The Irish government is courting trade partners in Asia, as a way of diminishing the impact of Brexit on its economy.
On a trip to Asia this week, the Irish minister of state for the department of finance, Michael D’Arcy, told GTR that while he hoped “common sense will prevail”, the uncertainty caused by the UK’s decision to exit the EU has made the opening of new markets for Irish companies even more imperative.
“You’ve got to be optimistic, you’ve got to try and ensure common sense prevails. If we can put in place as close as possible a trading arrangement between the UK and Ireland; if we do that we can put Brexit behind us,” he said.
Ireland is uniquely exposed to the Brexit situation. It represents the UK’s only land border with the EU and is, in trade terms, joined at the hip with the UK. It is the fifth-largest destination for UK exports (5.6%), while for goods and services, the UK is Ireland’s largest export market.
Thus, Ireland stands to suffer disproportionately from the potential introduction of barriers to trade and investment. Studies from the Economic and Social Research Institute show that a hard Brexit could lower Irish GDP by 4%, a direct result of the tariffs that would be placed on Irish goods exports (13% of which go to the UK).
Asked whether the Irish economy, which suffered a catastrophic collapse during the global financial crisis 10 years ago, was now resilient enough to deal with the hardest of Brexit, D’Arcy answered affirmatively.
“Yeah, I think we are resilient [enough]. Our sectors are stronger than they have been. The Irish economy has recovered remarkably, it’s the fastest-growing economy in the EU for a number of years now. 4.5% growth in 2017, our projections are 3.8% for 2018 and our medium-term projections are 3% plus. It’s slow, steady progress which is what we need. There are always shocks. Brexit was a shock, there will be others. But we have to prepare for those by ensuring we’re in a good position to deal with it,” he said.
He cited the growing trade relationship between Ireland and China, which has doubled to US$14bn since 2014 and praised the work of representatives on the ground in Hong Kong, China and further afield.
Those efforts, he said, helped encourage Cathay Pacific, Hong Kong’s airline, to launch a direct flight to Dublin, which will not only help traffic businesspeople to and fro, but will also slash the time it takes to get Irish goods to the Chinese market.
“Getting a direct flight, a 14-hour flight between Dublin and Hong Kong will be crucial too. But you’re also aligning that with the IF in South China, the high-speed rail link to Shenzhen and Guangdong will be crucial. It’s not a matter of days to get product here, it’s hours. Product could be here as quickly as it’s in London,” D’Arcy said.
The minister, who also spent time in Shanghai and Singapore promoting Irish business interests, was in Hong Kong to attend the Asian Financial Forum and to help Irish fintech company Global Shares launch in Asia.
Indeed, financial services are expected to be an area in which Ireland will make gains, post-Brexit. With uncertainty over the continued passporting rights of the City of London’s financial sector post-Brexit, as many as 100 financial institutions are thought to be eyeing Dublin as an alternative base within the EU.
The likes of Bank of America Merrill Lynch, JP Morgan and insurer XL Group have already announced plans to shift some operations to Dublin. For Asian banks and companies, too, access to the EU market is a key consideration when choosing European bases. D’Arcy said that Asian financiers “want to make sure that their business model isn’t disrupted in a way that impacts on profitability, which is very understandable”.
He added: “We’re not trying to poach jobs, there’s a serious potential difficulty for all financial institutions that in April 2019, companies established in the UK may not have the ability to passport into the other 27 EU nations. We’d prefer if the UK stayed in the Customs Union and Single Market, we think it’s in everybody’s interests. But from what I have seen, most of the financial institutions have taken the worst-case scenario of a very hard Brexit.”
And while the Bank of China launched a Dublin branch in June 2017, there are currently no plans for the city to become a renminbi clearing hub, the minister confirmed. However, the government will no doubt hope that other Asian financial institutions join the Bank of China in establishing Irish operations.