A British cabinet minister has warned that it could be impossible to make special tariff arrangements for Ireland in the event of a vote to leave the European Union.
The warning from work and pensions secretary Stephen Crabb comes amid signs of concern in Dublin about the outlook for the June referendum.
At a Cabinet briefing last week, ministers in the outgoing government were told that the next administration would need to devote considerable time and political resources to Brexit preparations if UK voters choose to leave.
Politically sensitive
Numerous risks are foreseen but the question of any public intervention in the referendum campaign by the Irish authorities will not be settled by the outgoing Coalition. While this is seen as a matter for the next government, it is sensitive politically in view of anxiety that the Leave camp might seize on any Irish argument against Brexit as an improper intrusion in the UK debate.
Mr Crabb said that, if a post- Brexit UK was relying on its membership of the World Trade Organisation (WTO) to regulate trade with the EU, it would have to offer the same terms to all WTO members.
He was speaking in Bristol at the launch of a 200-page UK Treasury assessment of the economic cost of leaving the EU. The report looked at three options: membership of the European Economic Area, like Norway; a bilateral trade deal with the EU, like Canada; or relying on WTO rules to regulate trade.
“We’d have to decide where to set British import tariffs. Would we choose to set high tariffs on food to protect British farmers? Or would we set low tariffs on food to protect British consumers?” Mr Crabb said.
“Regardless of what we decided on import tariffs, there’s a catch. WTO rules would require us to offer the same tariff to all countries. So if we wanted to offer low tariffs to our neighbours in Ireland, we’d have to do the same for all other 160 countries in the WTO.”
At present, there are no routine customs controls on imports and exports between the UK and Ireland.
Noting the operation of the common travel area since the 1920s, the Treasury report warned of new customs controls and duties if Britain left the EU customs union.
“Goods being exported across the border could be subject to various forms of customs controls and their liability to duty determined according to complex rules of origin. This would affect the current high level of cross-border activity and trade flows,” the report said.
Northern Ireland
“Indeed, Ireland is Northern Ireland’s single largest export market. The latest data shows 37 per cent (£3.6 billion) of Northern Ireland’s goods and services exports go to Ireland.
“In 2014, Northern Ireland manufacturing sales to Ireland were worth £1.4 billion, approximately 10 per cent of Northern Ireland’s total external manufacturing sales and equivalent to 37 per cent of Northern Ireland’s total domestic sales.”
Fergal O’Brien, head of policy at business lobby Ibec, said there was evidence that Irish firms were postponing investment decisions due to uncertainty over the referendum.
“There is investor uncertainty out there that is probably already impacting on board-level decisions or investment projects [among] UK corporations in terms of their investments across Europe, including Ireland, and definitely in Irish companies as well,” Mr O’Brien said.
“In a number of cases I think it is giving some companies cause for pause and thought.”
