Brexit and Ireland – part 3

The North of Ireland is the weakest part of the UK so should expect to be hit most by Brexit.  Local news has reported two companies as already shifting operations to the Irish State in preparation for the UK leaving.  The EU is the North’s largest export market and while for the UK as a whole, for the period 2004 to 2014, the share of exports going to non-EU countries has grown more than that to EU countries, this has not been the case for Northern Ireland. Since it has been pointed out that some agricultural products can pass across the border numerous times, the scope for tariff and non-tariff barriers to stifle this trade is significant.  Such tariffs generally range between 6 and 22 per cent

While for the three years reported in this paper, the share of EU exports going to the EU has been around 50% for the UK, it has been around 60% for Northern Ireland (NI). In terms of cross-border trade, exports from the North to the South are more important to the North than exports to the North are for the South.   Foreign Direct Investment uses Northern Ireland to export into the rest of the EU so any exit will hit this investment and this employment.

Finally, there is the loss of EU funding, especially for farmers, not that this seems to have prevented many unionist farmers from voting for Brexit.  The UK Department of the Environment, Food and Rural Affairs estimated that direct payments to farmers under EU Common Agricultural Policy subsidies represented 87% of annual farm income in NI.

Brexit could impel the UK into trade based on World Trade Organisation rules, just when the US under Trump signals that it may ignore these rules when it doesn’t suit.  China is also reported to be breaking WTO rules but the length of time it takes to rule on any breach and the potential for retaliation are strong impediments to enforcement.   In any case the UK is already failing to manage its trade and might be fined billions of Euros by the EU for failing effectively to police the existing EU rules.  Hardly an endorsement of its ability to look after its own borders after Brexit.

The new US administration is hailed as a potential alternative to the EU even while Trump threatens to restrict and withdraw US investment abroad.  You know Brexit is a disaster when the nationalist policy of the Trump administration is put forward as the alternative, but more importantly you know how stupid the Brexit idea is in the first place when you admit you need an alternative and don’t already have one.

If Brexit makes no sense in the North it scarcely represents an advantage to the South.  It may benefit from firms relocating from NI and Britain but this is likely to be relatively minor compared to the disruption to trade with the UK, which is worth over €1 billion per week.  Exports from the Irish agri-food sector to the UK amount to over €3 billion or over 50% of that sector’s value.  The Irish State has the biggest share of exports going into the UK of any EU country, so has the greatest exposure to potential reduction of this trade.  It also has one of the biggest numbers of its citizens living in the UK of any EU country, exposing them to the threats to their rights the Tories are deploying in an effort to get a better deal.

Merchandise exports from the Irish State to the UK were over 25% of such exports in 2015 while services traded to the UK were nearly 19% of such services.  It has been estimated that in 2014 200,000 people were employed as a direct result of exports to the UK, or over 10 per cent of employment.   Again any reduction in markets could lead to reduced employment, wages, tax receipts and thus state-funded services.

In this respect, it is interesting to note that many of the economic forecasts of the quantitative economic impact of Brexit show greater falls in wages than in economic growth generally, which is no doubt a feature of the models but which shows that it is assumed that workers will pay most from Brexit.

None of this is particularly surprising and most people just get numbed by too many figures.  The effects are recognised and the question is how these are to be mitigated.  The Tories talk about opening up Britain to the world, but this world includes a growing protectionist US; a more powerful China that has already forced a British climb-down over a nuclear power station; Japanese car companies who have done the same; a Commonwealth that is supposed to welcome a return to a 21st century British Empire, and the rest of the world, much of which is part of trade blocs that the British are rejecting.  Given this context, were Brexit to go ahead, the direction of the British state will be less under its control than it was inside the EU.

Similar problems will face the Irish State if Brexit goes ahead. Up to now it could straddle a growing relationship to the EU with historic but declining dependence on the UK; and it could do this while acting as if it was the latest State to join the Union, that is the union of the United States of America.  Brexit threatens the second and Trump threatens the third.  The first is threatened by the nature of the type of Brexit that may occur and by being squeezed by the US and Britain.

If controls on immigration that are under the authority of the EU and British impede migration to the UK, the importance of this migration will decline relative to the Irish State’s greater trade with the EU, making it more attractive to enter into the Schengen area to facilitate such trade.  Entry into the Schengen area for any reason would make problematic any more favourable Irish migration arrangements with the UK compared to others, who might object to less favourable arrangements for their own EU citizens. Either way migration links to Britain could suffer, and such migration (just like that to the US) has always been a safety valve for the young fleeing a country that is regularly unable to promise it a future.

So, if the UK leaving the EU will hurt both Irish States, it is hard to see the sense in advocating that the Irish State also leave.  Unlike in Britain this policy is really confined to sections of the Left and more ‘radical’ nationalists and republicans.  But at least it is consistent with the latter’s nationalism, while how the Left expects workers to become more internationalist while their country becomes more isolated is another sorrowful mystery; even the Tories recognise the need to develop international links.  But why would European workers rally to a movement that declares that the problem is their ‘foreign’ capitalist states and not its own.

But of course, some new orientation to the world would be necessary for an Irish State outside the EU and there is really only one immediate candidate – back to the loving embrace of the similarly isolated British State, ludicrously trying to re-live its imperial youth.  A death-embrace of two states simultaneously pursuing a race to the bottom as a low wage, deregulated, offshore tax haven.

In doing so an Irish State would suffer badly, and just like the economic models relating to Brexit, we can be certain that it would be Irish workers who would suffer most for the nationalist fantasy that is Irexit.  The idea that something progressive or even socialist could develop out of such a project is preposterous.

The Euro area is by far the Irish State’s biggest trading partner, €109 billion in combined exports and imports in 2013/2014, compared to €52 billion for the UK.  Much of the foreign direct investment in the Irish State is because of its access to the EU market and could be expected to leave if it left the EU.  Foreign owned companies account for more than 20 per cent of employment while they dominate exports.

The Irish State would have to create a new currency, especially if (in the very unlikely event) its exit was motivated by the nationalist Left, which regards the Euro as a devil incarnate.  Establishing the credibility of this currency would require massive austerity while failure to do so would guarantee massive inflation.  In either case living standards could be expected to plummet.

In both parts of Ireland Brexit and Irexit is and would be a disaster.

The Left supporters of Irexit would have to find a new name for the above description of the results of Brexit and Irexit, as dismissing it as another ‘Project Fear’ wouldn’t quite cut it, as the experience of attempting to destroy capitalism by destroying capitalism only became a reality.

How ironic that it is the ideological supporters of capitalism itself that are inflicting this damage, rather than the relatively irrelevant proponents of Lexit.  Not only is this Left’s programme of breaking with the EU being implemented by the likes of UKIP, Tories, the Daily Mail and The Sun but the nonsense of a ‘progressive’ Brexit is being pursued by Corbyn’s Labour Party.  And we can see how useless that is as well.

Rarely does this Left get such an opportunity to see its big policies implemented. Unfortunately, it’s unlikely they will learn anything from their errors, since they seem barely to recognise that what they have wanted is actually being implemented.

Concluded

Back to part 2

 

 

 

One thought on “Brexit and Ireland – part 3

  1. “How ironic that it is the ideological supporters of capitalism itself that are inflicting this damage, rather than the relatively irrelevant proponents of Lexit. Not only is this Left’s programme of breaking with the EU being implemented by the likes of UKIP, Tories, the Daily Mail and The Sun but the nonsense of a ‘progressive’ Brexit is being pursued by Corbyn’s Labour Party. And we can see how useless that is as well.”

    The reason for this irony is that the ideological supporters of capitalism (Tories, UKIP) are supporters of those elements of what Marx calls the antediluvian forms of capital, particularly money-lending capital. But, that form of capital, of the financial oligarchy, has also been closely tied historically to the other main pillar of Toryism, the landed aristocracy. Both obtain their revenue from a form of rent seeking; one rents out land, the other money-capital, one obtains rent, the other interest. Both hold their wealth not as productive wealth but as paper wealth, fictitious capital. Finally, the Tories electoral and membership base is derived from the millions of small capitalists, and those atomised, backward sections of the working-class.

    The latter elements have a material basis for opposing a further socialisation of capital, because they get squeezed by bigger capitals, and by organised workers. The large scale money-lenders (share holders, bond holders) have no particular reason to support Brexit, but they have no particular reason to oppose it either, because they can hold shares anywhere in the world equally well, and unlike a productive-capital, they can shift their fictitious capital at a moment’s notice, with the press of a computer key, so as to obtain the highest yield, or to speculate on the potential for the greatest capital gain. In fact, as the ERM crisis showed, its where there are multiple small states, that such money-lenders and speculators can make the most money, as George Soros did in making £1 billion in a single day, by gambling against the Pound. A multitude of separate states not only gives greater opportunity for such financial speculation, but it means each of these small states, engages in a race to the bottom to attract hot money from the speculators, hiking its interest rates for that purpose, and offering the lowest taxes on dividends and capital, to attract the speculators to their shores, even though none of them increase production, create any new value, or real wealth by a single jot. There is always “freedom of movement” of capital, even if the proponents of national socialism seek to restrict the free movement of workers.

    But, Corbyn and the Labour Party as with other such social-democrats are ideological supporters of capitalism too. That is the historical function of social-democracy. Its Trades Unionist reformist consciousness, inculcates the idea in workers heads that their shared interests with capital (particularly with their own immediate national capital) is best furthered by negotiation and compromise, and thereby to bring about the greatest accumulation of that capital. In this last view, as Marx says, it is of course correct, that so long as capitalism exists, it is indeed in workers interests that it should accumulate as rapidly and as efficiently as possible, because that does provide the best conditions for workers living standards to rise, for them to organise and so on, and that is a fundamental requirement for them developing their own alternative forms of property to capital.

    That is why the social-democrats too are caught in a cleft stick. On the one hand, they recognise that the best conditions for capital accumulation is via further extension, and socialisation, and regulation, on the other, their historical connection of that to compromise between their own national working-class and national bourgeoisie, leads them into nonsensical contradictions such as those they propose with “managed migration”, or “soft Brexit”.

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