The Irish border and Brexit. A possible hypothesis of a special economic zone with economic-political function
The question of finding the best way out to achieve a Brexit that is as satisfying as possible with respect to national and international interests (even divergent ones) in play, as is known, includes a further problem: the management of the “Irish Border” affair.
Evidently it is not a small problem, because without an ad hoc solution, it would be a matter of applying the rigid and complicated rules of the customs regime in force according to the CDU in the commercial relations between the European Union and third countries, on a border of about 500 kilometers that for over 46 years, from the point of view of commodity flows, has been in fact a “weak border” subject to the rules of the single market.
According to the most recent data, about 33% of exports of goods and services produced by Northern Ireland companies go towards Eire.
In 2018, Northern Ireland’s interchange with Eire consisted of about 3 billion pounds in exports and 2 billion pounds in imports, equivalent to a trade balance of 1 billion pounds and a bilateral trade of almost 5 and a half billion pounds.
Eire is both the 1st country of export for Northern Ireland (equal to about 36% of its total exports) and the 1st import market (equal to about 28% of its total imports) .
In detail, most cross-border transactions were carried out by micro and small businesses, which represent the focus the economy of Northern Ireland, with about 74% of exports involving companies with less than 50 employees.
The UK’s trade flow to foreign countries is direct for about 6% towards Ireland, which is the 4th country with which it has greater connections, after the USA, Germany and China.
The same interchange report if analyzed by the Irish side, reveals that on the total foreign trade relations the flow with the United Kingdom accounts for 18%, and constitutes the 2nd country with which it has more connections after the USA.
According to The Guardian, every year 450,000 trailers arrive in Northern Ireland, transporting cars, foodstuffs and textiles: the total import value of the United Kingdom is about 13 billion pounds, of which about 11 billion pounds corresponds to the value of the goods purchased.
The continuity of this trade interchange must be safeguarded.
The United Kingdom before the Brexit process, in the Belt and Road Initiative (BRI), represented the potentially key partner for China to mediate within the European Union on particularly “hot” issues from a commercial point of view.
So now “Downing Street” should find a solution to safeguard its competitive ability in the markets, which could be strongly influenced, both because of the Brexit process and because of the lack of involvement (for the moment) in the BRI.
In this regard, Ireland is ready after Brexit to replace Britain as China’s new trusted interlocutor in the promotion of the Belt and Road Initiative, according to what the Foreign Minister (which is also Irish Deputy Prime Minister) said in recent months. On the other hand, the good link between the Dublin government and the Beijing government historically includes many examples of good trade relations, starting from the role of model played by the Shannon Free Zone created in 1959, and that of its functionaries, tutors for the creation of the first special economic zones in southern China in 1980, to feed the economic and commercial reform, the cd “Open door policy”, launched by Deng Xiao Ping.
So for London it is of vital importance to take this perspective into account because the effects on the United Kingdom could have very negative impact precisely starting from the economic consequences created on the commercial exchanges that take place through the border between Eire and Northern Ireland.
The occurrence of possible negative economic consequences, however, also exposes to the risk of the possible re-emergence of possible political frictions in this delicate area, historically never definitively placated.
This is why the contents of some points proposed by the British Government for the Brexit Agreement go in the direction of creating a sort of special economic zone along the Irish border.
This idea could have an important political value, and this would be in line with the functional evolution in the world of the SEZs. In fact, the increase of its relevance as a political tool to attract investments, will determine an ever greater attention both of the single SEZs and of the countries to look beyond administrative boundaries and therefore to develop integrated transnational approaches to the development of the SEZs.
Therefore in the present case it would be very desirable to create a “cross country” SEZ (for example above all in the area including the cities of Derry and Donegal), as happened in other parts of the world with positive results.
The endorsement by the European Union of this solution could be a good opportunity for the Brussels institutions to abandon their anachronistic position of substantial dogmatic and preconceived ostracism on the SEZs (which worldwide have become increasingly congenial to the historical context of a globalized economic development and dependent from the connection with the Global Value Chains, which today represent almost 50% of exchanges around the world) and to implement a more effective “realpolitik”, with effects of importance not only economic but also, as in this case, of evident specific weight to solve political-diplomatic issues.
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Valentina Di Milla
Chief Executive Officer
RALIAN Consultancy & Research SRL