IRELAND, THE ANGLOSPHERE AND THE EU - A PRIMARY SPOTLIGHT ON POLITICAL RISK - primaryaccess.co.uk
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A PRIMARY SPOTLIGHT ON POLITICAL RISK
IRELAND, THE ANGLOSPHERE
AND THE EU
14TH MAY 2019
The purpose of this note is to offer some insights into the realities of Ireland’s political and economic relationships and
attendant risks following the UK’s decision to leave the EU. It suggests the possibility of non- consensus outcomes as part of
the analysis and examines what events could trigger these.
Ireland joined the EEC in 1973-the same year as the UK. Right from the start, Ireland viewed its membership as a once-in-
several-generations opportunity to upgrade a hopelessly underfunded infrastructure and diversify its economy away from
over-reliance on the agricultural sector, through attracting foreign direct investment. As a strategy it was largely successful
on both fronts, with the EU making significant transfer payments over an extended period.
The extent of Ireland’s plundering of EU resources was captured vividly on an episode of Scrap Saturday, a satirical sketch
show which ran on Irish State broadcaster RTÉ’s Radio 1 from 1989 until 1991. In one episode, the character of the then-
Minister for Foreign Affairs says: “We are a member of the EEC, we are Europeans and committed to the give and take
of Europe; we take the CAP and the farm subsidies, and the structural funds and the free trips to Brussels and the big
expenses and we give them guff in exchange”. This funny and revealing insight accurately reflected the views of many in
Europe at the time, notably within the UK, regarding Ireland’s persistent and successful ‘panhandling’ of the EU, especially
in the matter of regional and structural infrastructure spending.
Ireland has always liked to portray itself as a good, if not a model, European citizen and dependable partner; its taxpayers did
indeed ‘take one for the team’ when the financial crisis of 2008/09 obliterated its over- leveraged domestic banking system
and led to a painful EU bailout. But on a number of occasions the Irish electorate has caused the EU major constitutional
anguish. Referenda to ratify the Treaties of Nice (in June 2001), and that of Lisbon (June 2008), were initially rejected. And
though both were overturned when re-offered, these events indicate that the people of Ireland are not averse to asserting
their sovereignty when self-interest and circumstance dictate.
This occasionally ‘sulky schoolchild’ version of Ireland is one of a number of reasons why it is well worth watching post-
Brexit (should that ever happen) because the country’s geographic position, with the use of the UK as a land bridge to
other EU states, and reliance on UK suppliers and markets (in addition to the land border with Northern Ireland), means it is
uniquely exposed to the cost, complexities and disruptions associated with applying and administering a customs border.
The economic implications are potentially enormous.
Data on Ireland’s trade in goods and services, sourced from the Irish Central Statistics Office, gives a pretty clear picture
which shows that while the EU states do feature as relatively important partners, the relationships with the UK and the US
are significantly more so, and particularly in goods trade.
14 Old Queen Street, London SW1H 9HP
Ireland’s top ten trading partners in goods and services, Irish Central Statistics Office, 2018©
IRE Services Exports 2017, IRE Services Imports 2017,
% USA % USA
UK UK
Netherlands Netherlands
2.5 2.3 1.51.3
0.1
2.3
11.5 Germany 1.8 Germany
3.6 1.7
2.3 France 2.8 France
4.0 Italy 27 Italy
4.0 Switzerland 12.4 Switzerland
16.4 Japan Japan
7.5
3.0
China 9.2
China
Spain Spain
IRE Goods Exports 2017, IRE Goods Imports 2017,
% USA % USA
UK UK
Belgium Belgium
2 2 2 2
4 Germany 22 Germany
4 3
24
5 27 Switzerland 6 Switzerland
Netherlands Netherlands
5
9
France France
8
China China
12 13
Italy 21
11 Italy
Japan Japan
Under the heading ‘For Ireland Brexit may prove to be another moment of psychological liberation’ written by Liam Kennedy,
Professor of American Studies at University College Dublin, and published on the The Conversation website, the author notes:
“Ireland entered the EEC as an agrarian backwater in need of aid—it now more confidently maintains EU membership
as a modern hi-tech, open economy. In 2014, it went from being a net beneficiary to a net contributor to the EU budget.
With such growth comes responsibilities and, with the EU demonstrating strong support for Ireland during Brexit, there
may have to be payback—or at least some tough decisions to be made regarding such issues as corporate taxation and
contributions to European defence.”
“Ireland’s globalised economy is highly dependent on investment by US multinationals. At present, approximately 700
US companies have investment in Ireland, employing around 150,000 people. In 2017 they paid €4.25bn into the Irish
exchequer. In 2016 Ireland accounted for 1% of the European economy yet attracted 12% of US foreign direct investment.
It must be added that it has benefited more than any European country from profit-shifting by US companies—a point of
some tension with EU partner countries.
For over 30 years, Ireland has promoted itself to American companies as ‘a gateway to Europe’—a pitch that has even
greater resonance since the EU referendum. The government and its agencies have been seeking to capitalise on this
messaging as Brexit nears, promoting the country as even more attractive for investment, and also positing an enhanced
presence in Washington as a close EU partner.”(1)
Dr Ray Bassett is a former Irish ambassador, now a senior fellow (EU Affairs) at Policy Exchange and a regular columnist who
14 Old Queen Street, London SW1H 9HPhas written extensively on the subject of the Anglo-Irish relationship in a Brexit context (see link below to his ‘Options for the
Irish Border’ paper, published in September 2018). While now ex-‘Establishment’, his opinions and writings on this issue are
decidedly opposed to the orthodox political assessment of Ireland’s place in the EU.
His argument is that the Varadkar administration’s slavish adherence to the Barnier/Juncker/Tusk axis is politically motivated
and does not represent what is most beneficial to Ireland from an economic standpoint. He makes the following supportive
points –
• Ireland’s links with the Great Britain are stronger than any other EU member state. It shares a common language, labour
market, culture & sporting links. UK TV and radio are available in the Republic. There is a large Irish diaspora living in
the UK whose travel and residency status pre-date EU membership. In addition to the 1.8m citizens of Northern Ireland
who are all eligible to claim dual nationality, there are an estimated 400,000 from the Republic of Ireland living in the
UK. A further 6m (~10% of total UK population) claim an Irish grandparent. Ireland has no comparable links with any other
mainland European country, with Spain, the second-largest destination for Irish nationals barely coming close (~17,000).
The numbers in the US are significantly larger if assessed by those claiming an Irish heritage.
• In comparison with its established patterns of migration and inward and outward investment, Ireland’s connections to the
Anglosphere are overwhelmingly greater than those to the rest of the EU.
14 Old Queen Street, London SW1H 9HPAs these graphs irrefutably confirm, when it comes to direct inward and outward investment, Ireland is overwhelmingly
tied to the US and the UK. Ireland has €93bn committed to the US, and €88bn to the UK in direct investment abroad; the
comparable numbers for France and Germany are €4.4bn and €3.1bn respectively. The same pattern repeats in terms of
inward direct investment. The US has €179bn, and the UK €58bn invested in Ireland; France has €15bn and Germany €5bn!
While the Netherlands, Luxembourg and Switzerland have a combined €260bn invested in Ireland, the vast majority of this
‘investment’ comprises financial and insurance holding companies located in Ireland for tax purposes.
• The country’s links to the other 26 EU nations are dominated by trade from US multinationals based in Ireland, and is
hugely concentrated in inorganic chemicals, medical products and pharmaceuticals. Ireland’s own indigenous industries
are heavily reliant upon the output from UK SMEs, notably so in the food sector.
• New policies being promoted in the EU are distinctly not in Ireland’s economic interest, notably the Commission’s
suggestion of harmonisation of corporate tax rates which, if invoked, would seriously compromise the attractiveness
of Ireland as an appealing destination for foreign inward investment. Other areas such as defence (a European Army)
are domestically unpopular, while the determination of the EU to curtail US digital corporations, many of whom have
a significant presence in Ireland – Google & Amazon being prime examples – threaten an important growth and
employment component of the economy. A common language and a ready supply of relatively well-educated and tech-
savvy workers may not be able to trump a sharp increase in taxes, particularly if the UK is prepared to fill that void.
• Brexit will leave a massive hole in the EU budget – Ireland’s net contribution will rise steeply; it will also be potentially
more exposed than any other EU member should the UK, US and Canadian trade alignments post-Brexit reach a
productive and mutually agreeable settlement. As shown in the graphics above, the US and the UK are Ireland’s two
largest export markets. Any new trade agreement in the North Atlantic will put significant pressure on Ireland’s relatively
exposed economy.
• The Good Friday Peace Agreement represented a historic and iconic compromise, where all parties negotiated to get
14 Old Queen Street, London SW1H 9HPwhat they needed rather than what they wanted. Brexit has unsurprisingly damaged the goodwill attached to that accord,
but rather than seeking to assist in reinstating the ex-ante status by offering to be the diplomatic bridge between the
UK and the EU, Ireland has actively encouraged the latter to use the Good Friday Agreement as a weapon against the
UK in its withdrawal negotiations, leaving all parties (excepting ironically the EU, who had no figurative dog in the fight
having not been an official signatory to the deal) on worse terms – potentially also giving rise to an upsurge in Republican
activism and violence as recent tragic events have made all too clear.
Appearing as a guest panellist on the BBC’s Question Time, Michael O’Leary, the notoriously combative CEO of Ryanair,
(Europe’s largest airline headquartered in Dublin) made a robust defence of the EU, concentrating on the growth opportunities
afforded to the business he runs by the EU’s eastward expansion. What did not emerge on that programme were details
of Ryanair’s long-running legal battle with the European Commission, which routinely took the side of the (financially
cadaverous) flag-carrying incumbents, for whom Ryanair represented an existential competitive threat; at one point the EC
threatened to sanction any of its employees discovered to have flown Ryanair on official business, even if it represented the
most cost-effective and direct option. It should also be noted that Ryanair’s entire fleet is sourced from American Boeing not
Airbus-the poster child of European industrial collaboration.
In his Politeia article referenced earlier, Dr Bassett makes the following critical observations: “The UK is still Ireland’s most
important trading partner. The Welsh port of Holyhead alone took 425,000 HGV vehicles on the Irish Sea route in 2016
and is now the second busiest ferry port in the UK, second only to Dover. Other Welsh and English ports receive large
volumes of Irish goods on their way to markets around the world.”
“In addition, as Ireland has prospered economically, it has moved away from being a net recipient of EU funds. The
Irish net contribution this year will be around €1bn and rising, soon to top €1.3bn, similar per capita to the UK’s present
contribution. This is even before the EU proposes measures to fill the gap in the budget left by the UK’s departure. These
measures are likely to adversely affect Ireland, as the EU will be seeking larger payments from the present net donors,
as well as cuts to the Common Agricultural Policy (CAP), an area where Ireland gets most of its receipts from the EU
(around two thirds). Norway, a country in EFTA with a similar population to the Irish Republic, pays the EU approx.
€400m pa, for full access to the EU’s Single Market. This figure is less than half the current Irish net contribution.”
Further, he writes “the Irish have always mistakenly looked on the EU as an economic project. As the more grandiose
political schemes of Europhiles like Macron, or the SPD in Germany, become more apparent, then Ireland will have less
enthusiasm for Brussels. In addition, it should be admitted that much of the Euro enthusiasm in Ireland has traditionally
been a form of Anglophobia. With the UK no longer there, the love affair with Brussels will most likely increasingly cool,
as Ireland is forced to give up even more of its sovereignty and elements of its economy are damaged.”
“This will be particularly true when the EU seeks to curb Ireland’s attractiveness to Foreign Direct Investment (FDI),
because of its corporation tax rate of 12.5%. The move to a common consolidated corporation tax (CCCT) would force
even the most Europhile Irish politician to reconsider the country’s continued participation in the Euro project. If Ireland
was outside the EU, then the ability of Brussels to dictate its tax rates would be eliminated. The EFTA type arrangement
would, of course, maintain full and free access to the Single Market.”
“If Ireland were to opt for an EFTA style deal with the EU, this would relieve the UK of the need to solve the thorny issue
of the Irish border, as Ireland could maintain the present customs union with the United Kingdom, thus preserving the
mutually beneficial arrangements between the two islands. The downside for Ireland would be its exclusion from the
decision-making process in Brussels. However, with a voting share of between 1-2% in the Council of Ministers, it is
arguable whether Ireland, at present, has much of a say in EU law making.”
“In addition, there are attractions to the EU for agreeing Ireland’s exit to an EFTA linkage. The usefulness of Ireland in
the negotiations has now passed, with the UK agreeing to a generous financial settlement. To countries on the European
14 Old Queen Street, London SW1H 9HPmainland, such as Germany, France & the Netherlands, it is doubtful whether the huge difficulties in finding a solution
to the Irish border are worth the candle. As the EU showed in its notorious bailout for Ireland, it was more than willing
to dispense with Ireland’s national interests when faced with wider EU considerations. Given the small size of the Irish
economy, relative to the whole EU, it is extremely unlikely that the issue of the Irish border will be allowed [to] scupper
the wider deal.”(2) It is perhaps worth stating that there is no formal or official proposal from mainstream Irish politicians
currently other than for the country to remain firmly in the EU.
In July 2000, Ireland’s then-Enterprise Minister and Tanaiste (Deputy Prime Minister) Mary Harney famously made an
observation about her country to a meeting of the American Bar Association: “Geographically, we are closer to Berlin
than Boston. Spiritually, we are probably a lot closer to Boston than Berlin.”(3) Nearly twenty years on, much of the same
reliance upon familiarity and common purpose could be re-asserted, regardless of what a growing number of people in
Ireland are coming to see as political showboating obstructing Ireland’s national interest.
Even if the initial (and recurring) Irish reaction to the UK’s vote to leave the EU remains one of profound shock, it is typically
tempered by the view that ‘it will never happen’. Theresa May’s seeming preference for ‘BRINO’ – Brexit In Name Only – may
well prove the cynics in Ireland correct. However, it should be absolutely clear that whatever impressions are given by the
political posturing from all sides, the threat to Ireland’s national economic interest is clear and dangerous; whether that threat
is activated by a so-called ‘Hard Brexit’ or a committed movement by the European Commission towards tax harmonisation,
the political priorities in Ireland will shift seismically.
DAVID STANISTREET & FRED HEFFER
david@primaryaccess.co.uk fred@primaryaccess.co.uk
Primary Access & Research Ltd is an appointed representative of Messels Ltd., authorised and regulated by the Financial Conduct Authority
14 Old Queen Street, London SW1H 9HPSources and further reading suggestions
1. https://qz.com/1542757/brexit-could-transform-irelands-relationship-with-the-eu-and-us/
2. http://www.politeia.co.uk/wp-content/Politeia%20Documents/2018/ Ray%20Bassett/’Brexit%20and%20the%20Border’%2 C%20by%20Ray%20Bassett.pdf
3. https://www.herald.ie/opinion/columnists/dan-white/dan-white-harney-was-right-we-are-closer-to-boston-than-berlin-27980646.html
Other sites of interest
https://www.cso.ie/en/index.html
https://www.irishtimes.com/life-and-style/abroad/britain-s-shrinking- ageing-irish- population-1.3817868
https://www.irishexaminer.com/breakingnews/business/eu-as-a-bigger- home-for-irish- exports-than-uk-is-a-pipe-dream-820899.html
https://www.irishtimes.com/news/politics/us-congress-would-oppose-an- eu-trade-deal- that-endangered-ni-peace-neal-says-1.3865160
https://www.dfa.ie/irish-embassy/usa/about-us/ambassador/ambassadors- blog/economic- ties-between-ireland-and-the-us/
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