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Minister Creed's Speaking Points, Conference on Copenhagen Economics Report on `Trade Implications of Brexit' Croke Park, 21 February 2018

Reflections/Reactions to the Report

  • I welcome this report from Copenhagen Economics, which is a comprehensive assessment of the implications of Brexit for the Irish economy, and I complement all involved in its compilation.
  • It is clear from the report that none of the scenarios examined envisage a positive outcome over the period to 2030, with an EEA-type outcome, as would be expected, forecast to be the least damaging.
  • I don’t think it will come as a surprise to anybody that the report makes quite clear that the agri-food sector would be the most severely impacted by Brexit, given its exposure to the UK market.
  • The percentage fall in production in beef, dairy and processed foods is higher than other sectors in all scenarios - reinforcing the message from other reports and analyses that agri-food is the sector most exposed to the consequences of Brexit.
  • It is interesting to note that, among its conclusions, the report says that most of the impact arises from the risk of regulatory divergence, such as would give rise to sanitary and phytosanitary (SPS) controls in an agri-food context.
  • While the acknowledgment of this factor is welcome - and it plays a particularly important role in relation to pharma-chemicals and electrical machinery - it should nevertheless be borne in mind that the impact of tariffs - which are not high in these sectors – could also be potentially very severe in the agri-food sector, where WTO MFN tariff rates are extremely high and would make many agri-food exports (particularly beef and dairy) uncompetitive on the UK market.
  • A second reason to welcome more generally the focus in the report on the impact of regulatory divergence is that it provides an opportunity for me to reinforce a point which I and others have been making, namely, that any ultimate trade agreement between the EU and the UK – such as a Customs Union or other form of customs agreement, or an FTA - which does not comprehensively deal with regulatory alignment in the agri-food area, will give rise to import controls as well as possible export certification requirements.
  • In terms of employment impacts, the report says that, while there will be considerable redistribution of workers across sectors, the overall ‘job churning’ effect will be only approximately one per cent of the Irish labour force.
  • However, it is worth pointing out that more than 60% of the jobs expected to be lost (12,400, of 20,000) will be in the agri-food sector.
  • This reinforces a point which has been borne out in other studies but is not as strongly emphasised in this report - that the unique exposure of the Irish agri-food sector to Brexit would have a particularly damaging impact on rural areas and on the rural economy, given the regional spread of employment in the sector.

Mitigation measures currently being undertaken

  • I and my Department have been very focused over the last 18 months on mitigating the short-term impacts arising from Brexit through practical actions aimed in particular at reducing costs in the primary and processing sectors.
  • In addition to the €150 million low-cost loan scheme for farmers introduced under Budget 2017, a further series of dedicated measures amounting to over €50million in total was announced under Budget 2018.
  • These included:
    • €25million in funding to consider the development of a potential further Brexit response loan schemes for farmers, fishermen and for longer-term capital financing for food businesses;
    • additional supports for capital investment in the food industry;
    • additional funding for Bord Bia to support marketing and promotion activities, bringing its total additional funding to date in response to Brexit to more than €14 million; and
    • funding for Teagasc’s development of a food innovation hub.
  • In addition, food businesses will also have access to 40 per cent of the funding available under the new €300m Brexit Loan Scheme announced by myself and the Minister for Business, Enterprise and Innovation.
  • Market diversification is also a key component of the Government response, as we seek to reduce our exposure to the UK market and develop alternative markets for our exports.
  • So, for example, market prioritisation research commissioned by my Department and carried out by Bord Bia is informing the selection of Trade Mission destinations as well as my Department’s input to the Government’s Global Footprint Initiative.
  • I will be leaving this weekend on a trade mission to the US and Canada, and will undertake further missions over the remainder of 2018, with a focus in particular on emerging markets that provide opportunities for further growth in agri-food exports.

The next steps required.

  • My Department and its agencies will continue to work with the sector to prepare it for all eventualities. We will continue to consult closely with all stakeholders as we have been doing since before the Brexit referendum, both through our own consultative processes and through the All Island Civic Dialogue.
  • We will also continue to deepen our analysis of potential outcomes and to develop our contingency planning in the event of a hard Brexit, in consultation with stakeholders and the relevant state agencies, and to feed into the cross-departmental coordination of work in this area by the Department of Foreign Affairs and Trade.
  • And we will continue to seek a negotiated outcome that will ensure that the trading relationship between the EU and the UK in its entirety post Brexit will remain as close as possible to the current arrangements.

 

ENDS