Britain and Ireland's trade war history has painful lessons for both

In a no-deal Brexit, jobs will be lost, bankruptcies declared and livelihoods will collapse in isolated Ireland. That is the brutal economic fact. The brutal Boris Johnson and his allies know it full well

If the British were to live entirely up (or down) to their historical reputation for cruelty, they might threaten to destroy the Irish economy if the Dublin government was so unwise as to stick to its current position on the Withdrawal Agreement. “Drop the backstop, or else” would be Boris Johnson’s threat. Maybe delivered in Latin rather than Irish. It would be a stupid thing to do, however.

The odd thing is that what is true about the power dynamic between Ireland and the UK, is also true for the UK in relation to its own big neighbour, the European Union. And given Ireland’s position in the EU as a full member state, it does complicate matters.

In both cases the smaller, open economy is heavily reliant on its vastly larger neighbour. Under no-deal Brexit, both the UK and Ireland would suffer a 7-8 per cent hit to GDP over a time horizon of say 10 years – and much more acutely even than that in certain sectors and regions. This is because no-deal Brexit means tariffs and, even more grievous, a huge increase in regulatory and other cots.

Say cheese. As Boris Johnson casually observed in his press conference, more than half of the cheese and beef produced in Ireland is exported to the UK, and “that’s a lot”. This is an area where tariffs may hit hard, in both directions. Hard cheese, actually.

Given that cheese may be subject to volume quotas too, it’s difficult to determine exactly how much of Ireland’s exports of cheddar, for example would be covered by the UK’s WTO-declared import tariff of 7 per cent. Whatever it would be, it wouldn’t help relations or trade.

More important still, the other cost increases to producers because of more complex regulations and red tape would, say the Irish government, add 24 per cent to the cost of their exported goods, on average. Few firms would be able to absorb such a double whammy – tariffs plus cost inflation – and consumers would turn away from uncompetitive Irish produce.

But by the same token, under no-deal Brexit the EU might feel it must put a 57 per cent tax on British cheddar going into the EU, but that won’t help the Irish much. The path to a tit-for-tat trade war is clear. Even the rich would suffer. I notice also, by the way, that imports of frog’s legs will be taxed at 6.7 per cent according to the UK’s new tariff schedule (it makes for enlightening reading)

Not only all that, but the “land bridge” of the British mainland is the main thoroughfare for Irish exports and imports to and from the rest of Europe. Everything pretty much flows through the Calais-Dover-Holyhead/Dun Laoghaire-Fishguard/Rosslare routes, as well as the meandering unmarked Northern Irish border. Some 53 per cent of Irish goods exports destined for places – other than the UK – still have to travel via the UK.

And of course many products, typically milk destined for further processing will criss-cross the border between Ireland and Northern Ireland many times before it’s turned into butter, cheese or a quiche Lorraine.

Out of all EU27 states, Ireland has the greatest “intensity” of trade with the UK, taking flows in both directions into account. In the words of a recent report commissioned by the government of Ireland: “Ireland’s high intensity of trade with the UK makes Ireland uniquely exposed to Brexit. The high intensity of trade with the UK also underlines the need for diversification of Ireland’s export base after Brexit”. Thus, thousands of jobs will be at risk, particularly in agri-food, pharmaceuticals, electronics and air transport.

Ireland, then, is the weakest link in the EU chain, because of accidents of geography and history. France, the Netherlands, Germany and Spain would all feel a bit of pain in some sectors, but the place where jobs will be lost, bankruptcies declared and livelihoods will collapse most dramatically is isolated Ireland. That is the brutal economic fact. The brutal Boris Johnson and his allies know it full well.

But the equally tough Europeans also know that the UK is massively more exposed to the European economy than the EU economy is to the UK. The dynamic between little Ireland and the UK is exactly similar to that between the little UK and the EU, ten times larger by GDP and population. This time around the British will find it trickier, though not impossible, to bully the Irish.

To recycle a useful statistic: about half the UK's exports go to the EU; only around say 18 per cent of the EU's exports of goods and services go to the UK. The EU can punish the UK just as severely as the UK can punish Ireland. The UK car industry, aerospace, farming, pharmaceuticals, food, financial services… all hit hard. Such is the nature of trade wars: the bigger party usually wins.

Like most things, something like this has happened before. Brexiteers wistfully talk as though, regardless of the Troubles, the UK and Ireland have always been one integrated economic bloc, but that’s just not so. The Irish left the sterling area late, in 1978, and the common travel area persists today, but trade policy is a more fractious, and sorry, story.

Arguments about the rents owed by Irish farmers to British landlords or to the British state after independence in 1922 led to a lengthy and nasty trade war, during which Ireland slapped a number of protectionist tariffs on British imports, with the British retaliating in kind: “Burn everything English except their coal” went the uncompromising slogan of the era (though originally coined by Jonathan Swift a couple of centuries before during a previous outbreak of unpleasantness).

But their misguided economic war on the British didn’t do the Irish much good, while the Brits barely noticed it. The British tariffs meant that Irish cattle were sometimes rendered near worthless, for example. The wider impoverishment of the nation and the flight from rural areas continued for decades after, and Ireland’s population only started to stabilise in the 1970s, after EU entry together with the UK. It gave rise to successive waves of emigration to Britain, which accounts for the presence of some of us on this side of the Irish Sea. (Happily so I might add).

This painful half-forgotten economic history of self-harm represents no end of a lesson for little Ireland, victimised by her much larger neighbour. But it is also a sharp lesson in economic realities for the British, now threatening much the same against their far more wealthy neighbours, who happen to run the world’s largest single market of half a billion people. And that, ladies and gentlemen, is why a no-deal Brexit really cannot be allowed to happen.