Trade Policy Insights: The Irish Backstop and Trade – What and how much?

Author: Daniela Stratulativ, Head of Global Trade Analysis, IHS Markit Maritime & Trade

Key Points:

• The backstop means there would be a single EU-UK customs territory. There would be no tariffs, quotas, or rules of origin checks between the EU and the UK. If the backstop solution is not applied, it means the UK, including Northern Ireland, will trade under the World Trade Organization rules.
• Ireland is the 5^th largest export market for the UK by value. In 2018, UK exports to Ireland reached 28 bn USD, representing 6% of total UK exports of 492 bn USD. Ireland is the UK's 10^th import partner by value. In 2018, imports from Ireland reached close to 19 bn USD, a share of 3% of the total UK imports of 651 bn USD.
• The UK (not including Northern Ireland) is Ireland's largest supplier at 22 bn USD. Northern Ireland is the 9^th largest supplier for Ireland at 1.7 bn USD.
• Ireland's exports to the UK (not including Northern Ireland) by volume reached close to 7 million tonnes in 2018. The volume of imports from the UK (not including Northern Ireland) was close to 14 million tonnes.
• Ireland's exports to Northern Ireland in 2018 reached 2.3 bn USD and 3 million tonnes. The highest volumes traded were plastering materials and wood.
• In 2018, Ireland's main imports from Northern Ireland by volume were plastering materials, dairy, and mineral fuels, followed by animal feed and cereals. Total volume was 3.7 million tonnes.

The backstop, the UK, and the EU Customs Union

The backstop solution would ensure Ireland's border with Northern Ireland remains open. In November last year, the European Commission stated that the EU and the UK have committed that they will use their best endeavours to conclude and ratify an agreement by 1 July 2020 which would replace the backstop. Earlier on Wednesday, February 20, 2019, European Commission President Jean-Claude Juncker and British Prime Minister Theresa May said that the backstop provision is temporary.

What the backstop means: there will be a single EU-UK customs territory. There will be no tariffs, quotas, or rules of origin checks between the EU and the UK.

If the backstop solution is not implemented, what does it mean for trade? All goods imported into the UK from Ireland and the other EU states will be subject to the World Trade Organization (WTO) rules on tariffs, quotas, and rules of origin. There would be customs checks and new administrative procedures. These can cause delays at the border, given the high volumes of trade.

What are the main products and volumes traded between Ireland and Northern Ireland, and Ireland and the UK (not including Northern Ireland)? Where does Ireland rank among the UK's trade partners? How important trade with Northern Ireland and the UK is for Ireland?

UK (including Northern Ireland) Trade - Ireland ranking among partners

Ireland is the 5^th largest export market for the UK. In 2018, UK exports to Ireland reached 28 bn USD, representing 6% of total UK exports of 492 bn USD. The top partners were the United States with a 14% share, Germany 10%, Netherlands and France 7% each. The UK exports to China also reached 28 bn USD, close to the value of exports to Ireland. The next major market after China is Switzerland at 26 bn USD.

The highest increases in UK exports were to China at 32% compared to the previous year, Switzerland 30%, Netherlands 22%, Ireland 13%, and the United States 11%.

^{Source: IHS Markit © 2019 IHS Markit}

Ireland is the UK's 10^th import partner by value. In 2018, imports from Ireland reached close to 19 bn USD, a share of 3% of the total UK imports of 651 bn USD. The UK's main import partner is Germany with a 14% share of total UK imports in 2018. Following are the United States with a 10% share, Netherlands 9%, China 8%, France 6%, Belgium 5%, Italy and Norway 4% each, and Spain over 3%.

The highest increases in UK imports by value in 2018 were for products from Norway 10%, Belgium 9%, Netherlands 8%; imports from Germany increased at 3%, while imports from Ireland registered a 1% increase compared to the previous year.

^{Source: IHS Markit © 2019 IHS Markit}

Ireland Trade - UK (not including Northern Ireland) and Northern Ireland ranking among partners

Ireland exports in 2018 reached over 166 bn USD, 20% higher compared to 2017. The main export markets by value were the US with a share of 28%, Belgium 13%, and the UK (not including Northern Ireland) 10%.

Ireland exports to Northern Ireland represent 1.4% of Ireland's total exports by value. Exports to the US increased by 24%, while exports to Belgium, the 2^nd largest export market for Ireland, increased at 44%. Exports to the UK (not including Northern Ireland) increased by 1% only, while exports to Northern Ireland increased by 9%.

^{Source: IHS Markit © 2019 IHS Markit}

Ireland imports last year reached 106 bn USD, an increase of 19% compared to the previous year.

The UK (not including Northern Ireland) is the largest supplier at 22 bn USD, 20% of Ireland's total imports. UK exports to Ireland increased last year by 9%. Northern Ireland is the 9^th largest supplier for Ireland at 1.7 bn USD.

^{Source: IHS Markit © 2019 IHS Markit}

Ireland trade with Northern Ireland

Ireland's exports to Northern Ireland in 2018 reached 2.3 bn USD, an increase of 9% compared to the previous year. Ireland's imports from Northern Ireland in 2018 increased by 16% over 2017, reaching 1.7 bn USD. Top exports and imports are presented in the figures below.

^{Source: IHS Markit © 2019 IHS Markit}

Ireland's exports to Northern Ireland reached 3 million tonnes last year, a decrease of 7% compared to the previous year. The highest volumes traded were plastering materials, representing a share of 27% of Ireland's total exports to Northern Ireland by volume, and wood and articles of wood at 17% share. Plastering materials exports decreased by 23% last year, and wood by 2%.

^{Source: IHS Markit © 2019 IHS Markit}

In 2018, Ireland's main imports from Northern Ireland by volume were plastering materials, dairy, and mineral fuels, followed by animal feed and cereals.

Total volume was 3.7 million tonnes, representing an increase of 10% compared to the previous year. Plastering materials account for a 37% share of Ireland's total imports from Northern Ireland, and dairy represents 20%.

^{Source: IHS Markit © 2019 IHS Markit}

UK (not including Northern Ireland) trade with Ireland

In 2018, Ireland's exports to the UK (not including Northern Ireland) by value reached 16.6 bn USD and increased by only 1% compared to the previous year. Imports were 21.6 bn USD, 9% higher than in 2017. Top traded products by value are shown in the figures below.

^{Source: IHS Markit © 2019 IHS Markit}

Ireland's exports to the UK (not including Northern Ireland) by volume reached close to 7 million tonnes in 2018, an increase of 5% compared to the previous year. The volume of imports from the UK was close to 14 million tonnes, also an increase of 5% over 2017. The highest traded products are shown in the figures below.

^{Source: IHS Markit © 2019 IHS Markit}

In-depth analysis of the UK's trade with the EU and non-EU partners, and implications of leaving the EU Customs Union can be found at UK and the EU Customs Union - Why in, why out?

This column is based on data from IHS Markit Global Trade Atlas (GTA) and World Trade Service (WTS). Risks, opportunities, impact on supply chains and shipping industry can be identified for any products at 6-digit code level within GTA. Insights can be complemented with the bill of lading data from PIERS and vessel movements via AIS.

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Full description of HS codes used in the analysis:

02 Meat And Edible Meat Offal

04 Dairy Produce; Birds' Eggs; Natural Honey; Edible Products Of Animal Origin, Nesoi

10 Cereals

22 Beverages, Spirits And Vinegar

23 Residues And Waste From The Food Industries; Prepared Animal Feed

25 Salt; Sulfur; Earths And Stone; Plastering Materials, Lime And Cement

27 Mineral Fuels, Mineral Oils And Products Of Their Distillation; Bituminous Substances; Mineral Waxes

30 Pharmaceutical Products

39 Plastics And Articles Thereof

44 Wood And Articles Of Wood; Wood Charcoal

48 Paper And Paperboard; Articles Of Paper Pulp, Paper Or Paperboard

68 Articles Of Stone, Plaster, Cement, Asbestos, Mica Or Similar Materials

84 Nuclear Reactors, Boilers, Machinery And Mechanical Appliances; Parts Thereof

85 Electrical Machinery And Equipment And Parts Thereof; Sound Recorders And Reproducers, Television Recorders And Reproducers, Parts And Accessories

87 Vehicles, Other Than Railway Or Tramway Rolling Stock, And Parts And Accessories Thereof