Northern Ireland And The Brexit: Social And Economic Consequences & Considerations

Introduction and Background

First of all will this paper cite all background information on the general Brexit and it’s connection to Northern Ireland, whilst further elaborating how the situation could proceed and how it should or should not proceed to guarantee the best outcome to Northern Ireland’s economy and society, but most importantly a secure and peaceful Ireland with or without border. This fairly interesting and relevant political topic, is surprisingly economic and there has to be found out, if there is a predictable outcome and what it may look like.

The Brexit Referendum

Britain always had some difficulty’s with the EU in the past (due to economic reasons) and when the UK Independence Party (UKIP) was growing in 2013, the wish of leaving rose. Due to migration crisis and the ongoing tension Pro- exit grew stronger and in February 2016 the PM (prime minister) Cameron renegotiated UK-EU relationship to vanish EU regulations, announcing an EU referendum.1 Sarah Pruitt, The History Behind Brexit (29.03.2017, History)

The later referendum (people’s vote) of leaving the EU passed by a 51.9%, calling for departure even though Northern Ireland voted to stay with 55.7% which is more important to this matter of Northern Ireland’s disadvantages that come with the exit. So when Theresa May followed after Cameron’s resignation, she formally stated her intention to leave the EU. On March 29th 2017, the order of abandonment was delivered to the Council of the EU, initiating the hourglass until Britain’s presumable Exit on March 29th 2019.

The Good Friday Agreement

Signed on 10th April, the Good Friday Agreement (or Belfast Agreement) was decided in 19982 bbc.co.uk, What was the Good Friday Agreement? (10.03.2018 9:51, BBC) . From the 1970s to 1990s the Republicans/Nationalists (pro-Irish and mostly Catholic) and Loyalists/Unionists (pro- and mostly Protestants) fought brutal and violent for/against the reunion of Northern Ireland and the Republic of Ireland. The tension rose when Catholics in the 1920s had difficulties to find jobs and a home and then protested against this, provoking Loyalists to protest against them. The whole conflict escalated and made different militarily party’s to cause many deaths to armed violence by e.g. the catholic Irish Republican Army (IRA), the protestant Ulster Defense Association (UDA) and Ulster Volunteer Force (UVF). troops eventually got involved in the fight later and caused many more Deaths.

In 1990 the IRA would stop the bombings and shootings, so both parties tried to make a deal with the help of many other countries. After many years of conflict and about two years of negotiations the UK and IR governments managed to sign the Good Friday Agreement in 1998, formed a new government with shared powers (Northern Ireland Assembly) and ended the conflict.

The effect of the Good Friday Agreement is currently endangered to be nullified, because a hard Brexit would probably mean a EU-UK border or respectively a “visible” NI-IR border. The hard conditions of a need to get special arrangements regarding the Northern Irish border, while staying out of any Euro zone will be discussed in this paper.

Method options of the Brexit

The Barnier staircase

As a reference for the several relationships for EU and UK, I will use the slide presented by Michel Barnier,3 Alastair Macdonald & Mark Heinrich, Stairway to Brexit: Barnier maps out UK’s Canadian path (19.12.2017 17:08, Reuter) EU Brexit negotiator. The info-graphic lists a stair alike trade-off between privileges and obligations (as well as country’s signed to named agreements), starting at a full EU membership descending towards the free trade pact with Canada and South Korea.

The first step after a EU membership would therefore be the membership of the European Economic Area (EEA) in which Iceland, Norway and Liechtenstein are part of. The EEA would bring rights for easier trade and travel due to the free trade zone (at least EFTA membership is required for the EEA membership). Obligations as the ECJ (European court) jurisdiction, unrestricted and free migration and travel, transfers to EU account as well as many other EU rules applying are generally rejected by the UK government.

The following step is occupied by Switzerland, which basically has the same position except for more judicial autonomy because it is just in the European Free Trade Association (EFTA) and therefore in the European single market.

Ukraine does neither have financial contribution nor does it have free movement across the border (losing connected advantages), but it is overseen by ECJ resolving in limited autonomy. Ukraine has agreed to a customized Free Trade Area (similar will be spoken about later).

The last step before free trade pacts, is membership of the custom union as assigned by turkey is also rejected, as it does have mandatory obligation sticking to European trade agreements and not being able to form own trade deals.

Extending the spectrum of possible relationships, Brexit Secretary David Davis f. E. has called for a “Canada Plus Plus Plus” deal, that allows for better benefits due to more access than Canada has. Barnier himself therefore declined in several newspapers the consideration of such favors.

The attentive reader might have noticed, that there is no direct agreement fitting to UK’s demand other than a more or less minor trade agreement. The general idea of Theresa May’s “hard” Brexit that still brings a great relationship is therefore more or less invalid and the day of departure is coming close (29.03.2019). Regarding that, the current situation would lead to a Brexit that is to current conditions, as what May came up with (Withdrawal Agreement), or an unwanted, unregulated hard Brexit, if there is no delay of negotiation (due to Art 50)4 John Wright, post-Meaningful Vote diagram (04.02.2019, Twitter) , because currently another negotiation to a modified agreement is declined by the EU.

Backstop and Withdrawal Agreement

The Backstop is a concept working as a safety net to avoid hard borders between Northern Ireland and the Republic, as it may wake old conflicts that were tilted by the Good Friday Agreement, which bound Britain to secure the achieved peace.5 Sofia Petkar & Tariq Tahir, What is the Brexit backstop and what does it mean for the Irish border? (06.02.2019 7:43, The Sun)

The Backstop is integrated in the Withdrawal Agreement presented by Theresa May and enters to effectiveness when UK leaves the EU without any new agreements, which is needed because the Withdrawal Agreement only sets rough terms regarding EU-UK citizens and the financial settlement while proposing ideas for future relationship and the NI border.6 Bbc.com, Reality Check: Brexit withdrawal agreement – what it all means (25.11.2018, BBC)

The Backstop would mean UK would stay in the customs union, while Northern Ireland remains in the European single market to provide control free border passing and free movement of goods. The Backstop-condition will stay until there is a valid free trade agreement between UK and EU.7 Karin Bensch, Was ist der “Backstop”? (13.12.2018 02:00, tagesschau.de)

Problematic is that it is unclear if the UK can arrange free trade agreements with other country’s during the backstop phase and they are therefore scared to be trapped in the customs union. There is a really volatile situation of May trying to alter the conditions of the backstop8 Adrew Sparrow, Brexit: May says she wants changes to backstop, not removal – Politics live (06.02.2019, the Guardian) and most of Britain rejecting a backstop.

(Brady Amendment passed, calling for alternative arrangements instead of the backstop9 Bbc.com, Brexit: Government supports Brady amendment on Ireland border (28.01.2019, BBC) . Changes/Removal of backstop was rejected by EU negotiator’s10 Daniel Boffey and Jennifer Rankin, No renegotiation, says EU after Mps back plan to replace backstop (29.01.2019, The Guardian) )

Proceedings

Under the assumption of UK leaving the EU there are several consequences that would come into force. As said, there are many options EU offered the UK, that were declined (Agreeing to stay in the EEA would f. E. not change that much). No jurisdiction and payments would also stop subvention and juridical help, which would Britain allow to change certain policy’s causing a need for economic and social monitoring. The paper will discuss such considerations later on.

If the UK will not remarkable loosen their demands, they can just vote for the current Agreement of May’s.11 Angus Walker, UK chief Brexit negoiator Olly Robbins warns Mps the choice is May’s deal or extension (12.02.2019, itv) If the vote for the WA would have succeeded the UK would have entered the transition phase until 20th December 2020 (or 1-2 yrs. later) to agree on more detailed trade and relationship agreements between UK and EU. Whilst the transition phase, the UK will stay remain bound to EU constitution except not keeping their institutional influence and afterwards be free if they have a satisfying agreement, so the backstop does not have to come into force.

The current Withdrawal Agreement was rejected twice on 15.01.19 and on 14.02.19. All of that little trust towards May from EU side literally broke into parts on the second failed vote, so there will surely be no more negotiations between both sides and definitely none with May. Not only does the EU have no more trust in May, commons are also indignantly and may take over the Brexit. Gary Younge is exactly right: “Britain needs more time on Brexit, but we should not entrust it to Theresa May”12 Gary Younge, Britain needs more time on Brexit, but we shouldn’t entrust it to Theresa May (15.02.2019, The Guardian) , leading the country into an unwanted Brexit.

The government declined all votes yet, leading them to leave without any Deal. The No-Deal Brexit is unregulated and would end all connections to EU. It would have significant long term effects on economy and could certainly disrupt or interfere with export/import, travel and even lead to many job losses and major inflation.

For that reason and because luckily most of the government does neither want a no-deal Brexit, a delay is most likely. May is only able to delay Brexit, when the commons approve the Cooper-Boles plan13 Ellen Barry and Stephen Castle, Cooper-Boles Amendment Challenges Theresa May’s Brexit Strategy (28.01.2019, The New York Times) for delay, which is likely to happen (around Feb 27th)14 Jon Worth, Brexit – what we know now, and how to still stop it (15.02.2019, John Worth Euroblog) . To allow such delay, all EU states have to vote for it and after such negotiations the UK will probably have to agree certain terms in advance. Even Olly Robbins, UK chief Brexit negotiator, says: “In the end they will probably just give us an extension”.

When the Brexit is delayed (Art 50)* it would open many more options. There could be long-term results such as a new referendum (people’s vote) to vote on Brexit again or to just vote for certain Brexit deals, a general election caused by a no-confidence vote in the PM to continue with given choices could f. E. enforce the labour party to presumable agree to a single market, even if it is just for the sake of their (new/young) voters. One option will always be to rescind Article 50 and stay in the EU.15 Peter Barnes, Brexit: what happens now? (30.01.2019, BBC)

One of the overall problems of further agreements, especially in commons house, is the split of the two fronts in parliament, There are conservative’s demanding a hard Brexit, “europhobes“, as the Guardian calls them16 Josh Holder, Séan Clarke and Antonio Voce, How Brexit has created four new political factions (15.02.2019, the Guardian) , kind of declining any deal and on the other hand the labour’s wanting a soft brexit and the so called “europhiles” that want a EEA membership.

Considerations regarding Northern Ireland

Social aspects

There are three major social aspects, that need to be inspected. First and the most important aspect of the whole situation is the relationship of a possible border, caused by new agreements, with the much older conflict before the Good Friday Agreement. Second would be the relationship of a possible border or even possibly new migration and work policy’s and the current migration and travel extent. Third one is the diminution of rights originating in the discontinuation of EU law application.17 Dr. John Temple Lang, Brexit and Ireland, Legal, Political and Economic Considerations (11.2017, Policy Department for Citizens’ Rights and Constitutional Affairs)

The first one is luckily also the most simple one, the agreement that establishes conditions the closest to no Irish border is the best in preventing violence and wakening an old conflict. Therefore a major consideration must be trying to nullify any principle of border, caused by limited agreements. Further, economic warranty should be sustained, to not seed any reasoning for new thoughts of inequality (later more).

The second focuses on the preservation of the Common Travel Area* (CTA), as well as a fair migration policy. If such would not be kept, the approximetaly 20.000 people crossing the border daily would be slowed down massively. The UK states it may sustain the CTA, how it follows to regulate any migration is contrary to that yet unknown. The UK accepts to not being able to control overland border-passing due to more than countless informal crossings and therefore does not restrict other insufficient entry’s. It is likely to go for a visa/work permit system or other internal measures, as Lang suggests. He says they could f. E. “reduce or eliminate social welfare benefits, exercise or increase their existing powers to deportation, imposition of administrative residence checks and restriction of to the Health Service. Stricter, modification of immigration rules.” Even if named actions would be considerable, the UK has not yet announced any. To fluently arrange such actions and measures, while keeping the Common Travel Are there must be a close cooperation of Ireland and the UK. Close collaboration may lead to favoritism of UK-IE travel, compared to other EU nations.

Third one refers to the presumable diminution of rights due to halt of surveillance by EU courts and application of EU law. There will no be any EU compensation for loss caused by national measures (except for compensation in regard of UK law), there will also neither be dis-application by court of such measures, if contrary to EU law or any agreements.

The EU charter of fundamental rights as an important element will no longer apply and so there will be massive diminution of rights by solely leaving the EU.

The Good Friday Agreement may also be insecure, as it’s preservation by EU law (due to 4(3)) would be ceased. It is not yet clear, as Lang says, if there will be future related surveillance to secure rights of this certain Agreement.

Economic aspects

There are some major differences in economic procedure that will greatly influence Northern Ireland’s future prosperity and therefore also all of Ireland. It has to be mentioned that there surely are no Agreements, all of Ireland would benefit more of, that the full EU membership of the UK18 Aidan Stennett, Northern Ireland trade in goods, 2017 (12.03.2018, Northern Ireland Assembly) . It also has to be mentioned that trade between the Republic and Britain is far more extensive and the Republic will therefore greatly suffer anyway.

Temple Lang already simplified that context to seven factors that mainly influence future Irish economy, that are also briefly going to be discussed in this paper: “The future EU-UK trade relationships, any special arrangements for Northern Ireland, the future UK agricultural policy, UK relationships with third counties (policy adoption), Development of the UK economy, fiscal transfers to Northern Ireland and how the Euro-sterling rate of exchange alters.”19 Dr. John Temple Lang, Brexit and Ireland, Legal, Political and Economic Considerations (11.2017, Policy Department for Citizens’ Rights and Constitutional Affairs)

Let us begin with the impact of UK’s fiscal transfers to Northern Ireland as a rather socioeconomic matter. Northern Ireland is one of the most profitable recipients of fiscal transfers globally and gets more than 5000 pound more per capita than they make by tax revenues. This is important because 2.5bn CAP Single Farm Payments between 2005 and 2014 make up 87 percent of Northern Irish farm incomes. The income of 24,956 farms (2017) in Northern Ireland was about 2.13bn pound in 2018.20 DAERA, Northern Ireland agricultural incomes in 2018 (31.01.2019, Department of Agriculture, Environment and Rural Affairs) If UK were to leave the EU, farmers would not receive CAP payments and may suffer of poverty. The presumably lower fiscal transfer would weaken Northern Ireland additionally. If the UK was about to literally let the Irish down, they might as well be offended and catalyst additional illegal activity and violence.

Euro-sterling rate is obviously quickly done. Suffer of british economy and the brexit will lead to a worse rate and follows with even more worse economy. Same with economy, if it deteriorates it will cause great harm to all of UK and Ireland.

The possible EU-UK trade relationships have already been mentioned, although any exit of the EU will cut off remarkable benefits in form of the named Single Farm Payments and such. They also decide over future tariffs and some more economically important agreements. The further choice of different deals will decide over any appear of a border, obviously limiting traffic of goods and persons as in a custom union and single market.

One of UK’s interest in Brexit economically may be a more intense trade with third country’s in a way they can take over certain cheap food policy’s to export and import cheaper products of lower quality that would not match EU standards. How changed f. E. changed quality standards interfere with the idea of no border and trade is specified later.

Special arrangements, to discuss last, may be the answer to some problems, similar to what is already intended in the Brexit. Specific arrangements would have to primarily save Northern Ireland from a border, but could likewise be a broader thing. Lang has also mentioned an interesting suggestion by Belfast professors, to include Northern Ireland to the EEA even if the UK does not. That idea would surely fix at least some economic and border related issues, but imply less unity of Northern Ireland and the UK (problem, maybe to unionists f. E.).

The border-problem

So there are without doubt several indicators for Northern Ireland’s future welfare, one of the most important ones will be the border. There has to be some type of border, unless the UK stays in the EU, but how does the UK have to modify it?

It would certainly have to be an “invisible” one, that does not disturbs Northern Irish. To manage such, there needs to be answered how tariffs and the different Value-added Taxes (VAT’s) are paid and quality checks are down without custom posts.

Quality standards that differ from European causes, as in economic considerations defined, a very unfavorable situation. This could be fixed using technologically advanced methods (that may be outsmarted) or by verification at different occasions as f. E. a VAT-inspection (at first sale). These complicated considerations add to the internal measures to properly regulate migration, without a visible border.

This lead to the conclusion, that an entry in the EEA or a similar free trade zone exclusively for NI would be beneficial for everyone. NI would be less dependent on exchequer, because they could continue to trade with GB and IE and basically maintain their current economic status. Lang therefore recommends to keep Northern Ireland in a free trade zone and argues with the fact, that an “invisible” border would indeed be unsatisfactory and probably too complicated.21 Dr. John Temple Lang, Brexit and Ireland, Legal, Political and Economic Considerations (11.2017, Policy Department for Citizens’ Rights and Constitutional Affairs)

I certainly am unsure about how such suggestions are actually being conviction enough, if one inspects the general harm to all of UK being caused by any Brexit, but I will surely indirectly refer to that in my conclusion.

Conclusion

To put this all together, Brexit will be an undeniable harm for global, European, UK’s and especially Ireland’s economy.

The UK will presumably and actually has to prevent any border violating the terms of the Good Friday Agreement, even just to avoid new waves of extremist nationalism.

To conditions of any Brexit, there are more or less preferable economic actions and considerations not to agree to any present agreements.

I conclude that the UK government will not take the most beneficial choices for Northern Ireland, or even the UK and will say that the UK government and the EU parliament has the responsibility to make the best out of any outcome.

The overall outcome of Brexit and Northern Ireland involved, is therefore more or less unpredictable.