Monthly Archives: September 2016

Trade has been the Antidote to War in Europe

Business men and women, trade officials and EU bureaucrats don’t often see themselves as peace builders. Yet that is the real outcome of their professions.

Without the trade they foster and make possible, the continent would not just be poorer but more violent. This might sound like a bold claim but let’s briefly put the achievement of EU trade and the single market in context.

Aside from the Nuremburg trials and the lesser known mass upheavals of people as nation states reorganised themselves behind new borders (a grim tale recounted in Tony Judt’s Postwar, A History of Europe Since 1945), Europe did not really focus on reconciliation and peacebuilding per se. The moral framework of the war was too obvious and the exigencies of reconstruction and then Cold War too pressing. Rather, Europe’s post-war leaders understood that a peaceful future depended on trade.

Winston Churchill led with the way when in 1946 he called for a United States of Europe: “The structure of the United States of Europe, if well and truly built, will be such as to make the material strength of a single state less important. Small nations will count as much as large ones and gain their honour by their contribution to the common cause.” The first step was the formation of the Council of Europe in 1949 with its focus on human rights and democracy.

Two of the leading post-war architects of the EU, Robert Schuman and Jean Monet, looked first to the two products that made modern warfare possible, namely coal and steel. Within the framework of the 1947 General Agreement on Tariffs and Trade (since 1995, the WTO), they forged the European Coal and Steel Community in 1951, the foundation for the common market. Its purpose was set out in the Schuman Declaration; to “make it plain that any war between France and Germany becomes not merely unthinkable, but materially impossible.”

The Schuman Declaration also made clear that a united Europe would be built layer by layer: “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity”.

Thus followed the foundational EU document, the Treaty of Rome in 1957.  The Customs Union was created in 1958. In 1993, the single market was completed by the Maastricht Treaty allowing the free movement of goods, services, capital and people.

Within the Schengen Area, people from 26 countries (22 out of the 28 EU member states) cross borders without passports. Economic and monetary union began in 1999, followed by the launch of the euro which today is used by 19 member states. In 2009, the Lisbon Treaty looked to enhance the effectiveness of EU institutions and decision making processes.

The construct that emerged has proven to be robust and attractive to other European states. The EU dealt effectively with the greatest challenge it faced since 1945 with the fall of the Berlin Wall in 1989, the collapse of Soviet Bloc and the absorption of twelve new member states as a result.

The founders of the European project certainly aspired to a supranational pooling of sovereignty. There has been progress toward this but it has been very carefully, even gingerly progressed in foreign policy and security for example. The UK has played an important role in that process and Ireland has defended its interests well.

But make no mistake about it, in terms of pooling sovereignty the greatest progress has been made in trade: the single market is the beating heart of the European Union.  And the single market is the four freedoms.  It is from this perspective that the UK wish to alter its immigration regime will be judged by fellow member states.

Nowhere else on earth have sovereign nations pooled their trade laws, tariffs and customs, regulations and standards, and binding arbitration with the depth and comprehensiveness of the European Union.

And against the backdrop of Europe’s violent preceding centuries, nowhere else on earth has shown so dramatically how trade can be used as the antidote to war.



DG Trade, DFAT


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Costing Brexit

In my last blog, I recommended some links that explored the very difficult negotiation course ahead for the UK.  It may involve six processes by one count.  It will certainly mean that the key ones are sequential.  The talks ahead are so mid-numbingly complex and interlocked, that the two year time frame looks distinctly optimistic.  Bearing in mind how long trade negotiations usually take, one has to wonder how realistic.

The two year time limit was not really based on a consideration of what was to be negotiated.  Even at this stage we’re not sure what precisely is to be negotiated.  How and what is the UK going to leave?  What will be the nature of its new relationship with the EU as a third party country?

What we do know is that the UK departure/reentry will be complex, whether you’re looking at a hard or soft Brexit.  It’s one big known unknown. There is a second very obvious known unknown: whatever shape and scale the negotiations take, they will have an immediate and ongoing impact economically.

There are two reasons for this.  As a member of the WTO trading with the EU (to take one model), British business will face tariffs, on average 4.8% but considerably higher depending on the sector.

Ben Chou, the UK Independent’s Economics Editor filed this report on the likely costs involved.  Based on the average tariff, the cost is reckoned at £4.5bn but as Chou notes this could be much higher.  You can argue that this is offset by the decline in Sterling but it is  not as simple as that: weaker Sterling means that inputs from abroad are more expensive and eventually those higher costs feed into wages and unit costs.  But tariffs have a second economic impact that is much harder to quantify.

As one businessman said to me recently the scale of the tariff is not the problem; its the form filling and port clearances.  And tariffs are not the only new bureaucracy; there are likely to be rules of origins which will complicate an exporter’s life.  To take another example, the EU refunds VAT to businesses within the single market and its all done electronically.  Third party countries have to file by paper, a lot of it according to another businessman whose company here in Ireland processes VAT claims for other businesses across the EU. The UK is looking to a future where it is third party country with the EU and its 53 bilateral partners, a total of 80 countries in all.

Which is why Heathrow’s chief executive, John Holland-Kaye, told the Financial Times (26/9) that leaving the Customs Union would mean “adding massive overhead for very little gain”.  The article in which he is quoted notes that the UK has a very lean operation with only 5,000 customs officers, compared to Germany’s 35,218.  That could easily double if new procedures are imposed on the £150bn worth of goods exported by the UK to the EU.  And putting new systems in place could take years.

Businesses are highly dynamic and thrive on certainty, including tried and tested bureaucratic routes that green light their goods and services to market.  It is generally only our Embassies outside the EU that are called on to help extricate an Irish exporter’s shipment out of some bureaucratic snafu at the port of entry. Talk to any exporter and they’ll tell you that one of the great obstacles to entering a new market is the regulatory one.

And the UK has to factor in too that the EU has some 53 free trade agreements with other countries with whom it will have reframe its trading engagement once out of the EU.

If British business faces new requirements, it will take time to smooth out the wrinkles and adjust.  That again underlines the importance of a transition agreement between the UK and EU.  For Foreign Direct Investment companies, their patience may be tested.  As Japan robustly pointed out recently, its companies had invested in the UK precisely because it was a member of the single market whose raison d’etre is getting rid of barriers to trade.

While globally trade liberalisation is under pressure, the EU is forging ahead in creating free trade with partner countries. New free trade agreements are near completion, such as with the US (TTIP) and Canada (CETA); and more planned, such as one with India. Even when trade agreements are not finalised, a whole raft of trade obstacles are cleared out of the way that free up increased bilateral business.

Looking internally, the EU the integration of the single market continues with the ground breaking single digital market and a capital markets union.  By not being part of these negotiations, the UK is incurring another cost, somewhat ineffable but very real.

Costing Brexit is in its infancy but costs both quantifiable and intangible there will be.



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The Brexit Grand National

Brexit: the UK is going to leave the EU.  But how?  When exactly? Charles Grant at the Centre for European Reform has looked into the future to see the negotiating track that lies ahead for the UK as it departs the European Union. It is a really interesting piece of work.  You can read it here and I’d highly recommend it. I found it as a link in Martin Wolf’s column this week in the Financial Times (the FT is now essential reading for Brexit watchers). Having read Grant’s article, Wolf thinks that a hard Brexit is the most likely option.

The key point in Grant’s analysis is that the UK has to sort out its relations with the EU, WTO and bilaterally sequentially. That stands to reason but its implications for the Brexit negotiation process and British trade are profound.

Taking the first part, look at the negotiation process in reverse because the ostensible economic goal of Brexit is to free the UK to do trade deals around the world. The UK cannot finalise any bilateral trade agreements unless it has an established position as a stand-alone member of the WTO, as opposed to being a bloc member via the EU. Moreover, it has to divide the world into those countries that have an existing FTA with the EU (53 countries and counting) and those who do not.

The UK cannot establish its standing within the WTO until it has first established its trading relationship with the EU whether that is via the European Free Trade Agreement (EFTA) or the European Economic Area (EEA) or a bespoke UK-EU free trade agreement.

And the UK cannot do that until it has agreed the terms of its withdrawal from the EU. (To get a sense of the possible complexities, the Swiss are a member of the EFTA but not the EEA, having opted instead to negotiate some 120 free trade agreements with the EU. Yet because of the Swiss referendum restricting immigration, their relationship with the EU has to be revised).

Getting back to the starting line, the UK cannot legally do any deals with third parties as long as it is a member of the EU. The sequential process of negotiation facing the UK is not however some mere legalistic imposition. Any country that Britain wants to do a trade deal with will need to know where Britain stands vis-à-vis the EU and WTO otherwise it cannot assess what’s on the table and what are the implications for its trade with other partners.

Brexit then is the Grand National of negotiations with each multilateral forum containing a new set of fences to jump. The tricky bit is that the UK doesn’t know the height of the fences. That will be decided by the members of each fora. Any single member can decide the height that the UK has to clear to get to the next stage. Or can red flag the process at any stage by disrupting the consensus. That applies to the EFTA (4 members) and the EEA (30) as well as the EU (27 other members) and WTO (163).

The UK has only two years to run the course once the Article 50 gun is fired. Taking into account the need to get approval of the EU Council and Parliament, you can shave a month or so that. European elections will interrupt the process as mandates are refreshed and perhaps electoral instructions generated that have a direct bearing on the negotiations.

If there is no agreed extension, then the UK will find itself out of the EU, on its own, riding across unknown country with weights in its saddle courtesy of the WTO default single status membership.

As Wolf argues for various compelling reasons, the balance of probability is a hard Brexit. I know what a hard Brexit is when I don’t think about it but I don’t know what it means when I do. I suspect is more complex that its name suggests, with at least some transition if only to avoid excessive damage to the British economy.  Indeed both Wolf and Grant point to the critical importance of the transition agreement which is needed whether the British Government’s goal is a hard or soft exit from the EU.

And I think that, faced with the longevity and complexity of a soft Brexit negotiation, the impact and unknowns of a hard Brexit, and the post-Article 50 two year timeline, the transition agreement is the where the focus of attention should and will be.

Yet like the terms of a hard Brexit, the nature of such a transitional agreement needs scrutiny. Even now analyses of either are scanty. Given the importance of the British market to its trading partners, there is certainly an incentive to do deals and reach understandings for a transition period. The EU raises much of its capital needs in London, for example. More relabeling and less substantive demands on the UK’s part will facilitate a transition agreement.

Yet there will be a limit to this facilitation. Trade talks are followed with intense scrutiny business and unions who have a very keen interest in the prospective outcomes. Each member state will be subject to their own domestic political pressures, not all of which will necessarily support an interim arrangement. The appetite for transitional arrangements will be constrained the more the UK is looking to shed regulations to improve its competitive advantage. Trade difficulties for the UK will mean opportunities for its competitors within the EU.

No one should underestimate the UK. They have a formidable system, the reflexes of a big power, a large economy, international reach, a veto on the UN Security Council, skilled and canny officials, and a deep reservoir of experience. They have been a source of great firepower within the EU on free trade issues, on justice and home affairs, on security, international relations and overseas development assistance. That list could go on.

Within the EU, we in Ireland have relied on British support and sheer capacity on issues where our perspectives converged. We’ll miss them in Brussels, no doubt about it. Yet formidable though they are, they have set themselves an unenviable task of great, even confounding complexity in leaving the comfort of the EU Jockey Club, mounting up and heading off on the Brexit Grand National.





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Small Advanced Economies Initiative, Dublin Meeting

Ireland hosted the Small Advanced Economies Initiative (SAEI) last week in Dublin Castle. Never heard of it, you say. Not surprising as it’s a low profile gathering of officials and policy experts from seven countries that fit the description on the tin. It’s a forum to share ideas on three policy areas, namely foreign affairs and trade, economics and competitiveness, and science and innovation.

The SAEI was inspired and convened by New Zealand and also includes Singapore, Israel, Switzerland, Denmark and Finland. We like to keep it small so we can exchange views informally. It is very lightly managed without a permanent secretariat but the New Zealanders do a great job jollying everything and everyone into place.

In Ireland’s case, the host was a troika of the Department of Jobs, Enterprise and Innovation, my Department and Science Foundation Ireland. We generated a collegial sense of working together on this which really helped generate the creative ideas needed for an engaging agenda not to mention the logistical demands of organising an international visit of some forty-seven delegates.

I am happy to say the delegates were very happy with the agenda and engaged openly and productively on its wide range of issues. We had an opening session on the relationship of small states to big neighbours (Ireland and Britain, Singapore and China) and my presentation on our relationship with Britain was helped by the venue of Dublin Castle where I could point to King John’s tower, the lynchpin of conquest since it was commissioned in 1204 (don’t worry, I got to the Celtic Tiger and Brexit within 5 minutes). Our second plenary was on “The Great Unravelling? Rising civil society discontent with globalisation: Challenge and Opportunity for small states.” We had a very useful presentation and discussion with the OECD on business success in the digital age and what the data was showing. It was clear from this new engagement that the SAEI and OECD could find some useful work to do together.

In the three strands of expert discussions we exchanged views and proposals on small state diplomacy, economic complexity trends, productivity and competitiveness, regional fragmentation, research commercialisation, ODA and climate change.

Aside from our discussions, the Minister for Foreign Affairs and Trade, Charlie Flanagan (@CharlieFlanagan), hosted a welcome reception at Iveagh House; Peter Sutherland (Attorney General, DG at the GATT and WTO, EU Commissioner for Competition) was an authoritative and compelling keynote speaker at a dinner at Farmleigh; and the delegates visited Trinity for a briefing on Ireland’s innovation system by the heads of six research centre under the expert direction of SFI’s director Mark Ferguson. Before leaving Trinity, the delegates were shown the Book of Kells, that awesome totem of Ireland’s learned antiquity.

Looking to modern frontiers, FabLabs Ireland hosted a demonstration and discussion on their ground breaking and inspiring work (check out short Ireland video here and international video here), showing the vast potential of new technology to address social and economic issues (website here) by making it available to local communities. The Minister for Jobs, Enterprise and Innovation, Mary Mitchell O’Connor (@mitchelloconnor) addressed the concluding reception hosted at the Trinity Science Gallery where the delegates were treated to a survey of Irish innovation and business systems by Martin Curley (Professor of Technology and Business Innovation at Maynooth). Not bad for three days in Dublin!

The global context is now particularly challenging with stagnant trade, sluggish economic growth, regional fragmentation, public anxieties about a host of issues, the distortions of negative interest rates, doubts about globalisation and pressures against trade liberalisation, all against the frightening backdrop of climate change whose affects are here now, not in the future.

On our own small states are particularly vulnerable to the bullying effects of events, big institutions and powerful governments. The issues we discussed all related to how small states can cope in a world dominated by the agendas and interests of big powers. How can we advance the interests of our people and leverage our influence for positive outcomes? How can we shape and indeed share our policies to that effect? We and our friends in the SAEI have quite a bit of work to pick up after the Dublin meeting. That’s a very healthy indication of a productive engagement.


DG Trade Division, Department of Foreign Affairs and Trade

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Remembering New York, 911

Hard to believe it has been fifteen years since my family and I woke up on a beautiful New York morning and faced a day that would reshape our world.
After I dropped our young kids to the UN school, I recall glancing down Park Avenue and seeing a billowing grey cloud of dust. As Press Officer, I had the only TV in the Consulate so when I arrived the locally based colleagues were trying the three flickers to turn it on: something terrible had happened, the twin towers were mentioned.
We stood around the TV images of smoke billowing from the Twin Towers, all of us wrapt and confused. Minutes passed as we tried to make sense of what we were seeing. Then it happened, as if we were watching some event in nature like a chuck of rock sloughing off a cliff or a massive lump of ice shearing from a glacier: one of the towers sank in a haze of thick dust, implacable and indifferent to the people it had been sheltering.
Mobile phone networks were down but we got a call through to Dublin on a land line. We didn’t hang up for days and that phone on the table was our communications lifeline to HQ.
The Department cranked into high gear as the Secretary General, Dermot Gallagher created a crisis centre in the grand ballroom in Iveagh House and assembled a consular team of hand picked officers to fly to New York as soon as possible to strengthen the Consulate.
My wife called. Should she get the kids out of the school? I said no, it was miles from the Twin Towers. Rumours were rife: more planes were in the air about to strike DC: one of the staff wanted to leave because she had heard that two planes were hijacked and flying from Heathrow heading straight for NY like air-borne torpedoes. News reports came in about a plane hitting the Pentagon. I called Mary and told her to get the kids out of school.
What followed was a blur of activity, piecing together what was happening, reporting to HQ, dealing with the press from Ireland. We needed to figure out how many Irish were killed, injured or needing our help. The Irish media asked how many ‘Irish were among the dead?’
But in NY how do you define Irish? Irish born? Child of Irish born? Passport holder? And what of Irish Americans going back two, three generations?
Stairwell: Irish American firefighters going up meet Irish American financial traders going down. Story of the Irish. They died together when the tower collapsed.
As 9/11 unfolded, one of the biggest helps to the Consulate was the NY Police Department. Every other cop had an Irish name: the Irish pulling together.
Mary went to the UN School to get the kids. When she went in, one of the towers was still standing. She told the kids that bad men had flown planes into the towers. They would see one of the towers burning but they should not worry, she counselled. When she left the school she walked to a corner where people were crying. They pointed; the second tower was gone.
During the crisis and its long aftermath, it felt surreal. Clichéd but true, at times it felt like a movie, vivid, heightened reality but so abnormal to qualify as not quite real. Memories of that time have the same character, hived off from normal recall, a feedback loop that refreshes itself, never fading.
The Consulate was manned 24/7: a great team running on adrenaline. Old friends arrived as part of the consular group from Dublin. We had worked together on the Northern Ireland peace process and 911 was redolent of times like the Enniskilling and Omagh bombings, dislocating, violent events.
Our home was on East 37th St. My wife checked in when she could: kids home safe but confused by the news. People were streaming by on foot. Traffic stopped, evening fell, the air started to fill with a strange potent smell, burnt, unpleasant.
We worked long hours at the Consulate. The team from Dublin travelled around in NYPD cars following up on leads from home, checking to see who was still alive, who missing.
NY, city of spontaneous shrines in the days and weeks that followed. We pilgrimaged as a family to the nearby Armory Building, festooned with notes, photos of those hopefully just missing but most likely dead, lost somewhere in the gigantic heap of rubble that was ground zero.
9/11. We all changed that day.

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Tale of a Reformed Bicycle Outlaw and the Zen of Obeying the Lights

I was a bicycle outlaw.  In a choice between momentum and traffic lights, I chose momentum.  The roads were a jungle.  Cars, buses and trucks were careless and dangerous beasts.  Stop signs and lights were energy sapping traps.

Then I had a revelation.  I am an outlaw no more.  My Damascene moment happened on the Rathgar Road.

Some background.  Thanks to the great bike-to-work scheme, I invested in a good road bike and started cycling to work shortly after my return from Israel in 2015.  More or less downhill from the outer edges of Rathfarnam to Clonmel Street in the city centre.  Back home, a bit more of a puff uphill to an elevation of 100m above sea level.  About a 16 km mile round trip.

As a student, I used to cycle everyday from Clontarf to UCD and back again, a daily 30km.  Work and postings intervened.   In the quarter of a century that passed, I did virtually no cycling.

So when I hopped on the saddle again it was back to the future. Being a narrow-tired road bike, it was fast, a bit of a hound in fact.  Speeding off on the steep downhill from our housing estate as I was wobbly at first. But the old cyclist in me came back and I soon found my form. Speed and momentum was all.  It was war on the roads. Getting the advantage of cars was key and this meant that they had to obey the rules and I didn’t.  That levelled things out, I thought.

Approaching traffic lights and intersections called for cunning and timing.  How best to break an inconvenient red light with a minimum effect on my velocity.  How to use pedestrian lights to allow fast passage through an intersection.  How to scan the approaches to a stop sign so I could ignore it.  This was fast and exciting.

Then something happened on the Rathgar Road.  It is a boulevard of Edwardian elegance, with a long slope into the city centre and a wide cycle track. It allows for a very fast clip.  For the bicycle outlaw, precisely halfway along it there is an unfortunate traffic light. Its a straight-forward intersection with a less travelled road.  Breaking the light is a simple calculation.  The pedestrian light across the intersecting road was for me a green light that allowed me ignore the red light facing me.

One morning I cut through with ease but as I passed the paused cars I heard a distinct shout of an indistinct word.  It was clearly aimed at me. My outlawry had been noticed. And it made me think.

In fact, it changed my cycling habits radically. I tried it first as an experiment. I would stop at red lights, plain and simple. It was an odd feeling to suddenly become a law-abiding road user.

And then I had a moment. I was stopped at the lights that mark the start of the Rathgar Road, a complicated intersection in Rathgar village. It was springtime, a bit chilly still.  The sky was a clear deep morning blue.  The tall mature trees enveloping the church there were iridescently green and lovely.  The church spire vaulted into the heavens and it took your mind there, just as the builders intended. Heightened awareness from the cardio of cycling added to the lustre of the scene.

When the light turned green, I moved on. Since then, the zen of actually obeying the rules of the road means my mind is free to stop calculating about survival on the margins.  The survival of me and others, come to think of it.  Between the humdrum of pedalling along, there are moments to take in the surroundings, to notice things. There’s time to ponder.  What a great word.  Ponder.  To obey the rules of the road is to cycle and ponder.

Does all this law-abiding stuff add appreciably to my journey time? Barely, I would hazard.  I often catch up with bicycle outlaws that zip past me at lights.  So my journey time is about the same. The pauses allow my middle-aged cardio system a rest. As I stand still at an empty cross roads patiently waiting for the light to change, I wonder if drivers notice.

It would help if the bicycle lanes were maintained, if the potholes along them were fixed, if cars were not allowed to park there.  One morning I counted fourteen cars parked in the bus/bicycle land on the Rathmines road between Leinster Road and Military Road.

I am not alone, not by a long shot.  Plenty of cyclists pull up at traffic lights along with me.  Over the couple of years I’ve been cycling, there seem to be fewer bicycle outlaws.  Or is that my imagination?

Maybe I and the many fellow cyclists who wait on lights instil a little more respect in drivers about cyclists. And in such small things maybe its a kind of low level peace building between the machine that is helping to kill our planet and the one that can help us save it.



How do the benefits of exercise compare to the harm from pollution?

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