Senator Joe O'Reilly made a number of very good points. Perhaps I might divide the two issues, one being the free movement of people, about which Senator Michelle Mulherin also asked. I agree with what Senator Michael McDowell said. I was worried about it initially, about what would happen if people got off an aeroplane at Dublin Airport from Warsaw, got on a bus and drove north. They would then be in the United Kingdom. What would it do about it? I was very worried about this last summer and autumn.
I have talked to many people in the House of Commons and the House of Lords and give them credit for the efforts they are making. I have also talked to many people in the North and heard about the assurances they have been given. I have spent much of my life negotiating with the British system in one form or another and have many good friends in it. There is always the historical aspect that we should remember in thinking about the British. It is not what is said but what is written. I am now going on what they have said rather than what has been written because not much has been written about it. What Senator Michael McDowell has said about the British not showing any great worry or concern about the free movement of people is correct, including about EU citizens coming through here. Until I hear otherwise, we can take it that there will not be a problem with the free movement of people. Unless that position changes in the negotiations, there will not be a problem in that regard.
I thought there was really good news in the autumn, but that position changed on 17 January. While it was not about people, it was the first time Mrs. Theresa May had made a major speech on the issue. It was a very good speech in which she dealt with various matters, including the customs union. Up until then, including in the election and at the Tory Party conference, she had not indicated anything about the customs union. As I understand it from people in the Foreign and Commonwealth Office, when they sat down to analyse the matter it was realised one could not be part of the customs union unless one signed up to the four pillars. That meant Britain would be out not only of the Single Market but also the customs union.
For our purposes, at this stage we can draw a distinction and say the Border will not present a problem in the free movement of people. It will, however, be a big problem in the movement of goods and services. Rather than giving any profound quote, it is generally considered in the world of trade that Mr. Pascal Lamy is a world expert. He was head of the WTO and the renowned commissioner who did most of the trade deals that have led the world to where it is today. He has said categorically and without ambiguity that the situation is as follows. I have spoken to him and read his quote. He has not given many interviews, but he has stated that if the land border between the United Kingdom and the European Union is the land border between the North and the South of Ireland, there will have to be customs. It is not Bertie Ahern who is saying it but the person considered to be a world expert. There is no point in lying here to the contrary and quoting anyone else because he is the renowned person. He is stating that will be the case. I suggest - Senator Michael McDowell picked up on the point - that is why we need to move the goalposts and it would be fair to do so in negotiations. One should never start in serious negotiations from where one thinks one will finish. I agree, therefore, with the eminent gentleman, the last head of the Bank of England, who said the Border should not be between the North and the South but the sea border of Northern Ireland. I do not know how we can make that work, but let us start from there, rather than from the other position. The man in question is highly respected in UK circles and the world of finance but perhaps not in international trade negotiations. However, that is what he said we should try to do.
If there is a customs border, we should consider all of the things mentioned by Senator Joe O'Reilly. Those of us who do not remember the 1956 to 1962 campaign on the Border still know what happened during that period and it was all about customs points and checks. That is only one of the reasons. There are many other reasons.
On jobs, Senator Joe O'Reilly is correct in his analysis of the 25% figure I mentioned, which is taken from British documents, not mine. That is the challenge before them. On the Commonwealth, many current UK statements refer to it doing the new business in the Commonwealth, but the EU already has deals with most of the Commonwealth countries. I am sorry for the British but they made a democratic decision. Taking into account the 53 UK deals, most of the world is already covered. The new trade deal with India is well advanced. What it is doing is taking all of that, pushing it off the table and starting again. It is losing 100 and starting with zero. As I said, there is much talk about new trade deals in new places but deals already exist in most of those places. The 53 international agreements that the EU has through the WTO system have all been signed up to, including by Britain. What it is doing is losing all of that and starting again, including with countries in respect of which EU trade places already exist. That is stating the obvious. The British will not thank people like me for reminding them of that but that is the harsh reality.
There are two points I would like to make about the trade deals. Trade nowadays is not all about physical goods. Services exports have increased from 25% to 44% in the last 20 years. Trade policy in trade agreements increasingly focuses not on tariffs or customs controls but on recognition of product standards, human qualifications, protection of intellectual property rights, rules governing investment, copyright law and data protection. These are the infrastructures of modern trading systems. Trade deals are nothing like they were when I was Minister for Labour or Minister for Finance. In terms of where they are at now they are very convoluted.
On the tariffs, the current tariff percentage across the EU is approximately 5.7%. If the UK leaves the customs union, the result will be additional tariffs. The average EU tariff is 5.3%. In sectors like the car industry and agriculture the tariff is far higher. The British believe they have a good chance of achieving free trade agreements to reduce most tariffs to zero or near zero. That is its objective, but it would have to be negotiated in a new agreement. Under WTO rules, the UK cannot offer a zero tariff to the European Union unless it offers it to everybody else. I do not know where the tariff issue will end up. A lot of the comment of the British spokespersons is that the UK is free and therefore it can do what it likes but it cannot. To pull out of the Single Market it will have to go the WTO route and it can only do that if everybody agrees. Let us take it that people are not going to be small-minded, and I do not think they should, it will have to offer the same tariff to everybody. It is a very complex issue. In the motor, agricultural machinery and other machinery industries the tariffs range from 15% to 22.5%.
As I said, this is a difficult area. I agree with Senator O'Reilly that there is a real danger in this regard in terms of the agricultural area. The greatest negative of Brexit for Ireland will be its impact on the food sector here. We all know of the currency difficulties being experienced in the food sector. What is happening in the mushroom industry is horrendous. Export of our foodstuff against EU currency, which is not new, will be affected by tariffs. The UK is already saying that the plus for it will be its ability to import foodstuff from Australia and New Zealand, which will again impact on our food sector. I was glad to see the farmers organisations in Northern Ireland are engaging with the IFA. Why they did not commence doing so last July is beyond me. There are huge similarities in the argument for us in this area. I agree also that it is hugely important that our best people in agriculture work closely across the broad areas of agriculture, including in the cattle, beef and lamb markets but also the horticultural and fisheries markets. There is huge synergy on the island of Ireland and there is a great opportunity for us to work together in the period ahead.
Senator Mulherin is correct that the British-Unionist position is increasingly that the solution for Ireland is for it to leave as well. Anybody who thinks we should leave should take a walk around St. Stephen's Green for an hour and then they might feel better or those thoughts might go away. I participated in a few student debates recently. Some 17% of our exports are to the United Kingdom. The remainder go to the US or the rest of Europe. Most of our big employers are in the indigenous industry and the international market, which includes the European market. For us to dream of anything else is nonsense. We will leave it to the eurosceptics in the Netherlands and Italy to talk about this. Any sane or right-thinking Irish person should become more European arising out of all of this. We will have our battles and our arguments but there is now a stronger case than ever for Europe. I refer members to the 1970s when Commissioner Mansholt was arguing for the Common Agricultural Policy and the regional policy which were important for us. In this regard, we should become positive persuaders. There is an opportunity arising out of Brexit for us to be helping our friends in Northern Ireland. We do not have to do anything other than work harder on the agreements that we made in 1998 and the St. Andrew's Agreement, in which Senator McDowell and I were involved in October 2006. We need to use the mechanisms of the Good Friday Agreement. All of our State agencies should be helping and working on a cross-Border basis. We should be doing this aggressively but from a source of friendship. That is very important in terms of what we do.
On Senator Mulherin's question regarding free movement, I think I have already addressed that issue. They seem to be saying that there will not be any problem. They appear to agree on that but we will have to come back to the issue. Lord Howard is a great eurosceptic. I know him well. He was a labour Minister a long time ago. He never really wanted to be in Europe. I note from the British media in the last few days that if he intends to fight to the death on Gibraltar he will, probably, be fighting on his own.
It will not take him too long to cave in on that basis because there does not seem to be anyone else with him, including the Tory sceptics, so I think he will change his position fairly quickly.
Emigration and immigration is an enormous issue. Angela Merkel was good and brave but the numbers were just overwhelming. The interesting thing about it nowadays is that the European Council on the one hand criticises Turkey for the way it is breaching every human rights rule in the book in trying to deal with its issues arising from the coup last year but, on the other hand, it has made a deal with Turkey to try to stop the immigrants coming through Greece and is paying for it. However, I can understand this. Germany and Sweden felt let down in 2015. Germany was taking in a million refugees and, in fairness to Angela Merkel, the measures she introduced applied specifically to refugees from Syria, but this seemed to get lost in the language of the time. This will remain a complex issue and is, in fairness, the main reason the people in the UK voted to leave the EU. I think they believed they would solve immigration in voting to leave and that all immigration was bad. They have now realised they will need a large number of immigrants anyway, so it will be an issue for the foreseeable future. Even though globalisation is no longer a popular word and even though people are going back to nationalistic tendencies, the more the world connects and the more people around the world see the benefits of Europe, the more they will try to get into Europe. That is a fact of life. There are no easy solutions to the issue. I will come back to where I think it might go in the future when I address Senator McDowell's questions.
I agree with what Senator McDowell said about the issue of travel. The issue of trade is the basket into which we must put all our eggs and fight on. I agree with Senator McDowell that there was no question of a veto, but this goes back to what I said in answer to Senator Mark Daly earlier. It is a matter of using the Good Friday Agreement to make the arguments we can make outside of the negotiations, which we are not doing strongly enough. As I see the negotiations, 29 April is the day the European Council will meet. There will then be a month during which it will make its assessment. The final European Council meeting of the summer will be in June. Nothing will really happen until September. This is because the European Council is trying to play to the other side of the German elections, and I understand that. There will, therefore, not be too much negotiation at first but then it will go helter-skelter. The five months at the end lead to a negotiating period of about 13 or 14 months, and it will be impossible to deal with trade in that time. This is where the transition will come in, but the hard part of the negotiations will be done before then. The opportunity for us to get the EU negotiators on our side and to have a very clear line as to what our position is, not just what we want to see happen on the Border but also where it is, is really between now and the end of September. Once the negotiation starts, the 27 countries will all be in there fighting. While we are high in the pecking order at the moment and people understand the problems of the Border, this will dissipate as one gets into negotiations because the French will be on about their wine and another country will be on about its apples and it will get hugely complex. It always does, but we have a period to try to build on that.
There was first talk of a two-speed Europe in the early 1970s, and this comes back to questions asked by Senators McDowell and Mulherin. The first time I started dealing with the concept was at the end of the 1980s, when the original core group wanted to move ahead. Germany had made the decision based on the euro, and it was a very emotive decision for the Germans to move away from Bundesbank control. They wanted a two-speed Europe of countries with very strong criteria to fulfil. The Bundesbank was telling countries they could only be in there if they had certain deficit rates or a certain financial position. That got lost in political discussions and everyone wanted to come in, and that is what happened in the euro crisis. Italy should never have joined in the first bloc. Greece definitely and perhaps a few more should not have been in. We had to work hard to get below that 60%, but the original idea was just to have a core group. There is now talk again of a two-speed Europe. I am certainly against a two-speed Europe but I am not against change and I think we in this country should be aware of what will happen. It is the old story: if I were going there, I would not start from here. However, one must work out where one would start from.
The reality is that after the UK leaves, there will be 27 members of the European Union. Twenty-six of them will be in the banking union, 21 will be members of NATO, 21 will be in the Schengen area and 16 or 17 will be in the eurozone, so not everyone is in the one pot anyway. We should stay with the euro group because we should work on our deficit and keep trying to get ourselves back to where we were. There is the euro group and then the other European countries but there is also what was the new neighbourhood initiative, which has been lost for the past ten years. Europe cannot continue to be so ambiguous about what is happening in Ukraine, Bosnia and Herzegovina and Kosovo. Europe will have to circle the wagons in some areas of policy. I think it will be the euro group, the rest of Europe and then the other countries in Europe that are not in the European Union. There will have to be some new configurations of that. Whether or not Angela Merkel's party wins the upcoming election - I would like to see her continue on - her opponent is even more federalist and more integrationist, which would not suit us, quite frankly. Either way, there will be this configuration by the autumn so we need to start our fresh thinking as to where we fit in that regard. Regarding the idea of Europe staying as it is, there are too many cracks in the system and there is still the currency and the euro issues, the status of the Schengen Agreement, the status of the NATO countries, President Trump who does not seem that interested in Europe one way or the other, Putin who wants to put holes in it everywhere he can and Erdoan playing other games. I think there will have to be a reconfiguration, but not as a two-speed Europe. It behoves us to be watchful because the situation will not remain the same as it is today. I have answered the questions as best I can.