What would a no-deal Brexit mean for the island of Ireland?

The Economist is running a series of articles on the potential impact of a no-deal Brexit on everything from trade to universities, cars to retailing. This article looks at the Republic of Ireland and Northern Ireland.

A NO-DEAL Brexit would damage other European Union countries besides Britain. According to IMF estimates, for example, the GDP of each of the Netherlands, Belgium and Denmark would be 1% lower five years after a no-deal Brexit than they would otherwise be. (That may explain why, according to diplomats in Brussels, the first two have prepared better than any other countries for more customs and regulatory checks at their borders.) But by far the biggest loser, after Britain itself, would be Ireland, where GDP lost over five years would amount to almost 4%.

It is an irony that the most likely cause of a no-deal Brexit is the continuing argument over how to avoid a hard border between Northern Ireland and the Irish Republic. Brexiteers’ biggest beef with the draft withdrawal agreement agreed by British and EU negotiators is the Irish “backstop”, under which the whole of the United Kingdom would remain in a customs union with the EU until some way could be found to carry out customs and regulatory checks without building new infrastructure at the border. Yet if Britain were to leave the EU without a deal, both EU and WTO rules would require the enforcement of a hard border with associated checks and controls. So says the British government’s Northern Ireland secretary, Karen Bradley, echoing claims made by Philip Hammond, the chancellor, and Leo Varadkar, the Irish taoiseach.

Brexiteers deny this. They note that the British and Irish governments have made commitments not to enforce a hard border. They suggest seeking a waiver from WTO rules. But this is not convincing other than as a very short-term solution. After a no-deal Brexit, the Republic of Ireland and Northern Ireland would be in different customs, regulatory and food-safety regimes. The WTO would require the imposition of tariffs. If they were not imposed, Britain and Ireland would have to admit all goods from third countries tariff-free, under the organisation’s most-favoured-nation principle (which stops member states from discriminating among trading partners). The European Commission has said that health and food-safety checks would have to be applied to all cross-border farm and agri-food trade. There may be scope for operating some of these controls away from the border itself, but the risk of smuggling and indeed of organised crime in a place with a long history of both would be great.

The practical implications certainly worry businesses in Northern Ireland. Giving evidence to the House of Commons, the Northern Irish Freight Transport Association noted that 4.6m commercial vehicles cross the border every year. A third of what they carry is agri-food. The Northern Ireland Food and Drink Association pointed out that 30% of the province’s milk and 40% of its sheep go south for processing. It works the other way, too. Both Guinness and Bailey’s Irish Cream cross the border repeatedly for canning, bottling and export. Brussels has made it clear that it could not allow a long-term hole to be created in its external border by a failure to apply physical customs and regulatory controls.

Businesses in Northern Ireland were not much reassured by the technical notices on preparations for a no-deal Brexit issued by the British government last summer. After setting out how such an outcome might complicate those businesses’ operations, the notices suggested a place to which they might turn if they needed further advice. That was to Dublin, to consult the Irish government.

See more Brexit briefs:
What would a no-deal Brexit mean for the economy?
What would a no-deal Brexit mean for trade?
What would a no-deal Brexit mean for immigration?
What would a no-deal Brexit mean for retailing?
What would a no-deal Brexit mean for the automotive industry?