The Republic of Ireland has been following the BREXIT debate with more than usual interest. Trade between both countries runs at more than 1.2 billion per week, with the UK being Ireland's largest trading partner, but importantly Ireland is also one of the UK's largest trading partners. It is not for nothing that UK corporates often privately refer to the Emerald Isle as 'treasure island'! The Republic's approach to BREXIT differs markedly from its approach to the Scottish Independence referendum. The Irish political establishment went to great lengths not to express any views that might have been seen as leaning one way or the other in the Independence referendum. But not so with the BREXIT debate: several Irish past prime ministers have been wheeled out, along with current Government ministers, all firmly expressing the view that the UK should remain within the EU. Why the change in approach?
Well the answer is obvious: for four reasons Ireland needs the UK to remain firmly committed to EU membership. It's all about "location, location, location!" First, Ireland would lose a major ally in the EU in the Council of Ministers in Brussels were BREXIT to occur. For centuries deadly enemies, since 1973 and the advent of EU membership, the two countries' political, civil service and business "elites" have found a major commonality of interests around the EU table. Old enmities discarded, the UK was seen as a reliable EU partner. Were the UK to now suddenly depart the EU, Ireland would have lost a major EU ally on a range of issues, most significantly in the battle to keep the harmonisation of corporate taxation rates in the EU outside the legal competence of the EU to regulate. Sweden, UK and Ireland have fought that battle successfully to date, to now lose the UK from the "hands off our tax rates" battle team would represent a major blow to the key tool that has underpinned Ireland's economic success since the 1950s, as (for example) Ireland attracts ten times more US economic inward investment into Ireland than the US invests in China for example. They are not here for the Shamrock, they are here for the low tax environment. UK support - from inside the EU - is crucial for Ireland to maintain this strategic national interest. With BREXIT the UK's supporting influence is suddenly gone.
The second reason is ease of interaction: BREXIT poses a huge threat here. For historical reasons, Irish citizens enjoy visa free travel to the UK, millions have made the UK their home, and millions work there today without having become UK citizens, whether it be in leading some of the UK's top corporates, Universities or social and sporting organisations. Irish citizens are now the largest "ethnic" group sitting in corporate boardrooms in the UK. Our highly educated easy-to-attract workforce is highly valued by UK financial services, international banking and legal sectors. Irish employees are seen as a highly talented, stable talent resource by UK employers, who are culturally and linguistically comfortable in adapting easily to the UK working environment. The UK is not seen as a "foreign" country to them: will they now been seen as "foreigners" in the UK?
The third reason, probably the most important along with the fourth reason set out later below, is the big fear of sterling depreciation, allied to the risk of the return of UK protectionism and Ireland having to possibly leave the Euro. Following BREXIT, the UK could move into isolationist mode, arising from both domestic political pressure from the BREXITEERS, plus reaction to a "tough going away" deal imposed by the EU. UK imposition of protectionist trade tariffs on Irish exports to the UK, would render Irish exports to our largest trading partner uncompetitive. This is the major fear on the trade front.
The political pressure growing within the UK for the UK to "go its own way" in international trade (a highly risky aspiration) is another related risk, which may inevitably lead to spineless UK politicians yielding to such pressure. This would have inevitable adverse consequences for Irish exporters on one hand (uncompetitive exports) and also for Irish consumers on the other, as the EU might inevitably react by invoking tariffs against the UK, driving up the cost of UK imports which are essential for the Irish consumer's product choice and also for Irish businesses using UK inputs.
Allied to this risk, is the risk of a dramatic long term fall in Sterling, again making UK exports to Ireland ultra-competitive against their Irish counterparts, while Irish exports to the UK would become uncompetitively expensive arising from a stronger Euro.
On top of this is the threat to Euro instability arising from impact of BREXIT on international currency markets. Ireland's public finances have been ravaged by austerity; our assets are valued in Euros; some say we might have to leave the Euro if the UK leaves - where will that leave our depressed housing markets and citizens' hard pressed savings if we have to revalue in the "punt" ( the punt was the Irish pound that historically was linked to Sterling prior to the Euro, and which had to be successively revalued while in the European Exchange rate mechanism in the 1990s prior to our joining the Euro (ask Norman Lamont and George Soros about that!).
The fourth reason is domestic Northern Ireland-related political instability. Noticeably this has received little coverage in the Irish media as no one wants to reopen old wounds and the prospect of trouble reigniting in Northern Ireland arising from BREXIT. In brief, peace has now reigned for nearly two decades, but the residual poison occasioned by that sectarian conflict still resides in the underbelly of the Northern Irish body politic. The border between Northern Ireland and the Republic remains, as a matter of law, a border, but one that has become invisible as a physical entity: in essence, free movement reigns, with no armed border guards in UK military uniform, no watchtowers, no helicopters hovering, no snipers, no obvious military occupation present any longer. Peace reigns but peace is hard won and easily lost. Sinn Fein, the political wing of the now stood down IRA, is in power in Belfast, and is also now the third largest political party in the Republic. Were BREXIT to occur, then the UK's external border with the Republic would become the border with the EU, and the UK being outside of Schengen, and with the internal UK domestic political pressure to "control immigration", the re-imposition of a strong border-crossing presence in Northern Ireland will become inevitable, and most unwelcome by both Sinn Fein and the citizens living in the border counties, as the border 'melting away over time' would suddenly be dramatically reversed by the re-imposition of strong military strength border controls (no UK customs officer will sit in a customs office on the Northern Irish border without a heavily fortified UK military garrison in close proximity, and so the prospect of political instability, both North and South of the Border must be foremost in the minds of both the Irish and UK Governments as BREXIT Referendum day approaches. With BREXIT, the Border must inevitably resurrect itself, and that will spell nothing but long-term trouble for both Governments.
Interestingly, many Irish commentators commenting on BREXIT have been deluded into analysing BREXIT via the old maxim from revolutionary times, that "England's difficulty is Ireland's opportunity", leading to some Alice in Wonderland-like commentary (for example) that City banks will move en masse to Dublin; that UK inward investment destined for the UK will suddenly turn left at Calais and head straight to the Republic; and other such fantasies. True, the Republic has many advantages as a business location, and the country has successfully modernised largely with the advent of EU membership, from a largely agrarian society in 1945 to a modern democracy today ranking in the top 30 of the world's most developed nations on many indices. However, they ignore the sad reality that its capacity to plan for short and long term strategic economic shifts is woefully deficient. To give an example, the Irish State is unable to plan new schools or expand health services provision in areas where the census indicates will have short to medium term major population growth arising from urbanisation, a regular ongoing measureable phenomenon. To now think that the Irish State could absorb a major flow of unanticipated corporate movements from the UK is sadly delusional, as the Irish Achilles heel is inability to plan for future societal and economic trends. Building a single orbital route around Dublin took over 30 years! It has been gridlocked since inception, with no adequate response evident. Ireland cannot control expenditure in its own health service, which is a constant state of crisis; the national telecom infrastructure, once the pride of the EU In the 1990s has been sadly underinvested in by successful vulture fund owners following 'beneficial' privatisation; many of its brain talent has emigrated following the ravages of austerity, while its politicians response was to take instructions from Frankfurt to socialise the banking sectors' wildly reckless and profligate lending onto the remaining population. The University system is creaking at the seams with the country’s Universities all rapidly descending down the global Universities rankings following massive State underinvestment in key science, technology and business support disciplines. A country whose national debt amounts of over 200 billion (that's 100,000 euros for every man woman child and dog, with the interest-on-the-interest being the real killer) in a country with an active workforce of only around 2million workers, is hardly a sponge to absorb the fantasy exodus of corporates from the UK should BREXIT occur. A State whose kitty is controlled by Frankfurt is hardly in a position to absorb a large influence of UK based businesses that will need a rapid infrastructural response from the Irish State. Where would the workforce come from (suddenly)? Where would the office space be created (Dublin office rents are high, and highly occupied, by international comparisons)? Would the massive wage rise pressure forces, currently building within the Irish workforce, their patience resentfully worn thin by years of austerity-imposed wage cuts ( between 30-40%) make Ireland an attractive location to inward investors when wage rise pressure and industrial action unrest is coming out into the open in the public and private sectors? These are all questions commentators have studiously avoided. But BREXIT requires them all to be answered with clarity and foresight, not fantasy and conjecture.
Finally one issue perplexes people in Ireland more than all others: the UK obsession with immigration, and its nefarious linkage to BREXIT, is puzzling. Notwithstanding the ravages of austerity, and the high emigration and unemployment that followed, Ireland's absorption of over 100 nationalities since the halcyon days of the Celtic Tiger has not led to immigration becoming a significant domestic political issue in Ireland. It is curious to observe that the UK's BREXIT commentariat (whether BREXITEERS or REMAINERS) never mentions the elephant in the room: is it not the case that many people of colour in the UK are UK citizens, many of them had having their parents or grandparents invited to the UK following the demise of the Empire? It is undoubtedly the case that many are viewed as immigrants by the little Englanders who have been so energised by the prospect of BREXIT as a panacea to what they see as the inevitable consequence of the UK's EU membership. But this misses the point completely: they have not learned the lessons of history, that for hundreds of years now, continuously, the Crown has excelled at attracting the best and the brightest from all over the world to the UK's "green and pleasant land", and they in return have rewarded the UK with their allegiance and their labour to further the cause of the United Kingdom across a wide spectrum of endeavour. Why now cast away a winning formula? The Empire is over. The Royal Navy no longer rules the waves. Wishing it be so will not bring it back to the Glory Days of Empire. Instead the UK should be renewing itself so that it becomes a leader again, not a sideshow to be sniggered at. It should see its citizens as assets, not as interlopers. It should see itself as the place of choice for the most talented, rather than resent it is so.
It is clear to us in Dublin that the myopia of the current BREXIT camp has ignored the lessons of history. And if BREXIT ensues, the U.K. will be all the worse for it, losing its place in the world, relegated to the category of a second rate developed country, no longer with an influential seat at the top table of the most economically advanced and societally developed democracies on the globe called the European Union. President Obama put it well, the UK could take its place at the back of the queue.
If BREXIT does occur, the consequences for Ireland, while seeking to make 'the best of a bad lot', will be the prospect of severe economic disruption, loss of competitiveness, loss of a substantial ally at the EU top table, Euro instability threats, and the real prospect of unwelcome resurrection of domestic political turmoil on age-old issues we had long thought the two countries had by now put to bed for good.