Brexit and Ireland and a pessimistic economic analysis.

Have to admit to being somewhat entertained by the narrative emerging from the UK media in relation to the Davis/Barnier discussions yesterday. Even the Guardian tilted towards the language of ‘capitulation’ and so on in respect of the UK having to bow to reality in relation to the power relationships at work. 

British negotiators have capitulated to key European demands for a phased approach to Brexit talks, agreeing to park discussions on free trade until they have thrashed out the cost of the multibillion-euro UK divorce settlement.

Putting a brave face on a concession that may further strengthen the tactical dominance of the EU, the Brexit secretary, David Davis, insisted his initial retreat remained consistent with long-term government strategy.

The ‘tactical’ dominance of the EU? Surely strategic. As always the lack of appreciation that the UK is not equal to the weight of the rEU is quite something to behold. And what – reasonably – could Davis or the UK do to redress that simple fact? Absolutely nothing. The irony of May’s line about Corbyn going ‘naked’ into the negotiations is underscored ever more sharply by this. There’s even a sort of parochialism in the following analysis…

But a politically weakened UK team appeared eager to show signs of progress on Monday even if it meant accepting priorities set by their counterparts.

The chief EU negotiator, Michel Barnier, made clear that he believed Britain was in no position to dictate the timing of the negotiations.

Absolutely – the election did nothing to support the authority of this British government. But nor did it substantively change the equation.

Meanwhile meant to get to this last week but so many events. Stephen Kinsella in the SBP writes gloomily on the above this . Very very gloomily. Discussing the election result in the UK he notes that ‘Britain has no strong parliamentary consensus to implement Brexit. There is no strength and even less stability… a weak government delivering a bad Brexit deal is very bad news for Ireland’.

Then he notes that the Irish Government Economic Evaluation Service, a group of about 80 economists established to assist the civil service on economic matters, recently held a conference in Dublin Castle on the impacts of Brexit on this island.

First up the idea that the EU [or rather its largest states – wbs] has more to lose from a hard Brexit than Britain seems to be incorrect. 

[research showed] neither France nor Germany will be hurt by a hard Brexit, because they have other markets in the EU 27 to sell to.

That seems obvious doesn’t it? That’s the advantage of being in a common market. It’s near enough tautological.

But… hold on. There’s proximity as well as size.

The countries hurt most by a hard or soft Brexit will be… 

Will be?

…will be… Britain and Ireland.

How badly?

In Britain, they will see negative trade effects of between 20 to 40 per cent in goods and in services and up to 50 per cent drops in external demand. 

Germany will be minimally hit by a hard Brexit even though it is Britain’s largest export market. The good news? Germany and other nations will increase export to Ireland under any Brexit scenario. 

But…

Research from Mike Fahy and the Dept. of Finance showed how exposed parts of the Irish economy are to a hard Brexit. When he showed his research there was an audible intake of breath among the conference participants. Sectors where we have a comparative advantage in pro ducting goods and services over other countries where economic theory tells us we should specialise, are exactly where we might get hit hardest. 

Sectors producing meat, animal and dairy products, sectors producing manufactured good and beverages, chemical production and financial serves, these are especially badly hit in any Brexit scenario. Eight of the EU’s top 12 most exposed products to Brexit are Irish exports. Worse; after any Brexit, many of Ireland’s cash-cow sectors are vulnerable ego third-country trade deals. 

There’s more.

Research from the Dept. of Agriculture… showed the agri-food sector contributes 7.6% of our national output. It is responsible for 8.6% of all employment – about 170,000 people – and 10% of goods exported. The beef industry exports nearly 50% of its stuff to Britain. The dairy industry exports 22%. Almost 69% of all our prepared consumer foods go to the UK. 

These are areas we are world class in and exposed should any tariff arrangement be put in place. Tariffs of between 50 and 60% might be levied on beef and dairy, for example, effectively shutting them out of the market (this analysis also ignores the voliatitly sterling is underogin at the moment). 

Pick any scenario you like, the results are all negative, and for hundreds of thousands of our citizens, especially in rural Ireland. 

All this is information from the state and state Departments. It points to – at a minimum – significant job losses for Irish workers.

Jesus Christ.