Brexit: Northern Ireland's industry eclipsed by Republic's after 1961
When Ireland was partitioned in 1921, Northern Ireland had two-thirds of industrial output on the island. Today NI has employment in manufacturing that is a third of the Republic's.
In 1911 British data showed that manufacturing employment accounted for 20% of the all-Ireland workforce compared with 36% in the UK as a whole while in 1926 the first Census of Industrial Production of the Irish Free State (the Republic of Ireland from 1949) showed that about 7% of employment was in manufacturing compared with 29% in NI which had the concentration of industry including two significant shipbuilding firms.
The Free State was dominated by agriculture while in the 1920s in other small European countries such as Sweden, Denmark, Netherlands, and Belgium, about 25% of the workforces were engaged in manufacturing. Only 130 companies employed more than 100 people according to Denis O'Hearn in 'The Atlantic Economy: Britain, the US and Ireland.'
In the early years of NI its ‘Imperial Contribution’ to the British Treasury - reflecting the strong economy - was in a substantial surplus but from the latter part of the 1930s, the province has depended on subsidies from the British government as the economy has persistently underperformed.
In 1924, the textiles and clothing sectors (e.g. Irish linen) were the biggest components of manufacturing in NI accounting for 54% of output, but only 2.4% in the South. By 1961 NI had 164,000 employed in manufacturing compared with 158,000 in the Republic. Today 80,000 are employed in NI manufacturing - a third of manufacturing employment in the Republic.
According to the Northern Ireland Statistics and Research Agency (Nisra), the 2015 external sales of goods (including to Great Britain) by NI companies were estimated to be worth £18.3bn, 79.6% of all external sales. The value of services was £4.7bn.
Official data from HM Revenue & Customs show that in 2016 the Republic with a 31% share was the BIGGEST export market for NI's £7.8bn of manufacturing exports - see chart below.
There was a small trade deficit of £300,000 with the Republic and an overall goods deficit of £2.1bn in 2016. See data report here.
The EU accounted for 55% of export value.
Exports outside the UK in effect account for 44% of external goods sales.
Brexit not mainly about economics
Some 56% of NI voters supported remaining in the European Union in the June 2016 UK Brexit referendum and the Democratic Unionist Party (DUP), the leading party of the majority Protestant population supported Brexit. The DUP was also in effect the money launderer for a donation of £435,000 (€500,000) supporting the Leave campaign in Great Britain.
Last March David Davis, the Secretary of State for Exiting the European Union, surprised a House of Commons Committee by admitting the British government had done no economic assessment of the possible effects of crashing out of the EU with "no deal," even though the economic risks are overwhelmingly on the UK side.
In NI the DUP was mainly motivated by maintaining links with Great Britain while the majority of voters across the UK, aged over 45, supported Brexit and also did not work! In contrast, 53% of full-time workers who participated wanted the UK to remain in Europe, as did 51% of part-time workers.
British data show that cultural and ethnic attitudes, not direct economic motivations, are the main distinguishing features of anti-globalisation voting.
The bulk of immigrants to the UK since 1991 arrived from outside the EU.
Northern Ireland successfully lobbied the British government to cut the corporation tax rate to 12.5% - the Republic's headline rate, but the DUP is prepared to give the locational advantage for foreign firms to the Republic by being prepared to support border controls.
According to the NI Executive over £13bn in EU funds have been received since 1994 and the EU Common Agricultural Policy (CAP) through the single farm payment accounts for 87% of total farming income!
A House of Lords committee was told that some 60% of those working in NI agri‑food factories are non‑UK nationals while 90% of the seasonal labour required to handle the seasonality within the industry, is non‑UK labour.
Some 23,000 to 30,000 people cross the border from both jurisdictions to work.
A hard or soft border?
Since the Belfast Agreement of 1998 that brought peace to the province, the border that had once been marked by military fortifications and custom posts has almost physically disappeared.
In London, the British government and the opposition Labour Party are split on staying in the EU’s single market or the customs’ union, which includes in addition to the current EU28, countries such as Switzerland and Norway.
In Northern Ireland absent an EU-UK agreement on free trade and free movement of people agreement coupled with the DUP’s opposition to a free trade zone on the island as a whole, there will have to be a return to some controls.
A “frictionless border” supported by a technology that doesn’t exist has been promoted and the British government is reported to be preparing to publish papers that could cover the issue.
The United Kingdom has not achieved an annual trade surplus in any year since 1998. According to Office for National Statistics last February, the only significant EU surplus in 2015 covering goods and services, was with the Republic of Ireland; at a global level, the surplus with Ireland was second biggest after the US. The Republic is the UK’s fifth largest trade partner for export of goods, ahead of China.
The EU is the biggest market for almost every product group exported by the UK and the FT says about 60% of UK goods exports are intermediate and capital goods or raw materials to mainly European global supply chains, not final consumer goods. How long will the big manufacturers wait?
It's possible to devise a system where most trade crossing the Irish border, which reflect movements by big companies, could be accommodated. Component trade between Great Britain and the Continent is also a big challenge.
Near neighbours typically are a country's biggest trading partners and the Republic is the biggest export market with almost a third share for NI's manufacturing exports. The EU accounts for almost a half of UK exports. In 1961, when Britain first announced hopes to join the EEC, it took about half of New Zealand’s exports according to the Economist. The UK accounts for 3% today while Asia-Pacific Economic Co-operation group members account for 72%.
Great Britain is making it more difficult to trade in its biggest market while faraway hills are green for it and Northern Ireland - the economics for the Republic of trade with NI are not significant but peace on the island should be a continuing crucial goal.
UK's challenge to get agreement on trade
Article 50 only applies to withdrawal from the Union, and requires only a qualified majority vote, while Article 218(3) of the Treaty on the Functioning of the European Union (Lisbon Treaty) requires unanimity and that would encompass trade arrangements, transition etc.
Besides EU leaders, more than 30 national, European and regional assemblies have a veto.
A deal with the UK could be vetoed by six separate Belgian parliaments, including the assembly of the 76,000-strong German-speaking community. Some referendums on the issue would also be likely.
The EU27 through the European Council at the end of April made it clear in a statement that "an agreement on a future relationship between the Union and the United Kingdom as such can only be finalised and concluded once the United Kingdom has become a third country" even though negotiations on various issues such as a transitional period can commence before withdrawal.
UPDATE: On 16 August, the UK government said in a Brexit position paper that avoiding customs checkpoints or any other physical infrastructure on the Irish border is its top priority when negotiating post-Brexit trade arrangements for its only land frontier with the EU.
The paper published by the Department for Exiting the European Union's also makes clear that the British government wants no customs implications at the Irish border in a UK-EU framework for a future partnership.
The government rules out a customs border on the Irish Sea, with checks and tariffs only in operation at entry and exit points between both the jurisdictions on the island of Ireland and the UK.
Creating a barrier between Northern Ireland and the rest of the UK was "not constitutionally or economically viable," it states.