In 2018 my Department published a comprehensive, independent expert study undertaken by Copenhagen Economics.
This report examines the implications of Brexit for the Irish economy and trade and quantifies the impact of possible new barriers to trade which might emerge as a result of Brexit. The study also provides analysis of the likely impact of Brexit on key sectors of the Irish economy and considers a range of possible Brexit scenarios.
This analysis was undertaken on the basis of no policy action being taken – this of course, is not the case given the extent of mitigation actions being taken by Government and firms across all sectors of the economy.
All of the scenarios examined produce a result that is less favourable than a non-Brexit scenario. The scenarios considered reflected 4 of the possible outcomes from the future relationship – an EEA scenario, a Free Trade Agreement, a Customs Union, or a worst-case WTO scenario.
Regardless of the scenario modelled, the Irish economy is still expected to record strong, positive growth out to 2030. Brexit has a dampening impact, however, resulting in a lower growth rate than would otherwise have occurred.
The WTO scenario would have the most negative impact on the Irish economy. However, the economy is still projected to grow even under such a scenario, by 2030 GDP is expected to be 7 per cent lower than would otherwise have been the case.
An EEA-like scenario would be least harmful – GDP in 2030 being 2.8 per cent lower than if Brexit had not happened.
The Customs Union scenario is more damaging than the EEA scenario (with GDP estimated to be 4.3 per cent lower in 2030 than would otherwise be the case). This scenario would not remove all tariffs/quotas (i.e. some tariffs on agri-food products would remain) and does not make any provision for services access or ensure regulatory convergence.
The FTA scenario used in the model reflects the average of all existing EU FTAs. Resulting in GDP being 4.3 per cent below baseline in 2030. The more comprehensive an FTA that might be agreed between the EU and UK, the lower the loss in GDP.
Since the Copenhagen Report was finalised, negotiations have progressed. The Withdrawal Agreement and the Declaration on the Future Relationship texts agreed between the EU an UK ,and which are before the UK Parliament at present, anticipate the conclusion of an ambitious Free Trade Agreement.
Based on the type of relationship envisaged, my Department is currently working with Copenhagen Economics to update the previous modelling exercise, to take account of the parameters the Declaration sets out.
Of course, all of the specific provisions of an FTA will be a matter for detailed and complex negotiations between the Union and the UK, and we cannot be certain of the time this will take.
What we know is that while the Declaration aims to minimise the increase in trade costs resulting from Brexit, it acknowledges that there are constraints regarding how low this cost minimisation can go.
I expect the results of the current economic modelling work to be available early next year.