The economy of Northern Ireland has more to be ruined by an uneasy Brexit than the Republic’s

As the Brexit final game draws near, the complexities of the issues surrounding the Irish frontier are put into stark relief. On one hand, there is a clear that everyone within Northern Ireland to avoid a “hard” border (generally seen as having to do with customs and other paraphernalia that has long since vanished out of Europe). On the other hand, there is an declared intention by government officials from the British government to pull the UK as in its entirety away from customs union, the single market, and free trade zones that are combining to create the structure that is the EU. They are inherently uncompatible.

Any border that is a harder one of any kind could impact the economics of both the north as well as south. It is inevitable that Brexit will cause some economic hardship to Ireland. However, the general opinion is that it can be confined to a handful of segments. A closer analysis of the structure of trade along the Irish border shows that loss of economics will be more severe on the northern side of the border than the southern side.

While nobody is expecting a total closing, however, there will be more tensions in trade than is currently the case should barriers be placed in place. The vast literature on international integration substantiates the idea that lowering trade barriers will result in an increase in trade.

Thus, it is likely that any Brexit that would take Northern Ireland out of the customs union is likely to have a major impact. There will not be an increase in trade, even in the near to medium-term and with the rest of the UK, which is where growth projections have been continually lowered after the Brexit referendum. In addition, more barriers will be imposed by the EU.

Global connections

Northern Ireland is not a global economy. In all sales, only 15% of products are exported, and 8.5 percent of services. In 2015, the total amount of exports was PS9 billion, or EUR13 billion, out of which EUR10.8 billion was for goods. In terms of per capita, this represents just a quarter of the total exports in Ireland as well on a service basis, it is 20 times less.

Transboundary trade flows More specifically, they are heavily dependent towards Northern Ireland. In the Republic of Ireland accounts for 33% of Northern Ireland goods exports as of 2015 and 40% of its services exports, which is around 36% of all exports. Contrary to this, Northern Ireland is a destination for only 1.7 percent of the total Irish exports.

Thus, any decline in trade between these two countries is of much more importance for both the Northern Irish economy.

Diversity is important.

If you study the distribution of trade across different sectors, it becomes apparent that it’s highly concentrated on a small number of. Trade between north and south in products is concentrated 52 percent in the food and beverage industry as well as services with 63% of retail and wholesale services. Trade between north and south products is 66% for the areas of food, drinks and chemicals.

At first glance trade between both regions of Ireland revolves around supply chains that are integrated in Irish Agribusiness, which is complemented by an occasional sprinkling of warehousing service. The surplus in trade that Northern Ireland enjoys with the Republic of Ireland is nearly all food and beverage exports.

The impact of this would be severe by a tense Brexit, which could result in the UK plunge into a trade regime under World Trade Organisation rules. According to WTO rules, food and related exports could be subject to tariffs in the range of 30-40. If sterling were to fall in value, this would most likely make Northern Ireland’s surplus a thing of the past over the course of a few days.

Even the possibility of a Norway-style Brexit (where Norway pays for its membership in the European Economic Area) would cause agriculture to be outside of the free trade regulations, which makes it more vulnerable. In addition, it is the case that the agribusiness industry in Northern Ireland is not as productive when compared with other EU regions and the possibility of a hard Brexit could result in UK agriculture under substantial price pressures from lower world-wide production.

Although agriculture itself isn’t the majority of both economies ( less than 3 percentage of net value added), significant processing and production of agricultural products and other related goods is also taking place. The agri-food industry makes up around 8 percent of the total jobs across both countries. Thus, the effects of a hard Brexit could be exacerbated. But, at the very least, the economy of the Republic can benefit from the fact that a lot of its exports are sent to the EU and is larger than Northern Ireland’s, which makes it less susceptible to the repercussions of a tough Brexit.