Is no deal better than a bad deal (Irish edition)?

Of all the vacuous platitudes regularly trotted out by Brexiteers, one of the most irritating is the mantra that “no deal is better than a bad deal”. What, exactly, would such a bad deal look like? We are never informed, making the claim “not even wrong”.

In contrast, it is pretty easy to define what a bad deal would look like, from an Irish perspective. First, and most obviously, and most importantly, it would be a deal that restored a visible border in Ireland, whether involving border guards of one sort or another, or physical border infrastructure, or both. This would undermine one of the fundamental premises of the Good Friday Agreement: that given the freedom to choose your citizenship, and without a meaningful border, it should no longer matter, very much, on which side of that border you live. The restoration of a border would therefore threaten the security of this island. A deal that allowed this would be a pretty dreadful one, by any reasonable standard.

Second, a bad deal would expose Irish agribusiness to competition from cheap overseas suppliers in the UK market. Such Anglospheric competition would severely reduce Irish exports to Britain, irrespective of whether Irish exporters faced WTO tariffs or not.

It’s pretty easy, therefore, to define what a bad deal for Ireland would look like in principle. Unfortunately, if the UK follows through on its threat to leave the EU’s Single Market, and refuses to become a member of a new EU27-UK customs union replicating the current EU28 customs union, then any deal that the EU will strike with the UK will necessarily be a bad one, thus defined. Most importantly, there will have to be a border on this island. And, since the UK will then do a variety of trade deals with the US and other countries, on the basis of an exceptionally weak bargaining position, it is highly likely that Ireland agribusiness will lose valuable markets there, even if they don’t face WTO tariffs.

So, in the Irish case, we have a meaningful definition of a bad deal, and we can therefore meaningfully pose the question of whether a bad deal would be better than no deal.

No deal would also mean a border in Ireland, and the loss of export markets consequent on the imposition of WTO tariffs. And it would involve additional economic costs, over and beyond those implied by a bad deal, of which more later. But I don’t think that you can automatically conclude that no deal would be worse for Ireland than a bad deal, mostly for political reasons.

As things stand, we have convinced our EU partners that a border in Ireland is unacceptable. The language from Barnier, Verhofstadt, Macron, and many others on the issue is exactly what we have been looking for. By signing on to a bad deal, we would be conceding the principle that a border is, in fact, acceptable. We would be saying to the EU26: “yes, we have been trying hard to convince you that a border is simply unthinkable and must never be allowed to happen, but actually, we didn’t really mean it. If push comes to shove, we’ll accept a border if that is the price that has to be paid for a deal with the UK.” If we were to take such an attitude, we could hardly expect our European partners to take the opposite one!

Once the point of principle regarding the border has been conceded, it becomes likely that the border will prove to be a permanent fixture on the island. The Brexiteers will be happy: they will be able to import as much chlorinated chicken as they want from wherever they want, and the Irish border issue will no longer be on the table to complicate matters for them. There will be no reason for the UK to ever get rid of the border, and we will have lost all leverage on the issue.

By contrast, if there is no deal, because of insufficient progress on the border issue, the point of principle will not have been conceded. Yes, there will still be a border, but there will be a border anyway under a bad deal. And the UK will know that, if it ever wants a trade deal with the largest market in the world, and its nearest neighbour, it will have to erase that border.

And I think that it is almost inevitable that the UK will, eventually, decide that it needs to have such a trade deal.** In which case the border will only have been reintroduced temporarily.

No deal will involve more economic costs for Ireland than a bad deal, and as I said in a previous post, I would like to see those additional costs quantified, taking into account the negative impact upon Ireland of the trade deals that Liam Fox is likely to sign. And it is therefore intellectually respectable to claim that a bad deal is better than no deal. But it is also intellectually respectable to argue that for Ireland, no deal is in fact better than a bad deal.

To an extent, it comes down to what our preferences are. If they are lexicographic, with the absence of a border dominating other Irish interests, then no deal is surely better than a bad deal. If, on the other hand, we are willing to accept a higher risk of the resumption of violence, in order to mitigate economic costs elsewhere on the island, then a bad deal might well be better than no deal. I think that these are issues that we need to debate, honestly, as a society.

My own view is that when things can go badly wrong, they often do, and that we should never take peace and stability for granted. I also think that the primary duty of a state is to provide security. And like everyone my age, I remember the Troubles. And so I tend to the view that we should not concede on the fundamental point of principle that has been forcefully articulated by our government and diplomatic service: a border in Ireland is simply unacceptable.

And what that means in practice, I think, is that in the months ahead — through December and if necessary beyond — we should hold our nerve, stick to our principles, and continue to insist that we need a solution to the Irish border question before the UK withdrawal talks proceed to the second stage.

** It may take time.

Maternity Care – A Cost Benefit Analysis

The Irish government has pledged to improve maternal choice by expanding midwifery-led care throughout the country. Earlier this year, I posted about an Irish study examining women’s preferences for maternity care and subsequent motivations when choosing place of birth (Maternity Care – what do women want?). Since then, the cost-benefit analysis of midwifery- and consultant-led care in Ireland has been published in Applied Health Economics & Health Policy.

 

This is the first study to estimate the net benefit of consultant- and midwifery-led models of care using cost-benefit methodology and women’s preferences for maternity care, with the results arriving at a particularly useful juncture in Irish policy formulation. While both models of care are cost-beneficial for low-risk patients, the net benefit for consultant led-care is considerably smaller. This study demonstrates the demand for midwifery-led care in Ireland, which is currently provided in only two hospitals in the north-east of the country.  It also demonstrates potential cost-savings from providing midwifery-led care for low-risk women as an alternative to consultant-led care in hospitals across Ireland. It is important to note that consultant-led care is necessary for high-risk patients and is an important maternal choice for all maternity care patients.

 

This research was supported by the National Perinatal Epidemiology Centre of Ireland.

CCCTB – Bye, Bye Irish Veto?

Corporate tax avoidance is a high salient political issue in Brussels.

This is largely a response to demands from citizens across the EU to ensure that large MNC’s, particularly from the US, pay their fair share of taxes when operating in the EU single market.

Ireland, as we all know, has been called out, and challenged on this issue.

The companies that the EU have in mind are large Silicon Valley firms, and finance firms operating in the shadow banking sector.

The Commission have recently called for the introduction of a common consolidated corporate tax base (CCTB), to be introduced over two stages. They are also keen to introduce a financial transaction tax (FTT).

These are directly aimed at tackling corporate tax avoidance.

Ireland has said it would veto any attempt to introduce either of these at the EU level. But it was Britain that was most vocal about it.

It’s therefore worth noting that Jean Claude Juncker stated in his state of the union address this morning that he is in favour of moving toward qualified majority voting (QMV) on decisions related to the CCCTB and the FTT.

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A post-Brexit EU is going to be a very different terrain for Ireland.

QMV will be used more often. This empowers German and French interests in the European Council, and the numbers stack up to ensure they get what they want.

Is the writing on the wall for Ireland’s veto against the CCCTB?

Full speech: http://europa.eu/rapid/press-release_SPEECH-17-3165_en.htm

 

 

Latest issue of the Economic and Social Review

The Economic and Social Review has just published its latest issue at (Vol 48, No 3, Autumn 2017)

Articles

Taxation, Debt and Relative Prices in the Long Run: The Irish Experience
Vahagn Galstyan, Adnan Velic

An Irish Welcome? Changing Irish Attitudes to Immigrants
and Immigration: The Role of Recession and Immigration
Frances McGinnity, Gillian Kingston

Does the Month of Birth Affect Educational and Health Outcomes? A Population-Based Analysis Using the Northern Ireland Longitudinal Study
Stefanie Doebler, Ian Shuttleworth, Myles Gould

Policy Section Articles

Modelling the Medium- to Long-Term Potential Macroeconomic Impact of Brexit on Ireland
Adele Bergin, Abian Garcia-Rodriguez, Edgar L. W. Morgenroth, Donal Smith

How Sensitive is Irish Income Tax Revenue to Underlying Economic Activity?
Yota Deli, Derek Lambert, Martina Lawless, Kieran McQuinn, Edgar L. W. Morgenroth

Valuing Informal Care in Ireland: Beyond the Traditional Production Boundary
Paul Hanly, Corina Sheerin