Border delays and additional red tape could cut trade in goods between Ireland and the UK by almost 10 per cent after Brexit, according to new research published by the Central Bank of Ireland.
The research says that delays due to border checks and bureaucracy could rise by as much as 90 per cent in some sectors, with fresh food, drink and raw materials particularly exposed.
A range of studies have sought to estimate the impact on Ireland's economy of a harder version of Brexit, where the UK leaves the European Union trading bloc. The latest study, by the Central Bank economists Stephen Byrne and Jonathan Rice, is the first to look in detail at the impact of so-called nontariff barriers, which are the costs of complying with diverging rules and regulations and of border delays.
All these factors increase costs to business, and goods with a short lifespan, such as fresh food and some raw materials, are particularly vulnerable to delays. Bulky goods such as machinery are also exposed, international research shows, possibly because of the costs and complications of holding such goods at borders.
The range of firms affected includes those with international supply chains involving imports of intermediate goods and materials. Much of the delay would arise from customs-inspection delays and possible border congestion at ports, the researchers say. This could knock on to higher prices to consumers, as firms are forced to take on higher costs.
In total the researchers expect a 9.6 per cent decline in trade flows in goods between the UK and Ireland from an increase in border waiting times. This equates to a 1.4 per cent fall in total Irish exports and a 3.1 per cent decline in total imports.
Additional losses in trade would be involved if tariffs, or special import taxes, were imposed after Brexit on trade between the EU and UK.
Brexit threat to 40,000 jobs
The Economic and Social Research Institute has previously found that the imposition of tariffs under World Trade Organisation rules could cut Irish exports to the UK by as much as 30 per cent. A number of wider economic studies have said that Irish GDP could be 4 per cent lower in the medium term after Brexit than would otherwise be the case, at a cost of 40,000 jobs.
In the latest Central Bank research, auto parts – typically used as an example in international research – see a 4½-hour increase in waiting times and delays when countries are not in a free-trade arrangement. Although the bank underlines that this should not be seen as a typical figure across all sectors, the researchers found an average 90 per cent rise in delays, a very significant imposition for some sectors.
At the moment goods entering the EU from a “third country” – the UK’s status should it leave the customs union – are subject to additional controls, including physical inspections – mainly relating to agriculture and food products – and documentary checks. These checks can increase delays at customs posts and delays increase costs for retailers.
The UK has said it plans to leave the EU customs union and single market after Brexit. Under the withdrawal agreement currently under negotiation, present trading arrangements would apply until December 2020.
A new free-trade deal between the EU and UK could eliminate the threat of tariffs. It could also lower the risks from nontariff barriers, but only if the UK continued to apply many of the current EU regulations.
