Brexit: Challenges with solutions
Ibec has launched a comprehensive set of proposals to progress EU-UK negotiations and limit the negative impact of Brexit on business and the wider economy. In advance of the launch of “Brexit: Challenges with solutions” in Ibec Head Office, Ibec CEO Danny McCoy said the surprise UK election result offered a fresh opportunity for the UK to shift its divisive hard-Brexit trajectory. The Ibec report charts a pragmatic way forward.
“The economic risks and political challenges of Brexit are crystallising in the UK. Living standards are being squeezed and investment is being deferred or going elsewhere in Europe. With the Brexit clock ticking, the UK must quickly reassess and redefine its Brexit approach,” said Mr McCoy. “The concerns of business in the UK, Ireland and across Europe must inform the UK approach and the EU response. The Irish economy is powering ahead and is well positioned to respond to any Brexit upheaval, but the risks are very real. Brexit is a threat to our living standards and our economic ambition. There can be no complacency.”
The report sets out five principles which should inform the approach to negotiations: (1) A smooth exit, (2) Comprehensive transitional arrangements, (3) The closest possible future trading relationship, (4) Unique Irish challenges addressed, and (5) A prosperous and competitive future EU. While the report sets out how to progress EU-UK negotiations and move towards a comprehensive free trade agreement (FTA) in goods and services, it does not cover the wide range of actions that will be needed at a domestic level that are also needed to prepare Ireland for Brexit.
“Any deal must recognise the unique economic and political challenge for Ireland and include a range of specific measures to address these. An early focus on avoiding a hard border with Northern Ireland is vital, but the Irish approach must also be informed by the greater economic importance of the east-west Irish-British trading relationship. Across both trade and investments, the outcome of negotiations must not disadvantage Ireland.”
Headline recommendations include:
Trade: It is in everyone’s overwhelming economic interest for the UK to remain in the EU customs union, but if not, close cooperation and simplified custom procedures will be needed. An agreement on trade and customs on the island of Ireland should be framed in the first phase of talks. The UK and EU should also agree a common transit system early in the negotiations.
Customs: Close cooperation between customs authorities is vital, with new pre-clearance procedures and mutual recognition. Any tariff and tariff rate quotas that form part of a new EU-UK FTA must fully take into account existing trade flows. Businesses will need significant support to train staff in new customs procedures and upgrade IT systems, while customs authorities will need additional resources to address Brexit pressures.
Single Market and regulation: A new EU-UK regulatory cooperation framework will be required to support close cooperation and minimise regulatory divergence. Any new EU-UK FTA must include comprehensive, legally enforceable commitments to fair competition.
Common Travel Area and all island economy: The Ireland-UK Common Travel Area should be maintained and the need to support the Northern Ireland Peace Process must inform every decision. The future development of the all island economy must be an explicit shared EU-UK objective, matched with ongoing funding for key all island projects.
Alleviation measures: A temporary EU state aid framework is needed to support companies through any adjustment period and the European Globalisation Adjustment Fund should be reformed to ensure it can address the economic fall out of Brexit. Funds amounting to 5% of the value of current annual indigenous export sales to the UK will be needed annually from domestic and EU sources to help Irish companies innovate, diversify into new markets, train staff and invest for the future.
Mr McCoy continued: “The closest possible EU-UK economic and trading relationship into the future is in everyone’s interest. A new free trade agreement should be as broad, comprehensive and as ambitious as possible, covering both goods and services. However, a deal must not undermine the coherence and integrity of the EU Single Market and must ensure fair competition.
“The Ibec report aims to help shift the debate from political posturing to pragmatic solutions, but the way forward remains unclear. If the UK crashes out of Europe, Ireland will need all the policy levers available to respond. State aid will be needed to support companies through any period of adjustment, and tax and labour market policy must ensure Ireland remains internationally competitive. A post-Brexit EU must take full advantage of Europe’s collective strength and influence, but not limit the capacity of member states to respond quickly to external shocks.”