The 1998 Good Friday Agreement (also known as the Belfast Agreement), which brought to an end three decades of inter-communal violence, also heralded the advent of 23 years of increased cross-border trade and cooperation as well as an increase in Irish exports to the UK. That ease of access and trade was facilitated by the membership of both the UK and Ireland of the EU which created stability for the All-Ireland economy through the EU internal market. That stability has been disrupted by Brexit.
The whole of Ireland is about the same size as the US state of South Carolina; just 60% of the land mass of New York state. The population of the whole of Ireland is just 6.8 million with almost 1.9m in Northern Ireland. The Irish border, which is just 100 years old this year, runs across farms and communities. It divides the 32 County Ireland into 24 and six. The Border is 499 km long and is criss-crossed by over 200 roads.
Given the difficulty of policing so many small roads, it may seem to make sense to place the EU /UK border in the Irish sea and not across the roads and fields that now form the only EU land border with the UK. But that would be to ignore the complex and delicate political balance that the Good Friday Agreement was crafted upon.
The political divide in Northern Ireland is essentially between the Protestant Unionist community that overwhelmingly wants to retain the link to the UK and the Catholic and largely nationalist community that would like to see a united Ireland. Traditionally, the Protestants have been in the majority in Northern Ireland, but that demographic gap seems to be closing. The last published census in 2011 showed that just over 48% of the population of Northern Ireland were Protestant and slightly more than 45% were Catholic. But Catholics outnumbered Protestants in all the under 50 age cohorts. That statistic means that by this year the population was forecast to be 46% both Protestant and Catholic. The 2021 census, conducted last March, will be published next year. If it confirms this trend, then it increases the possibility of a Border Poll on Irish reunification, as provided for in the Good Friday Agreement.
‘Partition’ of the island of Ireland, was a controversial compromise between the British administration and the rebel Irish pushing for independence in the 1920’s. The then Unionist majority in Northern Ireland wanted to retain the link to Britain, being the descendants of Scottish and English colonists from the 1600s. Partition in 1921 led to a bloody civil war in Ireland. Eventually those in favour won out however the issue has remained contentious and resulted in further and extended violence over 30 years to 1998. That period known as ‘The Troubles’ claimed thousands of lives and caused huge economic damage.
At the time of Partition, Northern Ireland was – and had been – a powerhouse of economic development built largely on shipbuilding and flax for linen making. This economic success stood in sharp contrast to the economic impoverishment of the new Republic in the south. 100 years later and that situation is reversed – the Republic is an economic powerhouse while Northern Ireland remains reliant on UK subsidies to support a lagging economy.
The Good Friday Agreement brought conditions that enabled the Governments in Dublin and London to cooperate to restart economic growth in Northern Ireland. The UK government, in particular, poured huge subsidies into Northern Ireland, where over one third of the population are employed in the public sector. Both the Irish and UK governments, with encouragement from the US in particular, co-operated to improve life in the North and prevent a recurrence of the violence. European unity was, moreover, a key unifier as the European Commission set development priorities, supported human rights issues in a non-partisan way, and enabled freedom to trade within the internal market including trade with the Republic of Ireland.
Traditional all-Ireland trading patterns had, particularly with EU membership and strong political consensus, shown promising signs of recovery in recent years and business communities both sides of the border began to develop a number of cross border initiatives. Whiskey as an all island brand is a good example. Whiskey manufactured in the south with blended inputs from both sides of the border, could be bottled in the north of Ireland. New distilleries sprang up all over the island: 96% of Irish whiskey from the island of Ireland was exported in 2020.
Dairy products are another good example – a global export for the island with a healthy and growing international trade in butter and dairy products (Northern Ireland sends one third of its milk to the south for manufacturing). The European market is important for both those industries. And the IT sector was showing promise with a number of international investors showing interest.
Brexit changed much of that.
Trade is not now so easy – as Thomas Reilly explained in his previous blog. Creating the Great Britain-Ireland border in the Irish Sea should have given impetus to the Northern Irish economy, affording it the unique benefit of being in two markets at the same time – the UK market and the EU. However, politically, it is very unpopular with many Unionists and risks becoming a lightning rod for renewed violence.
Even on the commercial front, there are a number of immediate downsides, including such practical issues as rules of origin tariffs for products such as whiskey and dairy emanating from both sides of the border (e.g. tariffs on products with inputs from both Northern and southern Ireland but none where produced solely in one jurisdiction). Customs procedures have created delays at ports, supply chain disruption and VAT complexities have not helped. Agro-food imports from the UK are down significantly.
The EU/UK Northern Ireland border issues can be illustrated with some statistics.
- The EU, taken as a whole is the UK’s largest trading partner. In 2019, before Brexit, UK exports to the EU were £294 billion (43% of all UK exports). UK imports from the EU were £374 billion (52% of all UK imports).
- Northern Ireland had the highest proportion of goods imports to the UK from the EU and had the second highest percentage, after Wales, of goods exports to the EU from regions of the UK in 2019.
- 30% of UK food originates in the EU. Much of that is Irish.
- The UK’s top trading partner for dairy, eggs and meat is Ireland – 67% of beef imports to the UK came from Ireland in 2018.
Settling the Irish border issue is a priority to unclog trading and political relationships and to prevent further damage in particular to the UK/ EU relationship. In the meantime it’s a headache and an uncertainty – legally, politically and economically – for businesses operating between the only UK and EU land border.