On behalf of the board and members of the British Irish Chamber of Commerce, I thank the committee for inviting my colleagues and I to make a presentation. The British Irish Chamber of Commerce is the only organisation focused exclusively on the trade between Ireland and the UK, championing it, protecting it from being undermined and increasing its current value of more than €60 billion per annum and the 400,000 jobs which that sustains directly and many more indirectly. We respect the will of the UK people to leave the EU but a bad outcome for the UK in its future trade relationship with the EU would also be a bad outcome for Ireland and because of the extent of our connectedness economically, culturally and otherwise, we have much with which to concern ourselves.
Brexit has rightly been described by the Minister for Foreign Affairs and Trade as the most important challenge faced by the island of Ireland in modern times. While Brexit is about more than the economy, I appreciate that the committee's focus today is on economic challenges and on seeking potential solutions and, therefore, I will confine my remarks to that context. The UK is Ireland's largest two-way trading partner not just for our exports, but even more so for our imports. It is not often highlighted, because no other organisation speaks to the business of importers, that while the UK accounts for about 16% of our exports - this figure increases to 50% for indigenous firms - we also depend on the UK as the source of approximately 33% of our imports, and as a relatively small island economy without the UK's heavy industrial manufacturing tradition, we need those imports to keep our own economy running efficiently and competitively and to sustain thousands of jobs in retailing, packaging, medical devices, clothing, food processing and many more sectors.
Turning to such effects of Brexit as we can predict, the Economic and Social Research Institute has calibrated that, depending on just how hard a Brexit we end up with, UK-Ireland trade could decline by as much as 20% as a consequence of Brexit, with the loss of as many as 40,000 jobs and a decline in Irish GDP of as much as 3.5% over subsequent years. Based on current GDP figures, that amounts to a €9 billion loss and rising to the economy. Nobody in Ireland would be unaffected. Given the nature our open economy, every business and employer in Ireland effectively either trades with the UK or trades with somebody else who does. If someone is a barber in Barberstown, he or she does not export to the UK but he or she probably cuts the hair of somebody from Intel, which does. The UK and Ireland have always traded together and we always will but because of tariff and non-tariff costs imposed by Brexit, the problem is that trade will be at lower value and will, therefore, support fewer jobs. The most exposed sectors are food and agribusiness, where WTO tariffs would make our exports significantly more expensive to the UK consumer, and tourism, where a weaker sterling and barriers to free movement of people could make Ireland a less attractive destination for our largest tourism market, which is the UK. In the same way, there would be a loss of opportunity in education and research where British, Northern Irish and Irish students and researchers currently choose freely between our respective colleges.
A hard Brexit with no deal between the UK and the EU for free movement of people, goods, services and capital would present these and many more examples of barriers to the conduct of business, trade, investment and employment in the ways we have come to take for granted since we joined the EU together with the UK more than 40 years ago. While nobody has left anybody yet, the effects of the risk that such a hard Brexit could result in are being seen, with Irish businesses looking to establish operations within the UK to protect their access to the more than 60 million consumers in the UK while retaining their Irish business to serve the EU. I refer to the example of a call centre in Dundalk servicing the customers of a UK retailer. Ireland has particular competencies in this area. Faced with the need to match sterling income with sterling costs, it can simply pull out the phones in Dundalk and plug them back in in Newry, and it is no surprise that some are thinking this way, with consequent danger to employment in the Republic. The good news is that almost nobody anywhere wants a hard Brexit. It seems certain that few, if any, of the UK voters who voted to leave in last year's referendum meant that the UK should negotiate to walk over a cliff to an inability to trade with an EU it knows or with others who have shown no urgency to agree new bilateral trade partnerships.
In general, we can assume that, political buffeting aside, the shared focus of all negotiators will be on achieving a soft Brexit with managed trade and managed movement of people, ideally with minimal operational intrusion on day-to-day community or business life. Key to this will be to intelligently square the circle of the UK's rejection of free movement of people with the shared UK-EU desire for free trade among 28 countries. That will be challenging for all member states but of all the regions of these islands, Northern Ireland is the most exposed to the downsides of Brexit and, therefore, most in need of ensuring the softest possible separation from the EU. Solutions for Brexit's threats to Northern Ireland touch all of the wider Brexit risks - border checkpoints, proof of origin of goods in transit, proof of nationality and status of non-nationals, fishing rights, access to markets and continuity of key EU support programmes. Physical security of communities in Northern Ireland is heavily predicated on economic security for the region and on the avoidance of abuse of economic freedom as much as civic freedom. While we know that here, it is a huge achievement of Irish political and diplomatic skills that the unique circumstances of this island are to be given particular acknowledgement in the context of the forthcoming Brexit negotiations. However, as First Vice-President Timmermans said, it will take all of Ireland's famed creativity to devise ways and means by which this island's particular needs can be satisfied "in the context of EU Law".
What we need to do, and we need to start doing this now, is to bring together business and legal expertise to quickly develop fully thought through and legally proofed solutions for our negotiators. It seems that key to stress-testing of any of those measures will be their impact in the context of Northern Ireland. Thus, we have to devise solutions for Brexit that work for Northern Ireland, softening the terms of the UK's departure from the European Union and from the customs union. The British Irish Chamber of Commerce sectoral policy and Brexit committee fora, led by my colleagues Mr. Paul Lynam and Ms Katie Daughen, who are accompanying me today, span our hundreds of member firms, who together employ over 2 million people. They are focused on solutions of the type I will reference. These member firms bring together the experience and expertise of numerous businesses that know the issues and are motivated to solve them for the good of all. Our focus now is on working together with public representatives and agencies such as Enterprise Ireland, Revenue and customs officials and so on to develop practical solutions, including anti-abuse measures, that acknowledge the unique circumstances of the island of Ireland. It will take further time to proof any concepts to an adequate degree but the following are some potential ways forward that are currently under consideration in the work we are doing with member firms.
On free movement of people, bearing in mind that there is a difference between a person's right to travel and the procedures to validate that right, such as presenting one's Irish passport prior to boarding a flight to Dublin from the UK, the solution might be fully preserving the common travel area, notwithstanding that it has never operated with both Ireland and the UK either in or out of the EU. To ensure anti-abuse of free movement between Ireland and the UK, we may need to introduce a system of well managed movement, as is already the practice in Belgium, to which EU citizens, including us, may move for work but if we fail to get it within three months, we have to leave. We also need to confirm continuity of the existing shared visa waiver schemes between Ireland and the UK, which enable citizens from other nations, particularly Asia, to visit both islands on one permit.
On free trade in goods, bearing in mind that truck drivers are already accustomed to presenting other documents when boarding vessels, etc., the solution might be a pre-clearance model for through-traffic, that is, trucks and drivers, regardless of the driver's nationality, that pass through the UK landbridge to and from the EU, which is vital to Irish business. For trade with Britain and Northern Ireland, Irish traders could pre-register loads through an easily accessible online platform and already used portable or fixed number plate recognition and-or GPS locator systems that can track movement of those loads. We do not propose the Norway-Sweden border model, which limits the number of border crossing points, thus rendering some roads as unapproved - we know what that means here - and which allows for hot pursuit - we also know what that means here - by border police into each other's territories for up to 15 km in either direction, nor do we propose fixed checkpoints at either today's national border or air or sea ports where the physical infrastructure to address massive slowing of freight in transit would be impossible to provide and impossibly disruptive of trade, not least in fresh or chilled food trade, which is hugely important to the Irish economy. Reasonable anti-abuse measures will need to be provided to allow mobile spot-checks for proof of origin throughout the UK and Ireland. On free trade in services, which are very important, bearing in mind that services, ranging widely from education to legal advisers to downloadable software, are typically provided by mobile persons, which are to be treated as provided for in my earlier remarks, or through internationally transmitted data, the issue will be to enable unrestricted payment for such services between the UK and Ireland, without exchange controls of the type previously a feature of certain UK-Ireland transactions. It is not that long since we had exchange controls here.
On fishing, we believe the UK will not set as high a priority on retrieving its pre-EU fishing grounds as it will on ensuring the stability of Northern Ireland and on ensuring maximum market access for fish caught by UK fishermen so we propose that today's status quo of fishing rights as between Ireland and the UK remain as is.
On energy, as set out in the most recent publication by the British Irish Chamber of Commerce, the well-being of Ireland, Northern Ireland and Britain depends on access to an energy supply which is resilient, decarbonised and competitive. The best way to assure this is through physical interconnection of existing and planned energy connectors between our two islands and between North and South on this island.
On financial services, there is a natural co-habitation and complementarity in delivery of financial services among service providers on both islands, both grounded in common law, unlike the European system, and frequently working to each other's natural competencies. For its economic security, Northern Ireland needs to retain its opportunity to trade in these services with the Republic of Ireland and so provision should be made for a trade corridor for a pre-agreed menu of passported services between us.
Alongside all of these provisions, the UK and Ireland will need to give disrupted operators phased support for adjustment to the new environment. Such supports may be both financial and non-financial, including training and new market development advice and so on. Above and beyond such operational provisions as I have outlined, Ireland and the UK will need to invest in assuring the infrastructure for long-term successful growth in the economy and in our communities. For us, this must, as the great Dr. T.K. Whitaker knew, include assuring the future of the highest quality of third level and postgraduate education in this country. An immediately actionable step towards this would be to implement the proposals of the languishing Cassells report now.
At fair cost to the UK in contributions, etc., there is also the need to preserve EU funding programmes into Britain and Northern Ireland. Regardless of the timing of changed arrangements, we clearly have to provide together for a phased transition model to give all affected adequate time to prepare. We also suggest that there is now scope to craft together the wider opportunity of a UK-Ireland powerhouse model. In the context of newly shaped arrangements, Ireland and Britain can leverage our respective competencies in manufacturing and services, education and research, food and tourism, technology and cyber and at the same time deliver convergent costs of doing business on either side of the Border. This will promote more trade and employment among us, not less, supported by initiatives like the chamber's British Irish Gateway for Trade project which connects many more UK and Irish businesses online and with the involvement of trade support agencies such as Enterprise Ireland, UKTI and the various chambers of commerce throughout Ireland.
The agenda for action is clearly huge and apart from anything else there will be a practical need to avoid swamping our negotiators with more questions than answers. To that specific end, the British Irish Chamber of Commerce invites the Government to engage a tight, well-resourced collective of business representation, including ourselves, IBEC, SFA, the CBI from the UK, including Northern Ireland, the Institute of International and European Affairs, IIEA, and the Irish Farmers Association, IFA, to draw together the business community first to triage the issues offline and to bring forward really powerful solutions that are fully worked-up and already proofed to satisfy the EU legislative agenda. For example, the Government can have understandable difficulty commissioning any one law firm to advise it, but this expert group could bring together the best legal thinking of Ireland and the UK so as to bring forward proposals capable of making it through the negotiating process, ideally in ways which can also strengthen the EU itself, as is required for its future viability. The British Irish Chamber of Commerce will be glad to lead and facilitate this collective contribution to the work of Government, the Oireachtas and our negotiating officials and we strongly commend this valuable offer to the committee for consideration and endorsement.
