Ireland very exposed to hard Brexit: ESRI

Ireland would be the worst hit if Britain continues to head down the path toward a ‘hard Brexit’ divorce with Brussels, an in-depth Irish study of exports and imports across the EU has revealed.

The country’s leading experts on Brexit, Martina Lawless and Edgar Morgenroth at the Economic and Social Research Institute (the ESRI) have today unveiled the findings of the first ever international product-by-product study.

The results show that the EU’s exports to the UK would drop 30%, while UK-to-EU exports would fall 22%, under standard EU tariffs —commonly called the hard Brexit — when the UK formally leaves the trading bloc, which is expected by the spring of 2019.

It finds Ireland is directly exposed to any hard Brexit fallout and would lose 4% of its total exports under the hard Brexit outcome.

Worse, many of the sectors that Ireland exports and imports across the Irish Sea such as trade in food and textile products would likely to be devastated.

UK Prime Minister Theresa May surprised many when she appeared to adhere to a hard-line negotiation with Brussels in the upcoming talks over Brexit at the Tory Parry Conference early last month. It is the first time researchers have taken such an in-depth approach to studying the effects of the World Trade Organisation tariffs on merchandise trade with Ireland and the rest of the EU.

The ESRI examined 5,200 products that face some sort of tariffs when crossing EU borders.

Some countries would be relatively untouched, no matter the hardness of the Brexit settlement, with Estonia and Finland, Latvia and Slovenia only seeing declines in their trade by only small amounts.

That’s because several sectors such as paper products, pharmaceuticals, iron and steel face no or very little tariff levels. However, tariffs rise steeply to over 10% for footwear and to 49% on meat products, according to the research. “The UK’s exports to the EU would fall by 22% but as these reductions apply to 27 trading partners, the aggregate effect is larger than that of the EU with the UK facing a fall in its total trade of 9.8%,” the research disclosed.

“Trade in some specific sectors, such as food and textiles would be close to wiped out while others would be almost unaffected.

“The severity of the impact is therefore driven critically by the product structure of current trade flows between the UK and each individual EU member,” according to the researchers.

Analysing the importance of the UK in respects of total trade for every EU state, the study built up a picture of the ways in which any new WTO tariff regime could affect different countries, rather than just looking at the respective shares of trade.

Under this approach, “Ireland now stands out as the most reliant on the UK market, followed by Cyprus, whereas Germany with its more global export reach is less vulnerable than the EU shares columns suggested”, said the study.

That’s because tariffs are levied on specific product lines across the 5,000 individual products examined under the existing regime.

“Ireland, in particular, stands out in terms of tariff exposure on the UK’s imports from the EU. It makes up 5% of the UK’s imports but would be charged close to 20% of the total EU tariff. Germany, on the other hand, would be liable for just under 18% of the tariff owed to the UK, despite accounting for over 28% of the trade flows.”

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