Monday, January 30, 2023

Dublin still expects cost of Brexit despite trade deal

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Ann Murray took control of Lir, a high-end Irish chocolate maker with significant UK sales, weeks before Britain voted to leave the EU in 2016. But with a deal The eleventh-hour trade finally concluded on Christmas Eve, it is only becoming clear what Brexit will mean for a company that ships a truckload of goods to Britain almost every working day.

“We have done all the pragmatic and practical things we can do,” said Murray as negotiators limped towards the EU-UK trade pact. “Agree or disagree, things will change. They will never be the same again.

The new deal guarantees trade in goods without tariffs and quotas, which has given Dublin considerable relief that a disorderly UK collapse of the European trade regime has finally been avoided.

It also means the implementation of the Northern Ireland Protocol, the mechanism agreed by the EU and the UK last year to keep the 310-mile land border with the Republic of Ireland open – the priority. absolute Dublin after the 2016 EU referendum.

Irish Prime Minister Micheál Martin hailed the deal, saying it represented the “less bad version of Brexit”. “There is no such thing as a ‘good Brexit’ for Ireland,” said Mr Martin. “But we have worked hard to minimize the negative consequences.”

With businesses facing increased costs, delays at ports and cumbersome customs formalities once Britain finally leaves the single market and the EU customs union on December 31, Ireland afraid of paying a high price.

The country’s deep trade ties with its former colonial master mean it remains the EU’s most exposed to the fallout from Britain’s prolonged exit from the bloc, even with a deal.

The Irish border issue has hampered the Brexit process since the UK referendum on the EU in 2016 © Paul Faith / AFP / Getty Images

Not only did the never-ending turmoil of Brexit disrupt the stability of Anglo-Irish relations which helped secure the 1998 Good Friday Peace Agreement that settled three decades of political violence in Northern Ireland, but the feuds over the future of the border have exacerbated tensions in Northern Ireland between pro-British Democratic Unionists and Irish nationalists from Sinn Féin.

Dublin’s fervent hope now is that the trade deal will restore calm to political relations with its nearest neighbor after Brexit breaks.

But Roy Foster, a prominent Irish historian, said it would be a huge challenge to regain the spirit of “common enterprise” that Dublin and London developed before the Good Friday Pact and for nearly two decades after. “The gears, the levers have been completely put into reverse on all of this, which seems tragic to me,” he added.

Brexit still poses huge questions for businesses in Ireland, whose trade in UK markets will be crucial as its economy struggles to weather the effects of the pandemic.

Thousands of businesses in Ireland are said to have suffered severely in a no-deal scenario due to the high World Trade Organization tariffs allegedly imposed on their 13.5 billion euros in export trade with Britain, adding to the cost of goods which accounted for 9 percent of the country’s total exports in 2019. Such tariffs would also have raised the price of imported British goods.

Thanks to significant foreign direct investment, Ireland is today one of the most globalized economies in the world, with the share of exports to the United Kingdom falling from 55% in 1973, when the two countries joined the then European Economic Community on the same day. But the dangers for Ireland of a no-deal Brexit were still very great – and were heavily concentrated in its food industries.

Line graph of share of total trade over the past 12 months (%) showing the decrease in Ireland's dependence on trade with the UK

Fergal O’Brien, policy director of the business lobby group Ibec, said WTO tariffs would have added € 1.5 billion to the cost of these products. “For many sub-sectors of this sector, trade with the UK in this context would not be viable.”

Those risks were all the greater for Ireland because of the coronavirus, which left 352,000 people out of work in the last lockdown and more than 19,000 businesses demanding government wage subsidies.

Like many Irish exporters to the UK, Lir decided after the Brexit vote to reduce its dependence on the UK market which represented 90% of its sales in 2016. The company, owned by German venture capitalist Zertus , sells chocolate under its own brand and with alcohol flavors licensed from Baileys Cream Liqueur, Guinness Stout and Famous Grouse Whiskey. It also manufactures private label ranges for large British supermarkets.

“In the last four years we have tripled our exports outside the UK,” said Murray, citing increased sales to Germany and the Nordic countries.

Lir has always shipped products to these new markets via Britain – the ‘land bridge’ route to the mainland – but now plans direct continental shipments to avoid Brexit paperwork and any delays in ports as the new regime comes into force. “We are actively engaged in reserving the slots to avoid the land bridge during the first months of 2021.”

But the UK still accounts for 60 percent of Lir’s sales, enough for 250 truck shipments to Britain each year which will soon be subject to increased border friction under new trade deals. Ms Murray said Lir had to appoint customs clearance officers to run this trade from January and gain certification as an authorized economic operator to speed up customs procedures.

“Even if you don’t pay a tariff, we have to make sure that the products we sell are classified under customs, which we have never had to do before,” said Murray.

For businesses in Ireland in general, the looming requirement for UK trade controls is a huge and costly change that poses multiple challenges. A report released this month for the Irish Parliament through the port of Dublin, Ireland’s largest, said checks would be needed on 900,000 freight shipments to the UK each year, a sharp increase from the 200,000 annual checks on current non-EU trade at the port.

Eamonn O’Reilly, Director General of the Port of Dublin: “The controls will cause delays, there is no doubt. This is the nature of border controls ”© Aidan Crawley / Bloomberg

It is a very difficult task, according to the report. Eamonn O’Reilly, managing director of the Port of Dublin, said speed would suffer. “The controls will cause delays, there is no doubt. This is the nature of border controls.

“This is the opposite of what we saw in 1992 when the single market came into effect, when we saw trade accelerate through ports. Brexit cancels the efficiency gains that the European single market intended to introduce. “

The new regime will come in “virtually overnight” once Britain’s transition is completed on December 31, O’Brien of Ibec said. “The major problem we face from January 1 is the reduction in the efficiency of logistics and supply chains. Businesses are again holding higher inventories for emergency purposes, resulting in higher costs. “

The weakness of the British pound in the Brexit era presents further complications, as it erodes the ultimate value for businesses in Ireland from their UK sales.

Pinewood, a County Tipperary generic pharmaceutical company that makes 60% of its sales in Britain and daily shipments to that market, said it had transferred some UK contracts to the euro from the British pound l last year to preserve its performance. “This is probably the biggest concern we have,” said Colum Honan, site manager.

Lir Chocolates manufactures own brand ranges for major British supermarkets © Paulo Nunes dos Santos / FT

Despite the shock of the coronavirus which led to record unemployment in Ireland, the economy is plan to grow this year because the country’s pharmaceutical and technological multinationals are booming. But the pandemic has left a huge hole in Ireland’s public finances, adding billions to its national debt of 223.6 billion euros.

Returning to the Lir chocolate factory, Ms Murray said she never expected Britain’s exit from the EU to turn out to be such a ‘vitriolic’ process, but said that trade had to survive the split. “They are next door. We speak the same language. We cross them to get to our other markets. ”

Northern Ireland leaders put Brexit divisions aside to welcome deal

Northern Ireland’s Prime Minister Arlene Foster hailed the EU-UK trade deal, saying the region will seek maximum deals it opposed when Boris Johnson settled the thorny border issue Irish last year.

Ms Foster, leader of the pro-Brexit Democratic Unionists, and Deputy Prime Minister Michelle O’Neill of Irish nationalists supporting the rest of Sinn Féin, put aside bitter divisions over the UK’s withdrawal from the EU in welcoming the deal Thursday.

Their statements reflect the relief of the decentralized executive that a no-deal outcome was avoided, which would have disrupted the region’s economy and politics.

Ms Foster had opposed the Northern Ireland Protocol, which was part of the Brexit Withdrawal Agreement signed last year to keep the 310-mile land border with the Republic of Ireland open.

But following Mr Johnson’s announcement of the deal, she said the executive would pursue any potential benefits of the protocol, which has been touted as a ‘best of both worlds’ opening for the region to trade. freely with the EU and the UK.

“This is the start of a new era in UK-EU relations and in Northern Ireland we will want to maximize the opportunities that the new arrangements offer our local economy,” said Ms Foster.

Ms O’Neill said the executive needs to look at the detailed aspects of the deal. “There will be a lot of questions about what the deal means for businesses and citizens and it’s important that they get that clarity.”

Despite political unanimity, Northern Ireland faces tough new tests in the wake of the trade deal.

Businesses in the region have long been concerned about new compliance costs, red tape and delays at ports.

Plans for implementing the protocol were only agreed this month – three weeks before it went into effect – and companies have asked for more details.

“Questions remain about operational readiness and the long-term impact on supply chains,” said CBI Northern Ireland, the lobby group.


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