Trade, Stupid: Three Charts Explain Why DUP Needs Soft Brexit – Bloomberg

Trade, Stupid: Three Charts Explain Why DUP Needs Soft Brexit – Bloomberg

Arlene Foster, who holds the balance of power at Westminster, is very much in favor of Brexit. It’s just not so clear what kind of Brexit she wants.

The Democratic Unionist Party’s election manifesto said Foster is looking for a “frictionless border” with the Irish Republic after the U.K. exits the European Union. But the party hasn’t set out a clear position on continued membership of the customs union, which is probably needed to avoid tariffs.

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Foster is already facing pressure from farmers and industry groups to use her influence over Theresa May to ensure the U.K. remains in the customs union. The reason? After Brexit, Northern Ireland will form the U.K.’s only land frontier with the European Union, and its economy will probably suffer most should the nation crash out of the EU without a deal. Though Foster campaigned for Brexit, voters in the province rejected it.

“It’s hard to figure out exactly what their position is,” said Peter Donaghy, a data analyst who has been tracking the party’s voting record at Westminster. “They want a frictionless border but at the same time hint they want to leave the customs union, which is not a very consistent position. What we won’t have is an ultra-hard Brexit on the DUP’s watch.”

For more on the U.K.’s post-Brexit options, click here

Some 55 percent of Northern Ireland’s exports go to the EU, compared with 48 percent for England.

The Republic of Ireland is the province’s biggest trading partner outside Britain. Northern Ireland remained part of the U.K. when the rest of Ireland gained independence from Britain in 1922, and border controls largely melted away in the 1990s.

Without a deal, Northern Ireland’s exporters face tariffs, based on World Trade Organization rules. The DUP is not demanding the U.K. stays in the customs union as the price for supporting Prime Minister May, the Financial Times reported, without citing anyone.

“It all depends on the trade deal with the EU,” said Robert Murphy, a former customs official at the Irish tax authority who later worked at the European Commission in Brussels. “Without a free-trade agreement and no-tariff agreement, then it’s WTO tariff rates.”

Northern Irish farmers are particularly vulnerable. They could face duties of around 40 percent and most industries would suffer higher import costs if Britain imposed its own tariffs on trade from the EU.

The value of Northern Irish agri-food export sales to the EU in 2014 was 1.3 billion pounds ($1.7 billion), compared with 140 million pounds to the rest of the world, according to the Centre for Cross-Border Studies.

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