Remarks by Ambassador Mulhall on Brexit at Loyola Marymount University, LA, 17 October 2017
The UK’s decision to leave the European Union is a development that not many people predicted or expected ahead of last year’s referendum, but it has become a reality and we need to deal with it.
I will not rake over the coals of the referendum and the reasons why the Leave side came out on top except to say that it was always going to be a challenge to conduct a referendum on EU membership in a country like Britain with a print media that is so well-known for its deep and abiding aversion to all things connected with the EU.
Sixteen months after the 2016 referendum, the phenomenon that has come to be known as Brexit remains a disruptive and divisive affair.
It has clearly divided Britain politically (there are divisions within the two main political parties and between England and Scotland) and its economic effects are beginning to be felt, albeit less dramatically than had been predicted ahead of last year’s vote. Public opinion continues to be split on the wisdom or otherwise of Brexit.
The expert consensus remains that leaving the EU will damage the British economy, a development that will have unavoidable spill-over implications for Ireland on account of our extensive commercial links with our nearest neighbour. Our rule-of-thumb is that, if the UK economy shrinks by 1%, then our economy suffers a 0.3% decline. Not catastrophic perhaps for an economy like ours that is currently growing at almost 5% per annum, but a seriously unwelcome side-effect nonetheless. Indeed we are probably the EU member State most exposed to the currents generated by the UK’s decision.
The precise shape of Brexit is a source of continued debate in Britain where some of the propositions that were advanced by those who favoured leaving the EU are now bumping up against reality and gradually being shown to be unreliable. Chief among these was the prediction that the EU would rush to conclude a free trade deal with the UK that would preserve most of the economic advantages of membership but without its concomitant obligations. That clearly has not happened. EU countries will naturally want to keep the UK closely linked to the EU, but will not allow them to have a free lunch at the expense of the EU’s cohesion.
Brexit is also disruptive for the EU because it saps up political energies on the essentially negative project of unmaking Britain’s 44-year engagement with the EU. This was always going to be a highly complex endeavour and so it is turning out to be. Most EU Governments would, I am sure, prefer to be devoting their attentions to more positive initiatives. Coupled with a degree of frustration about Brexit around Europe, there is also a fresh determination to develop the EU’s potential. In Ireland, anxieties about the implications of Brexit has been accompanied by a rise in public support for EU membership.
The EU-UK negotiations have been underway since June, but it now seems unlikely that sufficient progress will have been made in phase 1 of these talks — on what is sometimes termed the divorce settlement — to allow for the second phase to start before the end of the year. That second phase will aim to agree a framework for future UK-EU relations, which is of vital importance to both sides.
And Brexit is, of course, especially troublesome for Ireland. There are three sets of challenges that arise for Ireland as a consequence of Brexit.
First, we will miss the UK as a like-minded partner around the EU negotiating table and there are fears that the very productive bilateral relations we have built up with the UK as fellow EU members will wane when we are no longer partners in the same European club. As EU members, we will need to concentrate on deepening relations with our EU partners.
Second, we worry about the potentially adverse effects of Brexit on our extensive economic ties with the UK. Two-way trade between Ireland and the UK amounts to some $75 billion annually. The UK accounts for about 15% of our exports, but this masks some vulnerabilities on our part. For Irish-owned companies — and for those in certain sectors such as food and agriculture — Britain can account for 40% or more of our total exports. The decline in the value of Sterling — 20% since June 2016 — has already caused problems for some of our companies, although there are also benefits that accrue to us on account of having access to cheaper imports from the UK.
Third, there is the sensitive question of the border in Ireland. For the past two decades, following the creation of the single market and the success of the Northern Ireland peace process, the Irish border has been an invisible one. This has conferred great benefit on the people of Ireland, and especially on those who live near the border. We want to preserve and develop those benefits. To alter the present situation, one that works so well for all concerned, would be economically disruptive and politically risky.
Sadly, the UK’s decision to leave the EU has introduced an additional element of uncertainty into an already fragile political situation in Northern Ireland. Let me be clear. No one in Northern Ireland, in Britain or in the EU wants to see a hardening of the Irish border. All accept that this would be deeply unwelcome. The question that arises is what in practice needs to be done in order to secure the retention of the currently invisible border in Ireland after the UK leaves?
What outcome do we seek from the current negotiations? It is clearly in Ireland’s interests to keep the UK as close as possible to the EU. We did not want them to leave, but accept that this is going to happen. We are now in damage limitation mode. We continue to hope that the UK will do the sensible thing and remain in the single market and the customs union. That would minimise the risks on the border in Ireland and would limit the consequence for Ireland’s trade with our nearest neighbour. We also favour a transition period after March 2019 and consider that this should last as long as is necessary to enable new arrangements to be worked out between the UK and the EU.
For Britain to retain close trade ties with the EU, it will need to accommodate the concerns of the EU and its member States. Specifically, the UK will need to accept that full access to EU markets of the kind that the UK enjoys at present is not something that is readily available to non-members. It would be unreasonable to expect the EU to afford the UK unconditional access to the advantages of EU membership after it ceases to be a member.
The goal at present is to arrive at an agreement to move beyond the first phase of the negotiations and to begin the difficult task of sketching out a new post-Brexit relationship between the UK and the EU. This will require sufficient progress to be made in the current negotiations on: the UK’s financial obligations; the status of EU citizens in Britain and British citizens in the EU; and a suite of issues connected with Ireland.
There is still some way to go before the negotiations are ready to move beyond this first tranche of topics and the financial issue is proving to be a particularly difficult one. With regard to Ireland, the priorities are to protect the Good Friday Agreement, to preserve the Common Travel Area between the UK and Ireland and the rights of Irish citizens in Britain, and to deal with the border issue.
From our national point of view, an encouraging element is the extent to which our EU partners and its negotiators have taken Ireland’s concerns on board.
We are in no doubt. Our future lies with the EU and we are on the EU side of the table in these negotiations, but we do have a special interest in a positive outcome. It is reassuring to have the strong backing of our EU partners for a solution that will protect the peace process and the invisible border on our island.
These negotiations are proving to be complex and difficult. Ireland has much at stake in a positive outcome which is definitely achievable, but, sadly, this cannot be guaranteed. I believe that there is sufficient pragmatism in both sides of the table to secure a sensible set of arrangements for future relations. It is a pity that all of this uncertainty has to be dealt with and that so much effort needs to be invested in achieving an outcome — a bespoke partnership that keeps the UK closely aligned to the EU — that, whatever way you cut it, will not be as favourable as what we now have — and Irish-British partnership within a 27-member European Union.
Daniel Mulhall is Ireland’s Ambassador to the United States