireann spent more time talking about greyhound doping than banking regulation.
We must not forget this lesson because we are today facing what is a defining challenge for this generation.
Rarely is it so unequivocally obvious that a long-term issue poses a dramatic threat to economic, social and political progress in our country.
Brexit is historic by any measure. It marks an attempt to return to a pre-World War II model of weak international organisations and bilateral trade agreements.
You don’t need to know much history to know how that turned out last time.
For Ireland it presents us with a direct challenge to a successful model of progress first set out by Seán Lemass nearly 60 years ago when he committed to opening our economy and society.
Seven months after the English majority delivered an overall 52% for Leave it is clearer than ever that there was and is no plan in Britain, or in truth anywhere, for where we go from here.
All we have is mounting confirmation that there is no scenario in which Brexit delivers a positive economic outcome and the overwhelming consensus is that it will lead to a significant and potentially permanent reduction in trade, growth, employment and public finances.
The same voices which campaigned through demonising Europe and foreigners in general are now claiming that Brexit is working out fine for Britain. This is simply untrue.
What has happened is that the Treasury and Bank of England significantly altered policy in order to limit short-term economic damage – but Brexit is not about what happens over six months or twelve months, it is about what happens over the next generation.
The Chancellor’s last fiscal statement predicted £122 billion in extra borrowing before including any negative impact from exiting the Customs Union and Single Market.
A comprehensive survey of large British companies published last week showed 58% saying that Brexit is “already having a negative impact.” More importantly it showed 84% saying that it is “Vital” to their business “that government handles Brexit negotiations well.”
Investment decisions there are being stalled and there is a general air of uncertainty which has not been dispelled by the White Paper.
And the impact is underway here as well – particularly in industries exposed due to Sterling’s weakness and volatility.
The ‘Hard Brexit’ which is now underway is, according to the ESRI, the worst possible scenario for Ireland. Without a coordinated series of actions to mitigate the impact will be profound.
After seven months there is no way of avoiding the fact that we are not showing the urgency and ambition required to meet a challenge of this scale.
Yes there is a lot going on. There are many consultations and many meetings – but we should be much further along by now.
We don’t need warm words or statements of concern, we need specific proposals setting out our national objectives for the negotiations. We can’t allow our position to be reduced to one or two issues – the threat we face is comprehensive and our response must be as well.
Next month negotiations will begin on the terms of Brexit. To face into these negotiations with any hope of success we have to set out our specific objectives and the principles which underpin our position. In doing this we have to repeat time and again that Brexit is more complex for Ireland than for any other country – and that includes the UK.
In fact there are four distinct dimensions to the issues we need to address before the Brexit process is complete. These involve our North/South relations, our relations with Britain, our position in the European Union and, perhaps most importantly, our core economic model.
When you look at the practical implications of much of this it is possible to identify a series of specific actions which we can take unilaterally or we should aim to secure through negotiations.
Ireland will remain in the EU
The first step though has to be to be for Ireland to state the principles underpinning our vision of the future.
The first of these is to be unequivocal in stating that Ireland is and will continue to be committed to full participation in the European Union.
A small and peripheral nation has nothing to gain from a model of international relations founded on looser cooperation, limited legal enforcement and greater regulatory competition. A seat at the table and access to fair competition is not a threat to our sovereignty it enables our sovereignty.
People investing in Ireland and using it as a European base must be assured that we will continue to have full and free access to what will remain one of the largest world markets – and that we will be a pro-enterprise voice when it comes to regulation.
An International not a Regional Economy
A related but wider point is that we must see ours as an international economy, not a regional one. The breaking out of a regional dependence on Britain was central to securing growth and rising living standards.
We now have a more diverse economy in terms of the markets we trade in, but clearly we need to make it more diverse again and limit the ongoing risk that the policies of one or two trading partners can have a disproportionate impact here. This type of product and market diversification can only happen if we acknowledge it as a core objective and build it into all of our policies.
The North/South Dimension
Obviously the arrangements with Northern Ireland are the most important part of the post-Brexit situation. The consultations which have been underway in recent months have confirmed the deep integration which we have in economic, social and cultural affairs. The biggest threat to the undoubted progress in reconciliation remains two parties who continue to put their own interests ahead of the interests of the whole community, but Brexit is also a threat.
By all independent assessments this island will feel the impact of a crude Hard Brexit more than any other part of Europe.
An extra consideration is that UK residents in Northern Ireland will continue to have an automatic right to Irish citizenship and, therefore, to EU citizenship. This will be the largest concentration anywhere of EU citizens outside the EU’s border. It is a special case whether or not this is reflected in special status.
I believe that some form of Special Economic Zone status should be sought for Northern Ireland and those counties which involve the most North/South trade. However this now appears unlikely.
Because of the refusal of the British government to allow different arrangements for the devolved governments there will be a customs border and there will be regulatory issues which will grow over time.
So taking together our future in the EU, the need to ensure we are an international economy and the crucial importance of the North/South dimensions, what specifically can we do?
Secure All Elements of the Common Travel Area
The first objective should be to secure all elements of what is now referred to as the Common Travel Area. The CTA is central to our North/South and East/West relations but it is rarely defined in great detail.
A lot of commentary has focused on the idea of visa free travel and the right to work in each other’s jurisdictions. Certainly these are fundamental elements of the CTA, but it goes much further.
To all intents and purposes what we have is a substantial interconnection of rights in the areas of access social protection, health services, access to education and the ability to interact with state services without applying nationality criteria.
Over the last five decades many of these rights have been underpinned by EU law. As these protections disappear we have to replace them or we risk long-term misunderstandings.
This is an area where thankfully there does appear to be significant progress.
There are of course potential traps, especially concerning immigration controls on external borders, but there are no problems which generosity and goodwill cannot overcome either in our two countries or within the EU as a whole.
Reduction of Regulatory Impacts
The next objective should be to reduce the potential barriers to trade which will come from the post-Brexit regulatory regime.
Recent research has suggested that compliance costs can be a bigger barrier to trade than customs duties. Clearly this is not the case for all businesses, but it is something which we can work to address.
Under a Hard Brexit it is not possible to invent a completely frictionless customs border so we have to design means of mitigating its impact.
I believe our core strategy should be to both limit and subsidise compliance costs.
The amount of information to be collected has to be limited and automation maximised. A permanent consultation process for each major trading sector should be in place with a legal right of consultation before new regulations and new administrative arrangements are put in place.
As for the cost of compliance with new trade regulations, there should be, for at least a lengthy transitional period a direct subsidy of the costs of adaptation. For many firms this will be the first time that they will have to track their trade for customs authorities or this will mark a dramatic increase in such activity. They will need to pay for training, technology and often new personnel. Having to meet this through existing resources while also facing new customs duties would directly damage competitiveness.
Given the stated attitude to work permits for EU nationals, the many Irish firms which move Irish and EU staff back and forth to the UK will face potential barriers and at very least regulatory compliance costs.
Again, the only effective way of addressing this is through a new partnership and support approach by government.
Sectoral Support Strategies
The third major area for action is to recognise the impact of Brexit will vary from sector to sector and therefore the response has to vary. We need a series of meaningful sectoral support strategies to help navigate the next five to ten years.
Due to the UK being outside of the Single Market we should be allowed flexibility in state aid targeted at the UK market. There will be other constraints, but we should seek the ability to implement direct sectoral support where this might help mitigate the full impact of extra costs or other barriers.
However the bigger point is the need to implement an aggressive approach to market and product diversification on a sectoral basis. To do this we have to step-change research activity, training and agency supports.
New Arrangements for UK/Ireland Cooperation
No matter how successful we are in diversification we have to have a new approach to our connections with the UK because the UK will still be a major trading partner.
At present we have a deep and ongoing contact because we both attend every European meeting. At political, diplomatic and administrative levels we know each other well and we work together because so much of our work is within the formal context of the EU. We also work together on implementing regulations. We have to replace this contact.
Following Brexit there will be many unanticipated problems and possibly even opportunities in our relations with the UK. To tackle them we need structures which demand active rather than passive engagement.
Under the Good Friday Agreement we have the British-Irish Council, but it has a limited record of tackling urgent or complex issues. In fact it already has the competence to discuss EU issues but has played no significant role in shaping Brexit policy.
Our objective should be a clear one of having in place arrangements which oblige regular and structured discussions between our governments. This could be an evolution of the British-Irish Council or it could be something new along the lines of the Nordic Council of Ministers. That body has an independent secretariat and its members differ in terms of membership of the European Union and NATO.
If we are to have real cooperation then it can’t be an afterthought and it can’t be optional.
As I’ve said, there is no way of papering over the scale of the threat posed by Brexit. But Brexit is happening and it is happening in a hard and potentially chaotic manner.
The challenge is to do everything possible to mitigate its immediate impacts and to put in place foundations for our long term prosperity.
There is no evidence we can avoid any negative impacts but we now have to do everything possible to limit them.
Now is the time when we must move from generalities to specific proposals to overcome the many threats posed by the decision of our neighbour to turn its back on rule-bound cooperation amongst European states.