Engagement on the Future of the European Union

Session A today is an engagement on the future of Europe with Mr. Pat Cox. At our last meeting a number of witnesses focused on the impact the UK's withdrawal may have on the future of the European Union. Today, we will continue on that theme and we are delighted that Mr. Pat Cox has joined us. Mr. Cox does not really need an introduction to this group. As a former president of the European Parliament, his experience and understanding of European institutions will, no doubt, give him an invaluable insight into the potential ramifications and changes. On behalf of the committee, I welcome Mr. Cox to this meeting and thank him for his willingness to share his experience and analysis with us.

Before we begin, I must refer to the issue of privilege. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

I now invite Mr. Cox to make his opening statement, after which we will have a question and answer session.

Mr. Pat Cox

It is good to be here and I thank the members for their invitation to join them. Armed as I am with the information that I am covered by the Defamation Act, I will give it a right lash. I want to make a presentation in two parts. As I was asked to talk about Brexit and the EU's future, I will focus on Brexit first and then switch to the future of the EU.

With the United Kingdom leaving, the EU will be losing a populous state of 65 million people, which represents 12% of the population and 16% of the GDP of the EU. It will also be losing a member state which is a member of NATO and a permanent member of the UN Security Council. It is deeply regrettable that this is happening, even if it is now to be respected as inevitable. The process of disengagement will happen under Article 50 and the negotiations are due to start in the next two weeks, assuming there is a clear outcome to the British general election. The negotiating positions of the European Union are openly available on the European Commission's website, issue by issue. Two working documents of Mr. Barnier's team are available for public scrutiny on the essential principles and citizens' rights. The EU negotiating position is clear on the essential principles, financial settlement and the exit bill . There is no money amount for the latter but the principled details are there. There is no equivalent at the moment in the United Kingdom. We have a White Paper and the Lancaster House speech of Mrs. May, but we also have more obscure comments like "Brexit means Brexit" and "No deal is better than a bad deal". There is no actual negotiating position of a parallel sort and that is awaited.

The negotiation process needs to be completed within two years from the date on which Article 50 was triggered, that is, by 23 March 2019. It will require a vote of assent in the European Parliament and that means that the negotiations will need to finish months in advance because the European Parliament's mandate expires in 2019, when it will close down and elections will be held for a new parliament. Beyond that, it is highly likely that there will be a transition period which may be one of the explanatory factors for the timing of the upcoming UK general election. That period will probably happen during the lifetime of the next government in the UK but it would have happened at the very beginning of an election campaign had the current government run its course.

How will the European Union trade with the United Kingdom in the future? Without going into details, it will do this under a separate article of the European Treaty, Article 218. That article requires the approval of any deal by the European Parliament and depending on its contents, particularly if it impinges on the competence of member states, it could also require a vote in national parliaments. That very much depends on the detail that emerges. In that context, the United Kingdom has to have left the EU for a deal to be done. Article 218 covers the making of trade deals with third countries; therefore, the UK must be a third country before any deal can be struck. What can help that to be quicker than some trade deals is that while the United Kingdom's great repeal Act, as it is called, will repeal the European Communities Act 1972, the bridge over which EU law was transposed into British law, none of the EU law will be repealed. In fact, it is more akin to a great retention Act, until the British get around to changing their minds on some matters. That means that Britain and Europe will start on the same regulatory page when Britain starts as a third country, if it does not change any of the rules. That should allow for a quicker conclusion of any trade deal but it could still be, with national ratifications, quite a slow process in the end.

Regarding the EU more generally, the shock of Brexit and of the election of President Trump in the United States, neither of which was generally anticipated, are likely to have the effect of energising rather than paralysing the European Union in terms of setting about refining and defining its own future. There was a fear that a populist wave which was in some way Anglo-Saxon, to use that European phrase, might sweep over the Continent. There were lots of players echoing the US presidential campaign and the British Brexit campaign.

On 15 March, we had the Dutch elections in which Mr. Geert Wilders who attracted enormous global attention and, like Mr. Trump, is blonde and was boisterous in his campaign did not succeed in creating momentum to be a player in government, although he secured some additional seats.

We also had the French election which presented France and the European Union with a stark choice and the French made a clear choice in President Macron. Based on the opinion polls in France, it is highly likely that La République En Marche, the centrist political movement of President Macron, will win a majority of seats in the Assemblée National. This represents a considerable potential change in France and also for Europe because part of President Macron's campaign was a pro-European agenda and he will want to see some of that through. Elections to the German Bundestag are due in September and whichever Chancellor candidate wins, whether Chancellor Merkel who looks more probable or Chancellor candidate Schulz, that he or she will maintain Germany's European vocation is not in doubt. Alternative für Deutschland, the party that has picked up the more populist tendency in German politics, may get to the Bundestag but it will not be decisive. Italy is due to hold an election not later than in spring 2018, although it is most likely to be held in autumn 2017. The return of Matteo Renzi as leader of the Partito Democratico has given the party a lift in the polls but one of the major parties in Italy, the Movimento 5 Stelle or Five Star Movement of Beppe Grillo, is neck and neck in the polls with the Partito Democratico. While it is most unlikely Mr. Grillo will form a government, there may be a difficulty in finding an appropriate coalition after an election. All of these issues play into the future of Europe and cannot be ignored. There is, however, a real drive.

As the committee is dealing with Brexit, it should pay attention to a number of other issues, which could, I guess, be work for a future committee. In March 2017, the European Commission published a White Paper on strategies for the future of the European Union. The White Paper sets out a number of scenarios and while I do not propose to discuss them in detail, I will provide some headlines, as it were, to give members a telegrammatic flavour of the options. One scenario is to carry on, in other words, it would be business as usual. A second is to have nothing but the Single Market, in other words, we would do the Single Market and forget the rest. A third scenario is where those member states that want to do more do so. Another is to do less but to do so more effectively. The final scenario is to do much more together. As members can see, these scenarios extend from fairly low levels of ambition or "low energy options", as a certain president might describe them, to very high energy options. They are not prescriptive and national parliaments, parliamentarians and members of the public are invited to have a view on them.

The second element is that the Commission has accompanied these scenarios with a series of reflection papers. It has published papers on the social dimension of Europe, deepening economic and monetary union and harnessing globalisation. Today, it will publish a paper on security and defence. These are additional reflections to accompany the White Paper.

The EU 27 states, absent Britain, made a declaration in Rome on the 60th anniversary of the Treaty of Rome in which the Heads of State and Government committed to face the unprecedented global and domestic challenges. "Together", they said, the EU 27 were "determined to address the challenges of a rapidly changing world and to offer to our citizens both security and new opportunities". There is more detail in the declaration. I mention these matters because they provide important background on the future of the European Union.

Two further reports could be consulted by the secretariat and perhaps distributed. These have not been adopted but are draft reports of the European Parliament which explore two different avenues. They have been drawn up by the Parliament's Committee on Constitutional Affairs. The first, which is jointly authored by Mrs. Mercedes Bresso and Mr. Elmar Brok, basically asks how we build on the Treaty of Lisbon to build the future of the European Union. A second report of the same committee, which was authored by Mr. Guy Verhofstadt, looks at changing the institutional set-up in the European Union and adopts a "doing much more together" kind of tone. Members would get a sense from the reports of that substance.

In respect to how we choose a point of departure, it seems there is still considerable underdeveloped capacity in the Lisbon treaty. It would be worth considering how to take some steps together within the existing treaty framework, although some specific steps could be required beyond that. These steps should be particular, focused and concrete, rather than a general, sweeping arrangement.

A second question is whether we want more Europe. In this respect, the word "we" means whatever inclusive way we wish to phrase it. If we are to distil the question, what we need is a more effective European Union. We need to look at what it delivers or fails to deliver and have a very pragmatic focus. We should look as much or more at instruments of policy and capacity to act as at institutions. Form - what one should do, how one should regulate and how one should give democratic accountability - should follow function. We must decide what we want this entity to do and then develop around it the appropriate responses.

The absence of the United Kingdom means that a country that spoke up for competitiveness, globalisation, innovation, and openness in trade will leave the EU. As Ireland also believes in many of these things, we need to find those voices and our own voice on those issues to do with our own interest and build alliances on that front. It is clearly important that we know what the larger states want to do. One of the major questions to which we do not yet know the answer is what the attitude of the larger states will be as the European Union shapes a new future, sets priorities and decides on instruments, capacities and budgets. The larger states will have to carry the larger burden, for example, in terms of payments into budgets and so on, not least after the departure of the United Kingdom in the medium term. In that context, we frequently observed in the past that larger states can wish to see Europe's future in their own likeness. We need to encourage larger states, in our dialogue as a smaller state, to release to the European Union powers to act effectively for Europeans where it is appropriate and necessary to do so and not to hold the European Union back in an intergovernmental logic where, frankly, the larger countries will always count for much more than they would in a community-based logic where the wider community interest comes into play.

Overall, the European Union faces many challenges. The economic and financial crisis and migration crisis have indicated that many of the existing structures and capacities are far from perfect. However, we can do more to perfect the Union. That should be a pragmatic focus that Ireland could bring to the issue. We know from European history that mutual problems do not yield to mutual suspicion. We know also that mutual problems cannot be answered by demutualised and separate solutions.

The cost of doing some things more effectively will be real and we will have to look at that. The cost of not doing them could be fatal and damaging. Brexit is merely a hint of the cost of disintegration should we fail to succeed. I thank members for their attention.

I welcome Mr. Cox and thank him for his insight. His experience both here and in the European Union is invaluable. With that in mind, I will tease out a few of the points he made and ask him to comment or elaborate on them. We are all conscious that we are surmising or speculating to some extent because Brexit is new territory. Mr. Cox stated the European Union had seized this opportunity to define and redefine. Where does he see Ireland in that process in the sense that we are in a place we have never been before, economically, socially and culturally. We are strongly aligned with the United Kingdom through our geographical location and long history.

Can Mr. Cox see Ireland getting caught in a quagmire of trying to get the best deal from an Ireland-UK perspective? If Brexit triggers change in the whole European model, could we be caught in the turmoil without knowing the best direction to take? We may have an idea of where we would like to see Europe going but would we be better edging in a different direction at this point, in order to maintain markets or the relationship with the UK? Based on what Mr. Cox has just said, we could find ourselves at cross-purposes. How can we negotiate the best deal for Ireland in that scenario?

Mr. Cox also mentioned that whatever deal emerges will have to be ratified by the European Parliament. From his experience there, how much of an influence will that have on what will be put before the Parliament? Theresa May has stated no deal is better than a bad deal from the UK's point of view. She is probably trying to portray herself as a lady of steel who will terminate negotiations whenever she thinks they are going badly. What are the chances of getting to an end deal with the European Parliament taking that line and not passing it? Could it be from the European side that we might end up with no deal?

Mr. Cox spoke about redefining the European Union and revisiting the Lisbon treaty to make some possible alterations to it. Because of our Constitution, does he see any possibility of an Irish referendum coming up? Could we become the final stumbling block? It was mentioned here that we could end up in the situation of being duty bound because of our commitments. We could end up in referendum territory, which would draw out the process or even stall it. That would be no advantage to us. The longer we have uncertainty, the worse it is for us. Since 23 June last, the day of the UK referendum, we have suffered because of currency fluctuations and so on. People are talking about Brexit coming down the line but it has started here for many sectors. No matter what kind of deal it is, the sooner it comes the better. Then we will know the ground rules and will be able to move on. Could we end up in a referendum situation, in the opinion of Mr. Cox?

I thank Mr. Cox. His depth of experience as an MEP and as President of the European Parliament is very valuable to us. He has covered an enormous amount of ground in his opening statement. He covered almost the whole of Europe and made various references to Italy, Holland, France and so on.

I am the Vice Chairman of the finance committee, which has separately been dealing with Brexit matters, particularly in respect of customs and borders; and opportunities for and threats to the financial sector in terms of London's huge contribution to the overall capital markets of Europe. A lot of people do not really appreciate just how enormous London is as a percentage of the total EU financial markets. It is in excess of 80% of the capital markets activity in Europe. It is much bigger than Frankfurt, Paris, Dublin or anywhere else. Although there are some opportunities, the threats are much greater. What are Mr. Cox's thoughts on that matter?

The land Border between the Republic and the North of Ireland is unique. There seems to be almost no other example across Europe of this kind of situation. Either the territory is not there or deals are done. Norway, for example, is not in the EU but has free movement of people and is part of the Single Market. There is no desire for a hard border. Can Mr. Cox see a situation in which the EU is happy to have no border between an EU state and a non-EU state? It has acknowledged that it wants to work with Ireland. Both Ireland and the UK have said they do not want a hard Border. To be fair, Mr. Michel Barnier has acknowledged that. Eastern European member states, however, do have borders with third countries. They have rules, regulations, policing and so on. Would an open border with the North be tolerated in that context?

Mr. Cox mentioned that the UK makes up 12% of the EU's population and 16% of its GDP. While I am not sure what percentage of the budget they contribute, there will clearly be a huge hole in the budget once the UK is gone. We will have to either raise the lost revenue from other countries, or cut the budgets. The UK is a significant net contributor. The argument about £350 million a day or a week, whatever it was, going to the British National Health Service was part of the lies that were put out by UKIP and others during the Brexit campaign.

All the polls and barometers show that Ireland is pro-EU as a concept. In the context of the banking crisis and things like the Apple judgment and the common consolidated corporate tax base, CCCTB, Britain was an ally to Ireland on CCCTB but will not be part of the discussions in the longer term. During his election campaign, Mr. Emmanuel Macron was talking about CCCTB and the perception in France that Ireland is doing things differently from everybody else and benefitting. Although we argue that it is all very open and transparent, the French have a perception that we have manipulated tax rates in a way that deprives them and that our benefit is to their disadvantage. How likely is it, in Mr. Cox's view, that CCCTB will be pushed? In theory, everybody has a veto and anybody can stop it. Six reasoned opinions were issued by member states expressing concerns about it, but if we are the only outlier our position will not be strong. Any reference to CCCTB at the moment would be very damaging to our budget. They are talking about calculating the tax on three bases, one of which is where the sales are made. Clearly, with our population, the sales are not made here. We may be manufacturing the stuff and have the employees here but we do not have the sales. Most of our corporation tax is foreign direct investment, FDI, based. Some 41% of it comes from the ten largest payers. If that were to change, we would have a huge hole in our budget. My concern is how to hold the line on CCCTB against the pressures that may come. Will other countries be understanding and refrain from pushing the issue?

I ask Mr. Cox to respond to Senators Paul Daly and Gerry Horkan before we move on.

Mr. Pat Cox

Will Ireland get caught in the crossfire? That was the first theme. Ireland would not have chosen for Britain to leave. Britain has chosen to do so and we have to live with the consequences. One of the implications of the question is whether we would be better off getting out with the UK or going the course within the EU. Such a question arises in people's minds in this context. If we try to cure the severe economic flu that we will get from Brexit, particularly in the food and agriculture sectors as is well known, by leaving the EU, it will be at the price of catching terminal pneumonia. Terminal pneumonia is not a cure for a severe flu.

Among the trade relations between the Republic of Ireland and other states, our number one relationship is with the USA. A good deal of that is affiliate, in-company sales by US corporations back to the parent company in the United States. Much of it concerns transfer pricing and all the other elements that turn up in respect of who owes what money to whom in global corporate tax issues.

A second element is that the second most important trade partner for Ireland is the United Kingdom, which accounts for 17 or 18%. The EU 27, however, account for 41 or 42% of our trade. In pure trade terms, we would be more severely damaging ourselves to uproot ourselves from the EU part.

I was not suggesting that.

Mr. Pat Cox

I am not saying the Senator suggested it but these things come up. They arise from the question about whether we are caught in the crossfire. We are caught in a circumstance that we do not find desirable and from which we cannot escape, but we would be very unwise to cause that to propel us into a self-harming direction. There is a second element in this. I believe, unhappily, that the consequences of the Brexit will be highly negative for the British economy over time. That in itself will have a spillover effect in Ireland. It is, therefore, exactly not the route to follow. We do not want to hitch our wagon to something that we expect to go into more decline than potential growth.

There is a third element which is historic and in a sense paradoxical. We are going through all these centenary events we are having a decade of centenaries. Last year we had what was one of the key high points as we recalled 1916. It is paradoxical that 100 years later the rupture in this relationship comes not from Dublin but from London. In a curious way it is a challenge to our State to understand what its statehood is and what mature choice we want to make. We should not enfeeble our statehood by feeling our only option is to follow what Britain does in Britain's own interests. Looking at how the British debate has emerged and considering what Scotland wants from the Brexit period, namely, to maintain Single Market access, or considering the comparative indifference in the entire debate to Northern Ireland, it seems that to throw ourselves at such tender mercies would be a highly unwise strategic decision for our State.

All that said, the Senator asked the question as to what we are to do. We are part of the EU 27 and the first part of the negotiations is clear. The negotiating mandate will discuss citizens' rights, the exit bill for the British and the Irish question. The committee will have heard directly from Mr. Barnier on that position. The citizens' rights negotiating paper, to which I referred in my opening remarks, expressly includes a reference to Ireland to say we want all of the rights of EU citizens in the UK and UK citizens in the EU states to be resolved without prejudice to the arrangements that are made for Ireland. In other words, it recognises that our common travel area within that is a separate case.

When it comes to trade, we cannot be half in and half out of the customs union and the Single Market. We will be in the European Union and the United Kingdom will depart from the European Union. If that applies to the entire territory of the United Kingdom, our 499 kilometre border will become a land border within the Single Market. The exit of Britain from the customs union, which they say they want to negotiate their own trade deals, is something that will inevitably impose serious problems with cross-Border trade. Some suggestions have been made that Northern Ireland should be somehow accommodated as if in the Republic of Ireland. When we look at trade from Northern Ireland, it has a huge trade with the Republic but a much larger trade with the rest of the United Kingdom, so whether that is what Northern Ireland itself would choose to do is a question for political leaders in the Northern Ireland Executive. I hope that Executive will quickly re-form itself because Northern Ireland needs a voice at this table.

There are no simple solutions to the Northern Ireland part. The committee may have heard evidence from reading newspapers and from staff in the Revenue Commissioners who have pointed out how this might work. While it is true that there is no precise equivalent, the border between Norway and Sweden is not a precise parallel but offers some insight, as do the borders of many European states with Switzerland. Norway and Sweden have a very high level of exchange of data between the two customs services. They also have the right for customs officers to engage in hot pursuit up to 15 km into each other's territory. There are sensitivities on this island about issues of hot pursuit. It is not that I am recommending this but I am simply observing that one does not get easy parallel examples.

On the question of Ireland within the broader trade deal, there are two parts to this. The first part concerns Ireland, the common travel area, free movement and how somehow to avoid a hard Border. Mrs. May has not promised no Border but rather no return to the past hard border. We have to be careful that we do not get swept up in something that is not on the table. The issue of travel ought to be soluble but the issue of goods presents a problem around tariff codes, rules of origin, transaction costs and necessary inspections, even if they are random and occasional. Technology can help but it will not be the full solution.

As regards the question of a referendum, these issues on which the Senators have posed questions, or the negotiating stance of the EU, there are two elements to answer these questions. The EU negotiator, Mr. Barnier, cannot ignore EU law. If he does, it is the right of any member state or institution of the Union to contest this breach of the law before the European Court of Justice. The first part then concerns what the law allows. The second part concerns political judgment. The Senator asked about the European Parliament. It has passed a resolution and if one looks at it one can see what it is asking. It is very much in alignment with what was adapted by the Heads of State and Government late in April this year. It shows a high level of engagement across the institutions to speak with a single voice and have almost a single script. What, therefore, would the role of the European Parliament be? I would say, politically, it is to be a kind of guarantor in that the things that the EU wants to negotiate should be negotiated on the grounds that its assent is a requirement. Mr. Barnier will need to look over his shoulder to ensure the things he agrees with the United Kingdom are consonant with EU law and consistent with the general mandate of the Parliament because the Parliament's vote is sine qua non.

On the question of a referendum for Ireland, the more that future changes in whichever domain of the EU can happen under the aegis of the Lisbon treaty, the less likely is the question of a referendum. This is because that treaty is already the law. If issues are outside the terms of that treaty, without prejudging them they may or may not require a referendum in Ireland. If they are done strictly within the terms of the Lisbon treaty, and many could be done within those terms, a number of which need to be negotiated, and Ireland needs to have a negotiating position and be an active participant, then some of those changes might not require a referendum. Overall on the question of referenda, it depends on the complexity, ambition and scale of European change. If it is limited to building on the basis of the existing treaty, then no, and if it is outside of the terms of the existing treaties, given Ireland's customary practice, probably yes, as regards a referendum.

I have already touched a little on the question of the borders. The examples I mentioned of Norway, Sweden and Switzerland and so on have their own specificities. We will have to do something similar and have our own specificities on this island.

They allow freedom of movement of people. Norway is agreeable to a single market of people.

Mr. Pat Cox

They have a Nordic passport union but we have something equivalent with the common travel area.

Mr. Pat Cox

We have free movement which I think everybody wants to keep. I point out to the committee that the common travel area was mentioned in a protocol to the Amsterdam treaty. That was because Britain had opted out of the Schengen agreement and then we pragmatically opted out of it so as not to have to have a Schengen border on the island of Ireland. That opt-out was in a protocol to the Treaty of Amsterdam.

As a protocol attached to a treaty has the equivalent weight of being an article of the treaty, the common travel area has already been recognised in EU law by virtue of that protocol.

I have always felt, from day one, that we had much standing on that. The complexity arises in a different case. What happens when EU nationals use their right to come to Ireland from locations such as Bulgaria or Romania, for example, and we have a common travel area with the UK? How we cover the issues of work permits, residency and travel is not yet clear. The more it is open on an all-island basis North-South, perhaps the more rigorous will be the checking east-west. This is no grave problem necessarily for the Republic of Ireland but it might create issues for some people in the community in Northern Ireland who regard east-west passage as a birthright as it is a constitutional reality. Northern Ireland needs its voice to express itself in those matters.

I do not want to give the figure on the budget as although I have it, I do not recall it. The British net contribution is substantial as Britain is one of the four largest member states of the European Union. It will leave a hole in the budget. The exit payment is not designed as some kind of punishment. Britain has already entered into commitments under existing rules. If one reads the Commission's paper on financial arrangements, no figure is mentioned. There are many figures and much speculation in the media and good academics have done many sums but the Commission does not list a number in its document. It states that one matter that must be discussed is the "methodology" to work through the calculation of this. The first debate will be about what is included or excluded, and to what degree elements are included. What is clear is that in the medium term, the absence of Britain would reduce the overall spend in the European Union budget. There is a second question that must be asked about the European Union budget. If we want more secure borders and to have a proper humanitarian system to help save the lives of migrants in the Mediterranean, and if we want to have some kind of stabilisation instrument - a fund to cope with economic shock, which we do not have and which is a serious missing ingredient in economic and monetary union - they will cost money. They will cost more than the less than 1% of gross domestic product, GDP, in today's EU budget. Whether EU member states are prepared to have that debate, I do not know, as every time we come to budgets, they are strong on ideas but very weak in ponying up resources.

We are at a crossroads. Do we value this Union that we have built and its capacity to act in a meaningful way when collective action is more effective than separate action? I have given some examples. If we do, we must invest in it. It would not be a runaway investment but a recognition that something that matters has a cost. As I stated, there is a counterpart in that the cost of failure is much more demanding than trying to build a cost of success.

For the next medium-term financial framework debate, the documents will be published early in 2019 if not sooner, and that will need to be adopted by 2020 because it will come into play in 2021. In principle, Britain will not be part of that, although if it is to go through a transition period of several years where it retains access to the Single Market and the Common Agricultural Policy, for example, it may well be that there would be transition costs to be negotiated as part of the settlement. That is speculation on my part as we do not know the nature or substance of that transition.

Did Mr. Cox cover the common consolidated corporate tax base, CCCTB?

Mr. Pat Cox

It has nothing to do with Brexit and it has been around for a long time.

The UK would have been an ally in opposing it to a certain extent.

Mr. Pat Cox

As there are many states in the European Union that have sensitivities about this, Ireland is not alone. I do not know if it will happen as changes to the tax code require unanimity. This is the state of law. It may well be that some people would prefer that not to be the law but that is what it is. If we choose to hold out on that, we can do it. Of course, when one holds out on something, somebody else holds out on something else. That is the nature of political life down the line. We would not be the only ones and Ireland would not be exposed as the only hold-out on the matter. I do not know if it will happen. With the Apple case cited by the Senator, I know the Government is joining the Apple appeal and the view of the Revenue Commissioners is that what happened with Apple is consistent with the state of law. At least on the face of it, I am prepared to accept, if it is what our authorities argue, that this is so. What is consistent with the state of law will be decided in the end by the court.

Stepping out from the law to a question of wider ethics, we could ask if it makes sense that very large global corporations, through the law, can have tax rates at 0.1% or whatever it is. This is one of the problems that many ordinary citizens have with the presumption that the winners of globalisation pocket everything and the losers carry the cost. Frankly, we must be part of that debate as it matters to our society because we believe in globalisation and its positive utility to develop the mechanisms that understand where it hurts, we have a social and political responsibility to address such hurt. These were the voices that emerged in Brexit, to a degree, and in the election of Mr. Donald Trump, and we need to find some realistic answers to them. We need openness and foreign direct investment but we must also speak with our friends about some sense of ethics and fairness.

I also welcome Mr. Cox to the Chamber. I have a couple of items on the back of some of the questions asked. We had Dr. Anthony Coughlan here last week from Trinity College, and I am sure Mr. Cox is familiar with him. Mr Cox pointed out that the majority of our trade is not within the EU if the UK is taken from it, with 41% in the European Union. Dr. Coughlan made many arguments and Mr. Cox is probably familiar with them. There is the idea that the benefit to us of being part of Europe is more in the past and now that we are net contributors, the suggestion is we are really just paying to be part of a market, despite us doing trade with many other countries. The argument was to do a deal with the UK and so on. As we are net contributors, is it a fair statement that staying part of the market, with the freedoms flowing from being part of the European Union, is worth paying into the European Union fund?

The corporation tax issue has been referred to and Mr. Cox has answered it. We are discussing the future of the European Union in the context of Brexit and the issues that have been thrown up. Mr. Cox made a point earlier that populism and anti-European sentiment seem to have been halted, at least when we consider the result of the French and Dutch elections. We take some comfort from that but issues remain, no more than those which gave rise to the likes of Mr. Trump assuming power in the United States. Such matters concern citizens and it is a question of where they put their faith. A dominant issue is immigration into the European Union and of people within it. We only have to look at the recent outrageous tragedies in Manchester, London, Brussels and Paris.

While upholding our democratic values - our rights of movement and so on - how do we ensure that those same values are protected because these attacks are challenges to our freedoms? We must get down to the nitty-gritty and acknowledge that the threat does not just come from outside our member states but it also comes from within. How do we do this effectively? We hear Theresa May talking about human rights not standing in her way. Are we talking about curtailing civil liberties? Of course, many of our civil liberties are the antithesis of what the likes of ISIS proclaim. They proclaim there should be no such freedoms. We are really at the opposite end to what they proclaim. We also know that the conversation around the separation of religion and state is really a western conversation. Therefore, when we look outside to see the patterns of behaviour that influence people who become radicalised to act here, we know they do not see things the way we see them. We take these things for granted. We were brought up to recognise the authority of the State and the freedom of people to exercise their religious views.

To what extent should we start to call out situations or viewpoints that do not accord with our democratic values? To what extent is radical speech protected by the freedom of speech, which is also something we value? Where should the line be drawn? How would Mr. Cox say we can protect ourselves and the rest of the European in a practical way and ensure that this issue does not feed into anti-immigrant sentiment, because immigrants are not a problem? Immigrants have built up Europe, no more than our own emigrants built up the United States. How do we show people that we are actually acting to deal with the legitimate concerns because there is clearly a problem?

I remember reading a survey carried out on British Muslims in The Sunday Times in the last year. In terms of general dispositions and viewpoints of the rest of the nation, the data showed British Muslims had quite different viewpoints. The article presented the idea that there is a nation within a nation. We facilitate people self-determining but at what point should we assert that everybody - whatever his or her religion - is a stakeholder? Should we state nobody should just passively benefit from the freedoms of the European Union, Europe and western democracy but everybody must be called to the table to actually fight against anything-----

Are we straying from Brexit now into other issues?

I am talking about the future of the European Union. This is an issue that is obviously current and which may challenge people's views and the passion with which people stick with the European Union. European citizens see themselves as European citizens and this is very much alive in Britain. That is really the issue.

I have one other point. I acknowledge the good relations with the Islamic community here in Ireland. In my own neck of the woods there are very good relations. We have a big Muslim community in County Mayo and there seems to be a very good formula there but, across Europe, to what extent are Muslim leaders being asked to engage and to challenge dissidents, as they describe them-----

With all due respect to the Senator, the Muslim community and its needs are outside the conversation we are having here in respect of Brexit.

I disagree because one of the single greatest issues that led to Brexit, as some commentators would say, was the issue of immigration and security. I am interested in that because Mr. Cox, who has a breadth of experience, is here and I would like to hear some authority on the issue. Everybody has a view on it but Mr. Cox has a lot of experience in this area.

I thank Mr. Cox for his fantastic presentation. He is a wealth of knowledge. We have been sitting here for the last few weeks. Many groups have come. Different organisations, businesses and the agriculture industry have come in and their biggest fear has been the hard border and how shocking it would be. I also fear a hard border. I hear what Mr. Cox is saying about Theresa May and how she has committed to it but she also committed to not calling a snap election and then she did. How can we trust Westminster? That is the big thing. How can we trust it, particularly with what is going on now in England after the two recent horrendous atrocities? I imagine people coming here and then going up North will be an issue. The hard Border is a concern. In Mr. Cox's experience, does he believe Westminster will prioritise or have any interest in the North? I would also be concerned about that.

It is great that the European Union is taking an interest. I have heard reports from different people who have been in Europe that the first question the Parliament asks is about how we are getting on. There is a huge compassion and concern, particularly for Ireland. I hope that, with all of that compassion and empathy, the European Union will make Ireland a priority in this Brexit situation. Mr. Cox mentioned Scotland and its seeking a special status. The North is probably in a better position to achieve special status within the EU. What is Mr. Cox's feeling on that? In his experience, what does he think about the North getting special status within the EU?

We recently heard the Minister, Deputy Simon Coveney, speak about a united Ireland. We have heard the SDLP speaking about a united Ireland. Bearing in mind that we must take account of the unionist community, what is Mr. Cox's view? The reality is that more people in the North - over 50% - voted to stay in the EU. Bearing all of that in mind, does Mr. Cox have thoughts on the issue?

I will pose one or two questions to Mr. Cox, if I may. This committee should be focused on solutions rather than the problems. The problems are well rehearsed. Michel Barnier and various other senior European officials have stated, as have the British, that their intention is to have freedom of movement on this island. What is Mr. Cox's view of a federalist-type solution for the island of Ireland, where Ireland would be treated as a federal economy? This would allow for the type of North-South movement about which we have been speaking. Mr. Cox mentioned the "half-in, half-out" scenario. Is there a solution in being half in both camps, that is to say, in retaining our links with the British for trading purposes and with the Europeans for the open market?

With regard to investment, we will have road hauliers and people involved in transportation here later on today. One of the problems that may arise is that transport across the UK may become extraordinarily expensive. What is Mr. Cox's view with respect to investment in what I would call the European superhighway, that is, the development of our ports in Cork and Waterford? I envisage the possibility of ten or 15 ferries a day travelling between Cork and Roscoff or Wexford and Roscoff, in order to bypass the tariff issue.

I will pose a question on the issue of European solidarity and the pathway forward - the White Paper to which Mr. Cox adverted earlier.

Does he agree that we must wait for the final outcome of the Italian election and possibly even the Irish election before we consider what type of European Union of the future we will have? Is it all in for solidarity or is it the watered-down version? I am interested in Mr. Cox's views.

I welcome my fellow Limerick person to the Chamber. I am not sure if he covered it in his presentation but I have a question on education. Foreign students in Ireland pay higher fees. When Irish students go to the UK, they pay the same fees as UK students. I am very concerned about whether Irish students travelling to the UK to college will be treated like foreign students and faced with high fees. There is a quite a bit of movement between Ireland and the UK for education.

Mr. Pat Cox

Reference was made to other witnesses talking about trade flows and so on. Trade with the USA is particular because of the volume of US foreign direct investment and the level of in-company trade that takes place. It is not to say that is all of it but it is a very large part of it. That is a structural issue in the Irish economy. In or out of the EU and with or without Britain, that structural issue is there. There is no doubt that the larger part of the rest of the trade gravitates to the EU 27. A point which should not be ignored is that the EU has the exclusive competence under EU law to negotiate free trade area agreements between the EU and other states. Of the order of 90% of Irish exports are covered by EU free trade area agreements. If I am being asked whether I think a small state has the same weight in that global environment to negotiate trade as a large bloc like the Single Market, my answer is "No". We derive a considerable advantage in our non-EU trading relationships from EU free trade area agreements. Indeed, this is one of the complexities for Britain. Britain will need not only to negotiate new trade arrangements with the EU, it will need to renegotiate 55 free trade area agreements under which it enjoys trading privileges with other states because of the EU. That accounts for 85% of British trade.

I refer to net contributions. Just as earlier we were a net beneficiary, these are a function, happily, of our relative economic success. In spite of the many issues we have at home, we are, relatively speaking, one of the wealthier EU economies. Paying the net contribution is a function of the success we enjoy. When we joined the EEC, we were one of its poorest regions. Consequently, we were entitled to draw down substantial funds to assist our development. Not only do we have the benefit of trade for the money and access to a market, there is a great deal more we get which ought not to be set to one side by those who choose to ignore these things. For example, I refer to the last question. We get for all of our students the same rights as any student in any member state. If a state does not charge its own students, it cannot charge an Irish student because we are European and equivalent to them. When we get our qualifications, they are mutually recognised professionally as qualifications across the EU. When one is issued with a passport or driver's licence, it is recognised everywhere. One does not need to get a German driver's licence to be in Germany because the Irish one will work. We have ERASMUS exchange programmes, CAP funding, Leader funding and trans-European network funding in respect of ports, which are already providing things here. We have research and development grants for Science Foundation Ireland, our universities and leading innovators and researchers. While we have access to the Single Market, we have a great deal more besides and we should not ignore that. Beyond that are the intangible benefits of living on a continent that only knew war but which for the prolonged period, by historical European standards, of seven decades has lived in peaceful co-existence. That is an important stability condition from which much of the rest follows.

Senator Michelle Mulherin raised a whole series of issues about immigration and terrorism. As I am in this public forum, I take the opportunity to express sympathy and solidarity with all the victims of terrorism, especially of the recent and horrific events in the United Kingdom in Manchester and London. On immigration and the flow of refugees, we have duties and responsibilities. Our duties arise under international law and the Geneva Convention and we should not ignore those. However, we have responsibilities also to our citizens not to have something that washes over us to such an extent that we cannot cope. The consequences of the war in Syria, the shocking volumes of people who have had to flee, the shocking conditions in which they have found themselves as they have fled and the shocking exploitation they have suffered need a humanitarian response. However, I make the point that no single state can solve this on its own. If there was ever an issue the EU ought to address in future, it is to get a modern asylum policy and border management policy and to co-operate on them. Otherwise, as we have seen, unfortunate people who are fleeing will be shoved from pillar to post as they try to find some space.

This is an area in which the EU could and should be more effective and where we should play our role. We are already very proud of the fact that our Naval Service has done so much to rescue people. We do that jointly with Italy. However, there is a wider European effort in which we should feel free to join. Ideally, we should be part of that effort. There is a great deal of work to be done there. My broad answer to the immigration and asylum seeker point is that we need to follow the law while also managing how we deal with this. Our system has broken down and we will not answer it by doing what Hungary has done with everyone building fences around their countries. The only way to answer this is to find mutual solutions. Our concern should be reflected in pushing the EU and joining the debate to develop a modern immigration and asylum policy and a border security policy with capacity. That will cost money. That is why I am saying we need instruments that are focused on solutions and not big waffling discussions on some global concept of Europe. We need real delivery instruments with some real delivery capacity.

On the question of terrorism, its source and radicalisation generally, I risk digressing to make the point that it is unhappily the case that many of the terrorist incidents we have seen in continental Europe and the UK in the course of the past decade have been carried out by radicalised persons who were born, bred and educated in their host societies. We need to distinguish between immigration and asylum, which could include some bad guys but is mostly innocent people trying to escape slaughter and war, from this real issue. That real issue comes again to something where there is at least partly a European contribution to make. The United Kingdom will be leaving. It has a very good intelligence gathering system. We share intelligence flows through our Garda and security forces as we saw since the London incident in the last two days with the surprising but not necessarily unexpected link back to Ireland. We must do more of that. The EU needs to develop a greater capacity for that kind of sharing and policing because citizens are entitled to security. I return to the point that because this is a universal issue, trying to find an Irish solution, British solution or German solution is doomed to failure. The problem does not stop at any one border.

In considering that issue we should seek from the European Union a focus on TEN-T and have a debate about reprioritising the corridor to connect an outlying, peripheral island to the Continent because the middle piece, the landbridge across the United Kingdom, will become, as I stated, like two missing front teeth.

I thank the special committee for the invitation to appear before it. I also thank Senators for their interest and questions. It has been a great pleasure and privilege to address the committee.

The European Union can be instrumental in the sharing of that information. In all of these areas I say, please, voice our concerns. We must ask ourselves if we, in Ireland, acting alone, can find a solution that will work better than sharing a solution across a wider territory. I strongly believe it can be done better in finding the right instruments at a European level that will also apply to us and assist us in dealing with the challenges.
I wish to respond in general terms to the question of whether we should pay money to access a market. It is not just about that; it is also about valuing freedom and the values that hold us together, even though they are stressed and sometimes strained, but that does not matter. Ireland is remote from somewhere like Ukraine where I have been privileged to do a lot of pro bono work on behalf of the European Parliament on the Ukrainian reform programme. I highlight the fact that the Clerk of the Dáil, Mr. Peter Finnegan, and his staff have received staff from the Parliament in Kiev. They have made an extremely active contribution behind the scenes out of the headlines, for which they deserve credit. As an Irish person, I am really proud of the work that has been done.
We must realise there are aggressors on the borders of Europe. I refer, in particular, to the annexation of Crimea. I also refer to the war in Donbass, in which as many as 500 people die each year, despite the so-called ceasefire. Some of our neighbours are really scared and one sleeps less easily in the Baltic states than in Ireland. If we value freedom, Ireland must contribute to the debate.
I have listed the questions posed by Senator Frances Black. We must do everything we can to minimise the prospect of a hard border. There is a high chance, subject to sharing a lot of information on persons who travel to Ireland, which I do not think is an issue, that we will be able to resolve the issue of the free movement of people. The issue of the free movement of goods is more complicated. Ireland's membership of the customs union suits its economic interests because it helps to provide lots of supply chains. There will, however, be consequences if the Republic remains in the customs union without Northern Ireland. We need to work on minimising them as best we can. Unfortunately, when the United Kingdom chose to leave the European Union, there was no vote on the degree to which it should happen. Unhappily, it opted for a hard Brexit. The European Union cannot talk someone into a soft divorce if the other divorcee insists on controlling its borders, getting rid of the European Court of Justice, leaving the customs union and breaking the links with the Single Market. That is a hard Brexit. The British Prime Minister, Theresa May, has argued against what she has called the binary logic of a hard or a soft Brexit. In her party's manifesto, the speech in Lancaster House and the UK Government's White Paper she has opted for something every other observer regards as a hard Brexit that will, unfortunately, have hard consequences.
There has been much political comment in the Republic of Ireland and some debate in Northern Ireland on seeking special status for Northern Ireland. I am not sure what that term means. Does it mean that, to all intents and purposes, Northern Ireland would be involved with the Republic of Ireland in an all-island engagement with the European Union? That clearly would amount to very special status because constitutionally Northern Ireland is part of a state that is about to exit the European Union.
Earlier I asked the following question: why does Northern Ireland need an executive and a voice? I wonder if that is what it wants. When we reach the political question, a united Ireland can only happen through winning hearts and minds and consensus. History has taught us that militarism, bombs, guns and bullets are not the answer and divide rather than unite. If we want to have a consensual conversation about an evolution, with whatever structure and timescale is deemed appropriate, towards a unified island, we must tread carefully and with respect to ensure we will reach people's hearts and minds. I would not like to go over the heads of the representatives of Northern Ireland and say special status, in the way I have defined it - I am not sure what others mean by it - is something they would want to be covered in circumstances where one third of their trade is with the South but the two thirds of their trade with the rest of the United Kingdom would be damaged. In pure trade terms, people in Northern Ireland have questions about what their preference should be.
The point has been well made that 56% or the majority of people in Northern Ireland voted to stay in the European Union. Whether the same percentage would vote to exit the United Kingdom in a border poll is a separate question, one on which I cannot make a judgment. In opinion polls a majority in Northern Ireland have indicated that they would not support breaking the union with the United Kingdom. One needs a majority in favour of breaking the union in order to have Irish unity. The question of a united Ireland is connected because one needs to win hearts and minds and reach a consensus. I am optimistic that it is a very decent perspective that it should not be force fed. The pace should not forced because there must be consensus. We do not want to see a return to the killing and maiming we witnessed for three decades. That must be left behind and nothing should let the genie out of the bottle by creating difficult sentiments.
On the half-in, half-out question or whether we can do one deal with the United Kingdom and a different one with the European Union, the answer in law is no. The deal with the United Kingdom as a third country will be done under Article 218 of the treaty, under which the European Union has exclusive competence to make trade deals. We would only be able to do a bilateral trade deal with the United Kingdom if we were to exit the EU 27. We cannot choose to be tadhg an dá thaobh. We are on one or other side of the equation; we cannot have a 50:50 or each way bet. We can, however, keep a watchful eye, with others, to ensure the deal done with the United Kingdom will be consonant with Irish interests to the greatest possible extent and have a duty to do so. The effects of the adjustment or transition may be so severe that we may need to call on our European neighbours to show solidarity with us by an easing of the burden in financial terms. We need to be conscious of this aspect, but it is not our first bargaining point. It is important to note that 3.4% of the GDP of the EU 27 is tied up in trade with Britain, whereas the figure for the United Kingdom is as much as 12.8%. Therefore, the level of trade is of much more importance to the United Kingdom. As much as 17% of Ireland's GDP is tied up in trade with Britain. Ireland is, therefore, an asymmetric outlier and may thus need to make a special plea.
My last point is about transport. I co-ordinate activity on the major trans-European transport corridor from Scandinavia to the Mediterranean, while a colleague of mine, Mr. Péter Balázs, co-ordinates activity on the transport corridor that includes Ireland and the United Kingdom. In transport planning, if the United Kingdom leaves the European Union, it will be like missing two front teeth. Senator Gerard P. Craughwell is correct that we must consider strategic infrastructural investments to ensure energy and transport connections to facilitate the new reality while maintaining access to the United Kingdom.

I thank Mr. Cox for engaging with the special committee. If, at any stage, he wishes to contribute more, he may do so directly through the secretariat. I thank him for his answers and time.

Sitting suspended at 11.20 a.m. and resumed at 11.25 a.m.