‘The truth is Britain can’t afford to have a ‘no deal’ Brexit’

At the annual ‘Agricultural Talk’ organised by Carrigaline Macra, the Minister of Foreign Affairs and Trade, Simon Coveney, declared that Britain can’t afford to have a ‘no deal’ Brexit.

He also added that Ireland couldn’t afford that scenario either.

Minister Coveney was addressing the emergence of a report which suggested that a hard Brexit could result in the loss of 32,000 jobs in the meat industry, as well as causing the value of the production of beef in the EU to fall by approximately €2.4 billion in the short run.

However, the minister explained that he is as optimistic now for Irish agriculture as he was when he was the Minister for Agriculture, Food and the Marine.

The importance of regulatory requirements

Speaking at the conference in Co. Cork last night, Minister Coveney explained that the Brexit negotiations will become much more complicated if the regulatory requirements in one jurisdiction start to diverge from the regulatory requirements in the other.

“That is the key danger for me with Brexit. So if Northern Ireland leaves the European Union, they also leave the Common Agricultural Policy (CAP). If Northern Ireland leaves the European Union, they are no longer required to be cross compliant with EU directives on water quality, on animal health or on animal welfare.

“If Northern Ireland leaves the European Union, they no longer have to abide by the same food safety standards. They can do whatever is decided, either through a devolved government in Stormont or through new laws that may be passed in Westminster.

We don’t control it anymore; the commission doesn’t impose the standards, and the rules, and the inspection systems that are necessary to ensure that we have a level playing field for everybody.

“Britain will say: ‘Well look, we have the same rules today and we’re not radically going to go in a different direction’ – and maybe that is the case.

“But in order for us to move on to phase two of these discussions, we need to have a lot more certainty around what are the plans for Northern Ireland in the future on regulatory divergence,” he said.

The creation of an unfair playing field

The minister explained that if Britain – in the future once they leave the EU – decide that they are no longer going to apply EU state aid rules or EU competition law, it could plausibly supply grant aid of 50% or 60% for a fish processing plant or a cheese processing plant north of the border to help a company to grow and expand.

But south of the border, the Irish government wouldn’t be allowed to do that – because state-aid rules don’t allow it, he added.

Well then, instantly you create an unlevel playing field – whereby you have a business environment for the food industry that is operating to a different rule book north of the border versus south of the border.

“If you have that, there is no way of preventing a border. Because the only way that we could actually create a level playing field is by to actually stop a product at the border and to expose the fact that it is not being produced under the same rule book.

“This issue of regulatory divergence is not simply a notional concept in terms of north and south; it has very real implications for farms and food processing companies,” Minister Coveney said.

The minister outlined that 80% of all of the food that is produced by Irish small and medium-sized enterprises is actually sold to British consumers. He detailed that some 38,000 Irish companies trade with Britain virtually every week – representing 200,000 jobs or approximately 10% of the workforce.

That is the scale of Ireland’s exposure to the changing relationship with Britain. That is why we need to be really cautious and careful and intelligent, but also stubborn, in terms of what we insist on in the context of these negotiations.

“There’s the regulatory divergence issue which we are trying to get clarity on from the British government in advance of December 14, which is when EU heads of state will meet to decide whether we can move on to opening up phase two of the Brexit discussions – which is about the broader trade relationship and what it might look like in the future,” he said.

What happens in a ‘no deal’ Brexit situation?

Minister Coveney went into detail of what may happen in the event of a ‘no deal’ Brexit situation during his presentation at the conference.

Commenting on the matter he said: “In other words, if Britain just loses patience with the European Union and they decide to just go it alone with no negotiated deal. I don’t believe that will happen.

“But should it happen, we would face the EU and Britain having a trade relationship based on World Trade Organisation (WTO) rules.

What that effectively means is that they will apply trade tariffs that apply under WTO rules. Believe me, that would be a devastating situation for our agri-food trade between Ireland and Northern Ireland – and Ireland and the UK as a whole.

“Because for many dairy products, you are talking about tariffs of in and around 40%; for beef, up to 60%. Given the fact that these are tight margin products, clearly those kind of tariffs would simply end the trading relationship.

“Given the fact that it represents such a high percentage of our overall trade – both in terms of imports and exports – on the food side, it would have the kind of impact that we cannot prepare for.”

However, the minister is of the opinion that this scenario won’t come to pass.

“I don’t believe that is going to happen. But some people threaten it because of frustration and lack of progress in the talks. The truth is Britain can’t afford to have a ‘no deal’ Brexit, and certainly we can’t either.

“We should all put our hands up and accept that – and get down to detailed negotiation, where people work together,” he concluded.