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Tying a trade deal between the European Union and the United Kingdom boosts the outlook for the Irish economy next year, in large part because it removes a major threat to food exports and trade in general. The Irish economy will dodge the bullet of higher tariffs that would have meant huge problems for the food sector in particular.
Under the agreement, which is expected to be announced on Thursday, no tariffs or quotas will be applied to trade between the two parties. The only Irish sector directly affected even by the terms of a deal will be the fishing industry, which will have more restricted access to key UK waters and will demand support and compensation.
The official forecasts published with the October budget were based on the fact that no agreement was reached. current forecast of 1.7 percent. Finalizing a deal would also avoid the initial chaos and cost of a no-deal scenario and the long-term damage it would cause to relations between the UK and the EU.
However, new customs barriers will be lifted between Britain and Ireland and in the years to come will have a fundamental impact, increasing the cost of trade. There will be no more frictionless trading.
Complicated
Trade between the EU and the UK will become more complicated and costly with a deal, as the UK leaves the single market and the EU customs union. However, if a trade agreement were not reached, the two parties would have negotiated under the so-called terms of the World Trade Organization (WTO). This would have meant tariffs, or import duties, that would have applied to trade in both directions.
Tariffs are higher in the food sector and this would have caused major problems for Irish exporters to the UK, particularly in the beef sector, threatening farm jobs and incomes. High tariff levels of 70% or more would have been applied to Irish beef sales in the UK market if WTO terms applied, setting the price of the Irish product on the shelves and meaning that it had to look for other less lucrative markets. Dairy exports, in particular cheese, and other food exports would have also been affected and lower tariffs would have been applied in other sectors, such as clothing and some other manufactured products.
Tariffs would also have been applied to imports from the United Kingdom to the Republic, which would have pushed up the prices of a variety of consumer food and household products, prepared foods and meals and meats. Prices may increase in some cases anyway, due to the additional cost of customs procedures that will apply even in the case of a deal.
Irish companies will be watching closely to see what measures are agreed to limit disruptions as new customs procedures are introduced. However, there will be significant relief that additional bureaucracy and fees costs have been avoided. As the European Parliament will not have time to vote on a deal, it is likely that the EU member states will agree to apply it provisionally from January 1, pending this approval before it is fully implemented. requirements, however.
No such barriers will apply between the Republic and Northern Ireland, and a trade agreement between the two parties will also make the Northern Ireland protocol, the special agreement to avoid a trade border on the island of Ireland, easier to operate. . This is because the controls and bureaucracy necessary to ensure that the correct tariffs were applied to goods entering Northern Ireland from Great Britain and intended to be transferred to the Republic, and therefore to the EU single market, would be avoided. Personalized controls and food and animal safety controls will continue to be necessary.
Fight the coronavirus
A Brexit deal, and the emergence of vaccines to combat the coronavirus, will mean that the growth estimates behind the 2021 Budget will change. The projections had been completed on the basis that there were no widely available vaccines and no Brexit deal.
However, the possibility of a prolonged lockdown in 2021 will act to slow growth in the first few months and generate significant additional costs for businesses and people out of work. The government set aside € 3.4 billion in the budget in a recovery fund, most of which was not allocated, and while some of this may now go to fisheries, a Brexit deal would mean that much of the rest could be earmarked. to fight the consequences of the virus. But a Brexit deal means the prospects for 2021 are much better than they would have been without one.
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