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May's deal will leave Northern Ireland in damaging mode of dependency, warns economist

By Suzanne Breen

Senioreconomist Dr Esmond Birnie has came out against Theresa May's Brexit deal - but says he understands why the business community supports it.

Addressing the Better Belfast business breakfast in the city centre this morning, he is expected to say that low productivity and a lack of competitiveness - not Brexit - were the biggest economic problems facing Northern Ireland.

Dr Birnie said: "There are a number of reasons why the business community seems willing to accept the draft Withdrawal Agreement, even if viewed as the least worst option.

"It provides comprehensive legal cover for the process of leaving. It provides for the 'extra time' - the transition period March 30 2019 to December 31, 2020.

"In the short term, Northern Ireland and Great Britain remain, in effect, in both the EU's customs union and single market. In the longer term, Northern Ireland remains in effect in both.

"Much of the status quo is retained - along with the stability and continuity that brings. So, at least from a short-term point of view, the draft Withdrawal Agreement appears advantageous."

But Dr Birnie referred to a quote by the late distinguished British economist, John Maynard Keynes, that the job of an economist involved "ruthless truth telling" however unpalatable.

He said there were "substantial disadvantages" in the agreement which would become apparent in the longer-term.

The UK's net contribution to the EU budget would continue, and total £39bn in the transition period.

The UK couldn't leave the EU customs union unilaterally. Unless the UK could offer variations in its external tariffs it was "hard to see how it would be able to strike free trade agreements with the wider world", he said.

If the UK did get the EU's permission to leave the customs union, Northern Ireland would likely be left behind "unless the EU did judge some other way had been found to preserve the frictionless Irish border".

Dr Birnie described the prospect of a tariff barrier between Belfast and Liverpool as "a serious one".

He said: "The draft Withdrawal Agreement does provide for regulatory checks on goods coming from GB to Northern Ireland.

"That flow is worth about £11bn. By comparison, Northern Ireland's imports from the Republic are worth about £2bn and those from the rest of the EU £2bn. Checks could lead to higher costs, then higher consumer prices."

He expressed concern about Northern Ireland becoming a "rule-taker" from the EU with accountability absent.

"Since the 1970s, the Northern Ireland economy has been in a damaging mode of passivity and dependency," he said.

"A mindset developed of hoping that outsiders would make the hard decisions and provide more hard cash.

"Becoming a special EU zone/protectorate for single market purposes might only reinforce that chronic weakness."

Dr Birnie did not believe that a no deal Brexit would be "as catastrophic" as Bank of England speculation. He voiced support for Norway-plus arrangements, developing into Canada-plus, as a viable way forward.

"I'm talking here about having a very comprehensive free trade agreement between the UK and the EU together with the combination of technology, forbearance and remote checks which would avoid the need for a backstop regarding the border," he said.

Highlighting "deeply rooted weaknesses" in the Northern Ireland economy, Dr Birnie said productivity had remained substantially less than in Britain for a century. The average worker in the US, Germany and France produced 60% more per hour worked than their Northern Ireland counterpart.

"The economy was in trouble before the June 2016 Brexit vote. It was slowing down. Since 2007 growth has been below the UK average and since 2012 well below that in the Republic of Ireland," he added.

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