Managing the Brexit Challenge: Ireland, the EU, and Transatlantic Relationships
Remarks by Simon Coveney TD, Minister for Foreign Affairs and Trade
Center for Strategic & International Studies (CSIS),
Washington DC, 4 October 2017
Thank you to everybody for taking the time to be here. I know this is a very informed audience. While I have a long speech written, I would like to make some remarks and then deal with people’s questions and comments in detail. I would like to set a context first.
What Ireland is involved in right now is one of the most substantial policy challenges we have faced in decades. That is, the consequence of the decision of our closest neighbor, in ways our closest friend whom we have shared a complex history with, to leave the European Union.
Britain and Ireland joined the European Union together on the first of January 1973, ironically, six months after I was born. Since then, the effect of both countries being in the European Union, to the bilateral relationship of those two countries has been a very powerful and very positive and strong one. Our civil servants have worked together in the same corridors and in the same rooms and around the same tables in Brussels and Strasbourg and elsewhere in the European Union on common endeavors.
In different areas agreeing to pull sovereignty, nearly always on the same side of the argument on the future direction of the European Union – the design of a new common market and single market for trade which has always driven British interests in the European Union project - and it has helped us in no small degree to find a find a way forward in context of the peace process on the island of Ireland and Northern Ireland in particular and relations between Ireland and Britain, East and West.
That relationship has also facilitated freer movement and travel between both countries, which since Irish independence, has been strong but since joined EU membership has been strengthened even further in the context of a growing confidence and independence of mind within Irish policy makers. So when we joined the European Union, ironically, we were far more dependent on Britain and the British economy than we are today. Actually by participating today as a member of a Union, Irish independence and Irish sovereignty has been reinforced rather than undermined in the context of that union.
So it has been a real force for good for Ireland. And our relationship with Britain has matured in a way that a lot of people on this side of the Atlantic Ocean have welcomed and have assisted and have supported throughout that developing relationship too. As nearly 35 million Americans are of Irish descent and watch what happens on the island of Ireland with a lot of interest and not insignificant influence also at certain crucial times in our history.
The reason why this is such a fundamental moment for us is that Britain has chosen to take a different direction. They have chosen a very fundamental change in their approach towards Europe as a continent and the European Union as a collective of countries that has been working together since the early 70’s.
The roll out and consequences of that decision we are still trying to figure out, together. So, Ireland is faced with the reality of something we virtually had nothing to do with but the consequences of, will have a significant impact on Ireland’s place in the European Union and Ireland’s relationship with the UK, and indeed will influence commercial and trade opportunities in the context of Ireland and Europe’s relationship with the United States as well. We will talk about why that is over the next little while.
So, Britain voted to leave the European Union. The establishment didn’t expect that anywhere. As a result of that, certainly within the United Kingdom in my view, there was simply no detailed preparation for this eventuality. Since then, we have seen a rolling and evolving change in approach in terms of what Brexit, when it finally happens and takes place probably after quite a long transition period, will actually look like. So this is not like some other political storm that comes and goes. God knows we all know about political storms coming and going these days. This is a much more fundamental policy challenge than that. What we are actually doing now is forging a permanent, new relationship between Britain and the European Union. Because of that, a permanent change in the relationship between Britain and Ireland as well. Moving away from the shelter of being in the same European Union, with a common rule book, if you’d like, for so much of the decision making we have taken on the island of Ireland and East-West cooperation between Ireland and the UK.
Just in case anyone underestimates the importance of that relationship, from a trading perspective it is 63 billion (EURO), probably $75 billion, trading relationship each year. That’s a pretty big relationship for four and a half million people. 10% of our workforce is employed directly related to that current trading relationship. For those of you who know Ireland, it is made up for four provinces - there are more Irish born people living in Britain than there are Irish people living in Connaught today. We have an interwoven relationship with Britain that cannot be simply broken on the basis of Britain deciding to take a different direction.
So, how are we approaching it, and what does it look like at the moment and where is all of this going? In late June the two negotiating teams met - the European side is called the EU Task Force led by Michel Barnier, a French former politician and diplomat and the British side is led by David Davis who is the Minister for Brexit with his team. What was agreed, on the suggestion of the European side, because this is such a huge challenge, Is that we would try to break the process up into two phases.
The first phase would be, to be blunt about it, the divorce issues. So, what happens to EU citizens living and working in Britain today once Britain leaves? What happens to the hundreds of thousands, if not millions, of British people who live outside of Britain in European countries, or EU countries I should say, once Britain leaves. Does their status change? Do they need permits? Can they bring family members to live with them? If they leave Britain for a certain period of time, can they come back again?
The normal movement that we take for granted within the European Union, where there is completely free movement of goods, services, capital and people, which is the very basis of the single market, is all of a sudden now called in to question. That is the first issues that needs to be resolved or at least there needs to be significant progress made on that in the first phase before we open up what’s called phase two which is what the future relationship actually looks like in terms of trade and transition arrangements to get there and so on.
The second issue is what’s called the financial settlement issues. Now unfortunately, within the British media, this has been spun almost like it is a fine for Britain for leaving and so it has been very difficult to manage politically within the UK. Essentially what this is, is the EU side saying look we manage our budgets on a multi-annual financial framework basis. In other words, there is an EU budget agreed until 2020. Britain has committed a financial contribution towards that budget up until 2020 and so we expect them to follow through on that commitment. The British side is saying, hang on a second, we’re not paying anything to a union that we are leaving. Or that is at least until a few weeks ago, that was a position of many within the U.K. So that is a very fundamental issue because if Britain does not contribute financially, well then all of a sudden there is a hole in the EU’s budget and other countries will have to pay more into the EU budget to actually pay for Britain leaving in the context of a multi-annual financial framework which is, as you can imagine, a pretty sensitive political issue because Britain is a very big financial contributor to EU budgets.
Then the third issue, in the first phase of negotiations, is Ireland. And so Ireland is in the same category as the financial settlement and citizens’ rights. It’s a big deal. That’s because within the European Union there is real awareness now as to what is at stake for Ireland. Why we are at such a vulnerable and exposed position in the context of our relationship with Britain and Britain leaving. Actually, the focus has not even been on trade, and it’s a huge trade relationship as I referred to earlier. The focus for now, in the context of the Irish issues, are on Northern Ireland – maintaining and supporting a peace process that has taken 30 years to get where it is now, ensuring that we don’t see a return to a border – a physical border - on the island of Ireland which would be hugely detrimental to the peace process and the normality that we have grown used to, I am glad to say in recent years, on the island of Ireland.
Ireland really has the only physical land border between the European Union and the UK, with the exception of a very narrow bridge leading out to Gibraltar, but it is a 500km land border with 260 substantial road crossings and many other paths and mountains and farms that span that border, too. For those that know anything about the Irish peace process will know why that border is so sensitive and so important to the conversation that we are having today.
Then, of course, there is the issue of what is called the common travel area for Ireland. Since independence, Ireland and Britain had this arrangement whereby Irish people could move and live and access social welfare, healthcare and education facilities and pensions in the U.K. and British people in Ireland could do the same. You could carry your entitlements back and forth between the two countries. It was almost a recognition of citizenship in each-other’s countries rather than simply free movement. We are saying in these negotiations, whatever happens here, we need to maintain that common travel area approach because it has been hugely important for the peace process but also for East-West relations between the two islands as well as the two countries. I think there is a recognition of that so, the three fundamental Irish issues are: protecting the peace process, in particular how do we implement in full the Good Friday Agreement or the Belfast Agreement as the British government will call it, in its entirety. That isn’t simply some kind of voluntary agreement between two governments, it is a legal treaty that has been submitted to the U.N. and it is something both governments, as co-guarantors of that agreement, have a responsibility legally to implement. The problem of course with the Good Friday Agreement, and it is a document of some genius I have to say, that involved quite a lot of U.S. input but the problem is that much of it assumes that Northern Ireland and the Republic of Ireland are a part of the same European Union – in terms of a charter of fundamental rights, in terms of animal health and welfare in the context of the common agricultural policy, in environmental rules and regulations, and the list goes on and on and on.
So then, if all of a sudden, a different rule book applies to Northern Ireland, that applies to the rest of the island of Ireland, how do we manage in a seamless way to have cooperation North-South, to manage an all island economy, to manage an all island approach towards animal health and disease control, to manage an all island approach in some areas around environmental management and healthcare and so on. That becomes extremely complicated and it effectively will require Northern Ireland to maintain equivalence in terms of regulatory standards with the rest of the island of Ireland, in context of North-South cooperation working as its meant to in the Good Friday Agreement.
So these things are not straightforward. That is why it has taken a lot of diplomacy and a lot of travel and a lot of handshakes and a lot of conversations and a lot of dinners and lunches to talk to other European countries about why Ireland is so uniquely exposed here and why the European Union has a responsibility to maintain the momentum in the peace process that it helped to build. I have to say that the response from other European countries has been hugely positive. Michel Barnier himself in particular is incredibly defensive of Ireland’s issues and our vulnerability and that is why we have the strength of language that we have to have in the negotiating guidelines of the EU side and that’s why we have so far, also got from the British government, pretty strong language in all of these areas too in a positive sense. The problem is that the language is aspirational. What we don’t have is the road map to achieve those aspirations so the British government says: there can be no physical infrastructure – on the Irish border; we want to protect and maintain the Good Friday Agreement in all of its facets; we recognize that we have a responsibility to the whole of Ireland, North and South.
This is the kind of language we are getting. We want to maintain the common travel area in full as it operates today after Brexit. So we are getting the recognition that we are asking for, aspirationally from what the British Prime Minister is saying in her speeches and that is very welcome. But, the real challenge is, how do we translate that into a new legal, constitutional, and economic and political reality between Britain and the European Union after Brexit? Because the current position is still maintained, although many are questioning it, that actually Britain is leaving the European Union, we’re leaving the customs union, we’re leaving the single market, we are closing the door and then we would like to negotiate the opening of that door again on negotiated terms. The problem with that of course is that if at the end of this Britain and Ireland and the European Union are not operating within the same customs union, however you design that, then how legally do you avoid customs checks somewhere on the island of Ireland between north and south or east and west – how is that done? If it is not done, you are undermining the integrity of the single market within the European Union which every country in the European Union will be adamant in defending. Because we have spent many years building up integrity and common standards and a common approach towards everything from state aid rules, to competition, to environmental law and standards and so on right across a single market with half a billion people. So we can’t create some kind of back door into that by cutting some kind of grey deal with the UK. That is not saleable to the other EU countries that are a part of this process. So what they are saying is that, we accept that there is a need for a unique and imaginative solution, is the terminology that is used to solve the unique Irish problems but in doing so we must not undermine the integrity of the single market and so the ball is very much back in the British court here because what has been promised to many people in Britain, is that it is possible to leave the European Union while holding on to all of the benefits of membership and actually gaining new benefits from being outside of the European Union and we can do all of that at the same time and it will lead to some kind of new glorious new future for Britain and the world.
That is not going to happen. It is very clear now that that can’t happen because the EU cannot effectively reward a country for leaving the European Union by continuing to apply all of the benefits of EU membership and ignoring all of the other things that a country wants to do with third countries in terms of trade agreements and so on. I think there is an understanding and realization that is growing in Britain that that is now the case, so there are difficult choices to be made.
From our perspective, the way this works from week to week is that we will need to get substantial progress made on Phase 1 Issues - citizen rights, financial settlement, and the Irish issues - before heads of state, who will meet in two weeks’ time, will give the green light to moving on to Phase II of the negotiations which is the transition arrangements and the new realities after transition - in terms of trading arrangements and political agreements and so on.
We want to move onto Phase II in Ireland. Our trading relationship with Britain east-west is hugely important to us but we need to make sure that we get some clarity and we do not simply avoid the difficult political choices on the Phase 1 issues before we get there.
Ireland needs to use the leverage that we do have in each phase to make sure that we look after Irish citizens and Irish interests as a consequence of a decision in the UK, that I said earlier, that we had nothing to do with in the first place but we have to deal with the consequences of.
I think it is unlikely that there will be sufficient progress on the three issues to allow for Phase II discussions to open but, let’s see. It will certainly require more movement on the British government side, negotiations start again next Monday on the 8th. Once we move onto phase II we will have both phases then being negotiated in parallel with each other and of course many of the border issues for example, in Ireland, will be linked potentially to any new trading understanding or arrangement that we have in the future. So, we can’t solve all of phase I issues in their own right and then start on phase II there is a need to progress both in parallel but there is also a need to make sufficient progress in terms of understanding on phase I before the phase II discussion begins.
This is a difficult negotiation. We are on the EU side, even though we are on the opposite side of the table from a good friend. What I would say to Britain, and I say it all of the time, is that Ireland is probably the closest friend you have here in these negotiations, and that’s true. The outcome that we want is very close to the outcome Britain wants which is a close trading relationship with the European Union that is seamless, that is barrier free if possible, that is a good political relationship too but recognizes the fact that the British people voted to politically leave the European Union. I don’t believe that British people and I don’t believe even English people voted to leave the customs union and the single market in the way that it is being interpreted since. I just don’t believe that, because I don’t think it is in Britain’s interests for that to be the case.
So, how does this apply to Ireland’s relationship with the U.S.? This is something that isn’t being spoken of enough in my view. First of all, Ireland’s relationship with the US is a $100 billion trade relationship every year. So for a little country of 4 million people it is a huge trading relationship and it is more or less even when you take goods and services together, neither country really has a surplus or deficit, there is a slight surplus on the US side but it is not major. There is about a hundred thousand jobs in the US economy in every state employed through Irish companies now there’s about one hundred and fifty thousand in Ireland employed by US companies. So the inter-relationship between the Irish and US economy is a very, very strong one and many US companies use Ireland as a platform to sell into the single market. I think that in the future this concept of Ireland being a bridge between these two huge economies, the US on one side and the single market within the European Union on the other side, is going to become even stronger in the future in the context of Britain leaving and the uncertainty that comes from that.
I believe that the trade relationship, at future discussions around a transatlantic trade arrangement, which are on ice at the moment but, will undoubtedly at some point in the future be discussed again, puts Ireland in a very interesting, strategic position as a partner for the United States, as well as a member of the European Union. I think, from a policy point of view, and, from a commercial opportunity point of view, that the opportunities are very, very significant there. If you look at the success of Britain and the United Kingdom attracting foreign direct investment, as an EU member state, it has been the most successful. If you look at the numbers around that, my understanding is that 50% of the decisions to invest in Britain as a foreign direct investment proposition has been to target consumers in the British economy, the other 50% of that investment has been to use Britain as a platform to trade into the rest of the European Union and indeed into other parts of the world. That 50% in the future may well be up for grabs. Nobody is going to sell into Britain if they have to pay further tariffs to sell into the rest of the European Union. There are very substantial US companies at the moment looking at re-jigging and changing their entire routes to market because of that and again, that delivers very exciting and interesting opportunities from an Irish perspective in terms of future cooperation with the US, which is one of the reasons why I am here.
Apart from anything else, a bit like our relationship with Britain, Ireland’s relationship with the US goes way beyond commercial opportunities – it is families, it is politics, it is history, it is tragedy, it is generational, and it is powerful and it will remain so and we will disagree on things at times. The European Union will disagree at times with the US and we will be part of the European arguments in many cases but sometimes I think we offer an interesting perspective given how well we know and how integrated we are with US thinking, politically. Again, I think the relationship which is stronger than I think it has ever been, will be tested in the future in a positive way as the new opportunities potentially from Brexit emerge but, unfortunately, the damage limitation we are currently focusing on, because there are very, very few upsides in my view from Brexit, the damage limitation we are currently focusing on will remain our focus for the foreseeable future, certainly for the next 18 months or so until we move into what I hope will be quite a long transition phase which allow further evolution of British thinking on Brexit so we can come to a much more sensible outcome, as opposed to the kind of hard Brexit thinking that unfortunately some people still advocate for.
With that, I look forward to your questions and thank you very much for taking the time to be here.