Analysis: while trade between Ireland and Britain is down, Brexit has had a significant positive impact on trade between the two parts of Ireland

While it's now five years since the UK electorate decided to leave the EU, the effects of that decision are still emerging. Analysis in the run up to the Brexit referendum and subsequently had identified trade as one of the key economic variables that would be impacted by Brexit. With Ireland being more dependent on the UK market for exports as well as imports, the impact on trade could have significant economic effects. Emerging data on trade flows shows some interesting results.

The Brexit decision had immediate effects, for example, on the sterling euro exchange rate. However, the status quo in the relationship between the EU and the UK only changed materially on December 31st last year, when the transition period post withdrawal had ended and the EU–UK Trade and Cooperation Agreement (TCA) came into force. Even that agreement includes a customs transition period until July 2021.

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Importantly, the new relationship between the EU and the UK includes the so called Northern Ireland Protocol, which is designed to avoid a hard border on the island of Ireland. While this protocol allows Northern Ireland to be part of the UK customs territory, ensuring that Northern Ireland can benefit from trade agreements that the UK signs, Northern Ireland also remains an entry point to the EU Customs Union. This means that Northern Irish producers can export and import from the EU on an essentially unchanged basis while they can also freely export to the UK. However, it also means that checks on some imports into Northern Ireland from Great Britain are necessary, which of course has been the topic of much political debate in Northern Ireland.

The fact that Northern Ireland can trade (import and export) with the EU including Ireland without new barriers due to Brexit, but faces some new barriers for imports from Great Britain, changes the relative costs of trading. This would be expected to lead to a reduction of imports from Britain and an increase in imports from the EU including Ireland. Trade between the EU and Great Britain now faces additional barriers, and one would thus expect reduced trade flows.

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From RTÉ Radio 1's Countrywide, Suzanne Campbell talks to farmers and food producers in Northern Ireland about the Brexit vote five years on

Of course in order to switch trade, it is necessary to find comparable products. Analysis of detailed trade data shows that the EU including Ireland produces goods that could substitute for most UK produced goods. For businesses the challenge is to find these substitute products and suppliers.

One additional impact of Brexit on Irish trade is the impact on the trade to continental Europe through Britain and the so called landbridge. Here, additional forms and delays at the ports add to costs. In anticipation of delays, many traders had stocked up early and postponed shipments in January 2021.

The CSO has published trade data for the first four months of 2021, which can be compared to the trade volumes for the same months in 2020 and 2019. Covid arrived in Ireland in March 2020 and this had an impact particularly in that month and April 2020, which makes the comparison of 2020 and 2021 less clear. Naturally, Covid will also have had an effect in 2021 and particularly in January. This means that February is likely to be the month which provides the best comparison.

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From RTÉ Radio 1's News At One, RTÉ Economics Correspondent Robert Shortt reports how imports of goods from Britain were down 53% in February year on year

Exports from Ireland to Great Britain in the first four months of 2021 were up by 7% over the corresponding months in 2020, but they were down by 8% compared to those months in 2019 (all without adjusting for price changes). In contrast, exports to Northern Ireland increased by 40% and 25% respectively relative to the first four months of 2020 and 2019. Compared to February 2020 and 2019, exports to Great Britain were down by 9% and 20% respectively. In contrast, Irish exports to Northern Ireland were up by 20% and 23% respectively.

The data for imports is even more striking. While imports from Britain into Ireland over the first four months of 2021 were down by 39% and 48% respectively compared to 2020 and 2019, imports from Northern Ireland increased by 61% and 59% respectively. The data for February 2021 shows that imports from Britain were down by 51% and 56% respectively relative to 2020 and 2021, while imports from Northern Ireland were up by 69% and 83% respectively.

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Exports to other EU countries for the first four months of the year were down by 5% relative to 2020 but up by 5% relative to 2019. However, exports to the EU were down for first three months compared to 2020, but up by 25% in April. Likewise, imports from the EU were down substantially in January and February of 2021 compared to 2020, but up in March and April. Some of this is likely to be a Brexit effect and hesitancy to use the landbridge. Since then, a number of new direct sea routes have opened up which allows trade with other EU countries to by-pass the UK.

The data provides early indications of significant Brexit effects. Trade between Ireland and Great Britain has been negatively affected, while Brexit and the Northern Ireland Protocol has had a significant positive impact on trade between the two parts of Ireland. While previous research indicated that the trade between the two parts of Ireland was lower than expected, Brexit appears to be increasing the trade integration on the island.


The views expressed here are those of the author and do not represent or reflect the views of RTÉ