Sources say Ireland will be looking for ‘long-term fix’ to offset hit to food industry

This article is more than 1 year old

This article is more than 1 year old

Ireland is in talks with the EU over a substantial Brexit emergency fund to offset the damage caused to the country’s €4.5bn (£3.96bn) food exports to Britain if the UK crashes out of the bloc with no deal next month.

As Theresa May prepares for a crunch meeting in Brussels on Thursday, officials at the European commission are already looking at continuous compensatory measures for Ireland as part of an ongoing arrangement that could last years.

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Contingency funds to compensate farmers have already been discussed at the highest levels and are expected to arise in talks with the taoiseach, Leo Varadkar, during a round of meetings in Brussels on Wednesday.

Sources say Ireland will be looking for a “long-term fix” in EU budget talks in April rather than a lump sum Brexit bailout.

Politicians have cited the ongoing assistance given to the Baltic states after Russia banned certain food exports from the EU as an example of financial solidarity it hopes to win in a no-deal Brexit.

Ireland exports €4.5bn worth of food and drink a year to the UK, ranging from beef to cheddar cheese. Calculations by the Department of Agriculture put the cost of tariffs under World Trade Organization rules at €1.7bn.

Michael Creed, Ireland’s minister for agriculture, food and the marine, has said this would be an “existential challenge” for the food and drink sector. He has previously said Ireland would seek “mega-money” from the EU.

The beef industry alone could face increased costs of up to €700m, which the head of the Irish Farmers Association has said has the potential to wipe out beef production in the country.

There are also concerns if Britain flips the other way and adopts a zero-tariffs policy, as this could result in cheaper chicken, beef and lamb from the US and South America displacing both British and Irish cuts from shop shelves.

Creed has already talked of the European commission’s “readiness to respond to that crisis should it develop in the context of a crash out”.

Informed sources say that ongoing assistance over many years will be the preferred option rather than a lump sum in a Brexit “bailout”.

“Flexibility on state aid rules may be one we look for, but any fix is likely to come in the European budget discussions, which start in April, because a no-deal Brexit will have an ongoing impact and will be unpredictable,” said a source referring to the negotiations for the next EU financial cycle of 2020 to 2027.

While Brexit is unprecedented, the assistance given to the Baltic states after Russia banned European food exports has been cited as a model for Ireland.

Exports from Latvia, Lithuania and Estonia to Russia dropped by €5.8bn since 2014 and are still being supported by the EU.

Creed has said Ireland’s ambition is to “ride out the difficulty” and “retain a foothold” in the UK with early engagement with the European commission in terms of “the need for aid, particularly exceptional aid on the beef side and also exchequer response”.

He added that he would also be looking for “flexibility” in state aid rules to allow the Irish government to intervene.

Sources in the European commission say they have not come to a view yet but “clearly there will be sympathy and understanding”.

A spokesman for the commissioner for agriculture and rural development confirmed they had “explored the ways in which the EU could help Ireland and Irish businesses”.

“There are possibilities under the Common Market Organisation which, for example, were used in response to the Russian ban and the subsequent dairy crisis. There are also possibilities under state aid rules, which have also been discussed.”

Those working on Brexit preparedness at InterTradeIreland, an organisation set up under the Good Friday Agreement to help build cross-border business, say an area of particular concern is the impact a hard Brexit may have on ”micro-businesses” with fewer than 10 people. In Northern Ireland 3,800 micro firms, employing 13,000 people, regularly trade across the border.

They have found 7,500 SMEs north of the border and “double that” south of the border that trade on both sides.

Eight in 10 of micro businesses north of the border export exclusively to Ireland and few have any experience of filling out customs declarations forms or understanding tariff regimes.

“They are the ones most likely to be affected by barriers to market access,” said Kerry Curran, policy research manager, as they are likely to be trading within supply chains and “also have less capacity to absorb the cost” of the extra administrative burden.