Saturday, 9 February 2019

Hard Border

There was a TV news article on Northern Ireland yesterday and I was slightly surprised to hear the Northern Ireland Parliament hadn’t met for two years because the major parties were in dispute.  One assumes that a country can operate without their elected representatives.  But then the program mentioned Northern Ireland was being governed from Westminster.

Now the elected representatives of Westminster appear to be in turmoil with no clear agreement or directions.  Should the UK parliament be suspended and government be vested in….. Brussels?  Just saying….. :-)

Actually I was more interested in the ‘hard border’ argument.  One ‘remainer’ stated that if the UK were to leave the EU without a deal the WTO would require a hard border between Northern Ireland and the Irish Republic.  A little research on my part suggested this wasn’t true.  WTO rules require a country to allow all trading countries equal access, unless specific arrangements have been agreed.  The WTO would therefore not require the UK to install a hard border if it allowed all nations to trade with the UK on equal terms.  However the Irish Republic would require a hard border because it’s a member of the EU.  The EU has a protectionist approach and has applied tariffs and quotas on many good and services from non EU countries.

An example of this is Irish beef.  67% of all Irish Republic beef goes to the UK.  Under WTO rules they would have to compete with much cheaper beef from countries like Australia, Argentina and Brazil.  This would decimate the Irish beef industry.  Actually it gets worse for the Irish because without a hard border, cheaper beef could be imported into the UK and then slipped across the Irish border. 

Actually I think this hard border is a red herring.  Switzerland is surrounded by EU countries and there is no hard border.

Of course adopting WTO rules wouldn’t be all good news for the UK.  Local farmers (eg, sheep) would have to compete with producers from the rest of the world.  New Zealand could probably send their lamb half way around the world and still sell it in the UK at a lower price.  NZ and the UK have similar standards of living which suggests the NZ farmers are more efficient. 

One of the problems with being a member of a protectionist organisation is it results in inefficiency and increased costs which are borne by the consumer.

If the UK does leave the EU without a deal and adopts WTO rules there will be some parts of the UK economy that will go through a period of pain whilst they struggle to adjust to a competitive market.   Interesting times ahead.

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