The UK decision to leave the EU will enter its official phase today as Article 50 is triggered, beginning the two-year negotiation process. During this two years the UK will remain an EU member, so the current situation with open borders and free markets within Europe will stay in place. But there are many uncertainties. Scotland is agitating for another referendum on its membership of the UK, while France has a presidential election to be held in April. The far-right candidate Marine Le Pen has promised she will take France out of the EU, if elected. Nobody seriously thinks she will be, but we are getting accustomed to surprise results.
The EU can go on without Britain, but without France it would probably not survive long. When it was formed in the aftermath of the Second World War, the main idea of the European Economic Community was to keep France and Germany from one another's throats. Two massive wars in the space of thirty years had wiped out cities and killed millions of people, mostly as a result of distrust between those two countries. The opening of borders has been largely successful in reducing tensions between European nations. Their closure will only have the opposite effect.
Free trade has proven itself the ally of peace, but if a far-right leader is elected in France and with the Tories in power in the UK, there would not be much hope for a reasonable outcome as ideologies often overrule common logic. This would be the very worst case scenario and with the implosion of the EU we would be exposed to the true dynamics of world trade like we have never been. Most farmers in the EU operate at break-even levels of profitability. They are kept going by a range of payments. The smaller the holding, the more likely it is to be operating at a loss. At today's international market prices, not many farms in Ireland, or the UK for that matter, would survive without EU subsidies.
As it stands we can only plan for the situation we have in front of us. This is complicated enough.
The EU has allowed free and open movement of goods and people across borders. This has benefited businesses in many ways, for example, by allowing vegetable farmers in the east of England to harvest their crops when local employees could not be found. With such a large target market, Irish companies like HYPERLINK "http://www.thatsfarming.com/news/snail-farming-carlow"Gaelic Escargot who export snails to France, have been able to find success.
The UK government talks of leaving the EU on the strictest 'hard Brexit' terms. Prime Minister Theresa May has taken the mandate of a slim 52% majority and is running with it. This is despite a sense that many people were misled by the Leave campaign, which focused on immigration and brushed over Brexit's economic costs. May is determined to close the UK's borders, yet is also seeking continued access to EU markets, if possible. On the EU side, there is a determination not to yield to UK demands, for fear it would encourage other countries to follow the UK.
Ireland is caught in between two seemingly inextricable forces. What we fear most is that the UK could introduce tariffs on imports, which would destroy a lot of our agricultural trade. Currently we have particularly important dairy and beef export markets to Britain, but all our agri-trade is dependent on open borders, without which costs would inevitably rise. According to the IFA, “53% of cheese exports, 29% of butter and 12% of SMP (Skim Milk Powder)” are destined for the UK, while 13,000 tonnes of sheep meat was exported to the UK in 2016. Currency fluctuations as a result of uncertainty over Brexit have already hit exports, but the worst could be yet to come.
On the other hand, Theresa May will find it difficult to plot a course, as she has some heavy resistance to trade barriers from within the UK. Industry leaders, employers' federations and those otherwise involved in trade were mostly opposed to leaving the EU. They know how it will affect thousands of businesses with EU supply chains and/or customer bases. They have not been listened to so far, but they have the power to hit negotiators where it hurts, in the pocket. For example, the US Chamber of Commerce published a report earlier this month which warned that much of the appeal for US companies based in Britain was unfettered access to EU markets. These companies invested £487bn in the UK in 2015, so it's going to be hard for politicians to ignore them if they say they will leave. Considering the fact that this is just one bloc of internal opposition to a hard Brexit, it seems likely that concessions will have to be made.
Ireland's relationship with the UK has always been one of reliance. Brexit has underlined this once again, though we are not quite as tied at the hip as we once were. Time was when most of our entire trade was with Britain. This is now only the case for some sectors. Yet just under 50% of our trade is still with the UK. Mushroom growers rely on the UK for 90% of their trade. They are likely to be hardest hit by any change in circumstances.
But there is many slip twixt cup and lip. We cannot really plan effectively for the outcomes, given the vast variability in what can happen. It will require some improvisation, but expect to see a climb-down from the hard-liners as the realities of Brexit's dire implications become clearer.