Maintaining the current trading arrangements with the Republic risks leaving Northern Ireland isolated within the UK as Great Britain’s trading regulations evolve, a leading economist has warned.
Dr Esmond Birnie said the economic considerations during the ongoing Brexit negotiations would always be intertwined with political considerations, but ultimately Northern Ireland sells almost four times more goods to Great Britain than the Republic and that the larger market is of vital importance.
The current trade flow from NI to GB is four times bigger than trade flow between NI and the RepublicDr Esmond Birnie - economist
Dr Birnie was commenting after an expected deal between the UK and the EU – on maintaining ‘continued regulatory alignment’ on the island of Ireland – reportedly collapsed over DUP fears it would effectively place a border in the Irish Sea.
“You can’t consider the arrangement for north/south in isolation from east/west, and I think this is partly why the proposals [on Monday] have caused some concern,” the Ulster University senior economist said.
“Because if Northern Ireland is aligned to EU regulations [through alignment with the Republic], and the rest of the UK, Great Britain, then moves away from those regulations, then a gap opens up which could produce a friction to movement in that direction. You are into a sort of border in the Irish Sea.
“This should be given important consideration because the current trade flow from Northern Ireland to Great Britain is about four times bigger than the trade flow between Northern Ireland and the Republic of Ireland. Those are the official statistics – so that’s £13 billion worth of Northern Ireland sales to Great Britain compared to £3.5 billion worth of Northern Ireland sales to the Republic.”
In the absence of specific trade deals between states, international trade is governed by the rules of the World Trade Organisation (WTO).
“That would be how we would have to deal with trade between Northern Ireland and the Republic of Ireland, and indeed between the UK as a whole and the rest of the EU and the rest of the world,” Dr Birnie said.
“There are tariffs under the WTO, in other words taxes on imports, but for most products they are not very high – less than 5% – and given that the pound sterling devalued by about 10% compared to the euro and the dollar, currency movements could outweigh that.”
However, Dr Birnie said one particular area of concern is the WTO tariffs on food products – which are a significant factor in cross-border trade – are “often well above 10%”.
He added: “Also, if you are not part of the customs union then EU would, in theory, want some system of checking goods coming into the Republic from Northern Ireland to identify the country of origin.”
Dr Birnie added: “It doesn’t have to be an economic disaster. Switzerland – which is surrounded by the European Union – isn’t in the customs union but it has a trading relationship with the EU which seems to work fairly well.”