If you’re reading an Irish newspaper or listening to an Irish radio station this morning and wish to get a brief summary of what the latest developments in Brexit mean then you’re almost certainly getting one side of the story, and getting it endlessly. Witness this extraordinary piece of “journalism” from our friends over at the Journal.ie, which manages to quote Michelle O’Neill, Simon Coveney, Colum Eastwood, Nicola Sturgeon, and a British Labour MP, without once quoting anyone who might approve of the UK approach, or even someone who doesn’t approve, per se, but might understand it.
What you’re supposed to think is very clear: Pull on the green jersey, lads, the Brits are at it again, but we shall stop them with the aid of our gallant allies in Europe.
What’s actually happening is not that complicated: Brexit was always a two-step process. Britain left the European Union on January first, of this year, with a one-year transition period in place in which to negotiate a permanent trade agreement with the European Union. That period expires at midnight on New Year’s Eve.
The EU objective in the trade talks is to ensure, in so far as possible, that Britain is not able to unfairly compete, economically, with countries like Ireland and France. For example, EU law prevents the Irish government from giving money to an Irish airline, under so-called “state aid” rules. If Aer Lingus is going bust, then there’s not much we can do.
But the UK is not in the European Union any more, and therefore it could, in theory, spend its own money however it so wished: For example, it could tell an American company that was planning to invest in Kildare that the UK Government will pay for the cost of building the factory if it invested in Nottingham instead. That’s state aid: It’s a fancy two words for bribery.
In order to prevent this, the EU is very keen that any trade agreement with the UK would explicitly ban it, and other things, that might prevent the UK from hoovering up investment from Europe. The nightmare scenario for the EU is that, for example, Intel could move from Kildare to Bolton, be paid to do so by London, and still sell freely into the EU market, just like they can now.
The other big issue, of course, is fishing: The EU wants to make sure EU fishermen can still sail into British waters and return home with big nets of pollock and hake. British fishermen, having finally gotten out of the EU, want to make sure that they cannot.
The trade agreement is where these battles are being fought. Put simply, in a no-deal situation on January 1st, Britain will be in a situation where its fishermen have sole access to UK waters, but have to pay tariffs to export those fish to the EU, making them more expensive than Irish or Spanish fish.
The British Government’s position therefore, is this: If there is no trade deal, then the withdrawal agreement signed last year no longer makes as much sense, because it was signed in the expectation of a trade deal.
The Irish and EU position, on the other hand, is that it doesn’t matter what the expectations were, because a deal is a deal.
Who’s right? That’s up to you.
But the fact of the matter is this: In a no-deal scenario, Irish and EU leverage over the UK is greatly reduced, because no-deal is the EU’s strongest card. The UK position, in essence, is that if they have to live in a no-deal world, and cope with tariffs and reduced trade, then they are within their rights as a sovereign country to tear up the restrictions on state aid in the withdrawal agreement to save their own industries.
How will this all end? It’s anybody’s guess, but the main takeway is this: For months we’ve been told that the UK had zero leverage in the trade negotiations, and that was never true. In the event of a no-deal Brexit, Ireland and the UK will trade on the same terms as Australia and Ireland do – not great, but not disastrous either. The main difference will be that Ireland will not be permitted, under EU law, to financially support its own fishermen and businesses, but the UK will.
It’s in Irelands interests to get a deal, and quickly.