How the “Brexit” debates and outcome
How the “Brexit” debates and outcome impacted Irish agriculture
impacted Irish agriculture
Dissertation submitted in part fulfilment of the requirements for the
degree of Masters of Business Administration (MBA)
at Dublin Business School
Juliana Braun Matoso
10276131
22th August 2016
Research Supervisor: Andrew Quinn
Masters of Business Administration 2016
Declaration: I, Juliana Braun Matoso, declare that this research is my original work and
that it has never been presented to any institution or university for the award of Degree
or Diploma. In addition, I have referenced correctly all literature and sources used in this
work and this this work is fully compliant with the Dublin Business School’s academic
honesty policy.
Signed:
Date: 22/08/2016
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Acknowledgments
I would first like to thank God without whom nothing is possible.
I am thankful to a number of people who helped me to accomplish this study. I would
like to express my deepest gratitude to my supervisor Andrew Quinn, for his support, time,
patience and encouragement throughout these months.
I would like to thank DBS library staff for their support. I would like to thank my
friends, classmates and family for their support and encouragement. Thank you for motivating
me to go through this study.
I also would like to thank the farmers for giving me their time and accepting to be part
of the interviews.
I would especially like to thank Pr. Bertrand Munier for his time, understanding and
insight on this study. His expertise has been a great asset to this study.
Thanks also go to Lorcan Allen, for his attention, time and who gave me a lot of
information that made a lot of difference on my dissertation.
Kuddos to Aveen Holland for helping me reviewing my draft.
Finally I would like to thank my fiancé Jean-Baptiste for his support, motivation,
comprehension and unending love. For this I will be forever grateful.
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Abstract
The Brexit vote in the UK raised doubts and uncertainties across all of the European
Union and especially the Irish agri-food sector, which exports over 41% of its products to the
UK. In this study we will explain that the Brexit brings an uncertainty that affects decision
making. Agri-food business owners are not completely aware of how this event can affect their
business and what they can do to be prepared to face it. Through interviews we will be able to
demonstrate that the Irish farmers need to be more proactive and could use some guidance. In
this dissertation we will show how the results of this referendum could open up new
opportunities for Irish farmers. These findings are important because it is the first step to a
broader understanding of the management of risk for businesses in the face of similar events.
The strategies suggested by our findings could be extended to more industries and applied to
other future events.
Keywords: Brexit, agriculture, risks, decisions, agri-foods, Irish exports, economic event.
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Table of Contents
Acknowledgments
………………………………………………………………………………………………………………….. 1
Abstract ………………………………………………………………………………………………………………………………… 2
Chapter 1 – Introduction ………………………………………………………………………………………………………….. 6
1.1 Background of the topic …………………………………………………………………………………………………. 6
1.2 Specific angle of the topic
………………………………………………………………………………………………. 7
1.3 Research aim ………………………………………………………………………………………………………………… 8
1.4 Research question …………………………………………………………………………………………………………. 8
1.5 Research sub-questions ………………………………………………………………………………………………….. 8
1.6 Research Objectives ………………………………………………………………………………………………………. 9
1.7 Suitability of the researcher and interest in the subject.
…………………………………………………….. 10
1.8 Approach to the dissertation …………………………………………………………………………………………. 10
1.9 Scope and limitations of the research …………………………………………………………………………….. 11
1.10 Organisation of the dissertation …………………………………………………………………………………… 11
Chapter 2 – Literature Review
………………………………………………………………………………………………… 13
2.1 Literature Introduction …………………………………………………………………………………………………. 13
2.2 Theme one: Irish Agri-Food Sector ……………………………………………………………………………….. 15
2.2.1 Generalities ………………………………………………………………………………………………………….. 15
2.2.2 Historical volatility of the Irish agricultural market……………………………………………………. 16
2.3 Theme two: The UK Market …………………………………………………………………………………………. 17
2.4 Theme Three: The European Union
……………………………………………………………………………….. 19
2.4.1 Overview of trade policies in the EU ……………………………………………………………………….. 21
2.5 Theme four: Risk Management……………………………………………………………………………………… 23
2.5.1 How can Decision Science help managing the “Brexit”
……………………………………………… 23
2.5.2 Risk Management as the main component of decision science in face of “Brexit”
…………. 23
2.5.3 How do cognitive biases affect the decision making process regarding event risk …………. 24
2.6 Theme five: Strategic (short-term) Risk Awareness & Management ………………………………….. 25
2.7 Theme six: Structural (long-term) Risk Awareness & Management …………………………………… 25
2.7.1 How do Businesses adjust to major macroeconomic changes ……………………………………… 25
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2.8 Conclusions: Challenge for Irish Agri-Food exporters. …………………………………………………….. 27
Chapter 3 – Methodology ………………………………………………………………………………………………………. 29
3.1 Methodology Introduction ……………………………………………………………………………………………. 29
3.2 Research Questions ……………………………………………………………………………………………………… 29
3.3 Research Philosophy ……………………………………………………………………………………………………. 30
3.4 Research Approach ……………………………………………………………………………………………………… 32
3.5 Research Strategy
………………………………………………………………………………………………………… 32
3.6 Research Choice
………………………………………………………………………………………………………….. 33
3.7 Time horizon ………………………………………………………………………………………………………………. 34
3.8 Sampling – Selecting Respondents
…………………………………………………………………………………. 34
3.9 Data Collection Instruments………………………………………………………………………………………….. 35
3.10 Research Ethics …………………………………………………………………………………………………………. 36
3.11 Limitations of Methodology ……………………………………………………………………………………….. 37
Chapter 4 – Data analysis and findings ……………………………………………………………………………………. 38
4.1 Introduction
………………………………………………………………………………………………………………… 38
4.2 Questions……………………………………………………………………………………………………………………. 38
4.3 Findings and analysis …………………………………………………………………………………………………… 38
Chapter 5 – Conclusion and Recommendations ………………………………………………………………………… 51
Chapter 6 – Self-reflection on own learning and performance
…………………………………………………….. 55
6.1 Introduction
………………………………………………………………………………………………………………… 55
6.2 Reflection on dissertation …………………………………………………………………………………………….. 56
References
…………………………………………………………………………………………………………………………… 59
Appendices
………………………………………………………………………………………………………………………….. 64
Appendix 1: Questions used for the farmers’ interviews.
……………………………………………………….. 64
Appendix 2: Sampling – Farmers ……………………………………………………………………………………….. 65
Appendix 3: Sampling – Economist …………………………………………………………………………………….. 66
Appendix 4: Interviews – Farmer 1 …………………………………………………………………………………….. 67
Appendix 5: Interviews – Farmer 2 …………………………………………………………………………………….. 69
Appendix 6: Interviews – Farmer 3 …………………………………………………………………………………….. 70
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Appendix 7: Interviews – Farmer 4 …………………………………………………………………………………….. 71
Appendix 8: Interviews – Farmer 5 …………………………………………………………………………………….. 73
Appendix 9: Interviews – Lorcan Allen
……………………………………………………………………………….. 75
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Chapter 1 – Introduction
1.1 Background of the topic
The European Union have brought benefits to Ireland’s agricultural sector; these
benefits include investments to improve farmers’ living conditions and to help them become
more competitive at market. A lot of capital was invested, and by 2020 about € 11 billion will
be invested on the Irish farming sector (see (European Commission, 2015)).
In addition to these investments, the European Union represents an opportunity for the
farmers to sell their goods easily and with little taxation across other EU countries. As a natural
neighbour, the UK is the preferred country for exports, as mentioned by Bordbia.ie (2016a)
and Matthews (2015), representing circa. 41% of the total exports.
Figure 1: Ireland’s exportation of agri-food and drinks. Source: Bordbia.ie (2016)
Compared to the rest of the countries in the European Union the Irish agri-food is the
sector most connected to the UK. Excluding fish, the Irish agri-food exports to the United
Kingdom represent 51% of Ireland’s total agri-food exports and the Irish imports from the UK
represent 51% of Ireland’s total imports.
The agri-food sector exports 41% of its total production to the UK, with the most
represented products being dairy, beef and lamb. As mentioned by Donnellan and Hanrahan
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(2016), in 2014, meat (particularly beef) and dairy products (butter, cheese and milk powders)
represented 46% of agri-food exports to the UK. These products are most sensitive to the
possible “Brexit” as they do not compete in the world market and they are important from a
socio-economic point of view in peripheral regions of the UK.
1.2 Specific angle of the topic
As the UK is part of the European Union, the following from European Commission
(2014) is applicable to it: “The single market with the free movement of goods, services, people
and capital within the EU’s borders is the cornerstone of the Union’s ability to create jobs by
trading with other countries and regions”, meaning that the trade is free in the European Union.
Newspapers and politicians blended the words “British” and “exit” to create “Brexit” as a handy
descriptor of the idea of the UK leaving the European Union. The Britain’s prime minister
David Cameron promised that if he got re-elected on 7 May 2015 then he will provide a
referendum before June 2016, so the British can choose whether to stay in the European Union
or to leave it (see (The Economist, 2015)). What do Irish farmers think about the Brexit? What
do economists think of the farmers’ opinions and their impact on the Irish agricultural business?
What can farmers learn or do in relation to the Brexit? As these farmers now recognize how
dependent they are on the UK in the agricultural sector; do they have a plan?
The uncertainty of what will happened as the UK voted to leave the EU brought doubts
and fear in the agricultural sector.
Bodkin (2016) highlights that in the worst case scenario the ESRI (Economic and Social
Research Institute) anticipated that if the UK votes to leave the European Union, the trade
between the UK and the Republic of Ireland will suffer a 20% fall. As reported by Bird and
Kantchev (2016), as the UK chose to leave the EU, the pound was affected and collapsed by
more than 11%. It reached the lowest level against the dollar since 1985. The IBEC report said
that “Dublin could benefit if some corporate activity relocated … but on balance the risks
outweigh any possible advantages”.
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1.3 Research aim
The aim of this research is to understand what the actual agricultural economy between
the UK and Ireland is and how debates on this subject are affecting their business today. It is
also about analysing the farmers’ opinions on the “Brexit” and its impact on their business.
These points of view will then be criticised thanks to economist’s analysis and we will finally
study the impact their opinion has on their business, as objectively as possible.
1.4 Research question
The main question of this research is:
“How has the debate and outcome about the “Brexit” affected Irish agriculture?”
The objective of this research is to understand how the “Brexit” is affecting the farmers
business after the referendum in June 2016, having in mind that the UK has a big influence in
the Irish agri-food sector. It is hoped that the conclusions of this main research question will
lead to recommendations, not only for farmers, but for any business owner facing the
possibility of an alarming event.
1.5 Research sub-questions
The sub-questions on this topic will be:
“How substantial is the agricultural economy between Ireland and the United Kingdom
today?” This question will allow us to understand how relevant the relationship between the
UK and the Republic of Ireland is in the agricultural sector.
“What do farmers consider to be the major issues regarding the Brexit?” It is relevant
to explore farmers’ concerns about this event, and if the debates made on the subject are
affecting their businesses (for example, by impacting the decision making processes of the
business owners).
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“How do economists evaluate farmers’ opinions and their potential impact on the Irish
agricultural business?” The purpose of this question is to have a better understanding of the
subject from an economic point of view. By confronting economists’ opinions to farmers’
concerns, this question will allow us to better understand the deviation (if any) from the usual
decision making processes that the farmers face in front of the uncertainty of an alarming event.
If a derivation is noted, the economists’ opinions may form the bases of recommendations to
the farmers.
“What could farmers do to mitigate their concerns regarding the “Brexit”?” This
question needs to be made in order to know if the debates on the “Brexit” are affecting their
business and if they are prepared to it.
The practical benefit of the research is to calibrate the impact of the farmers’ opinions
on their business (assuming that their opinion has a real impact on their business, for example
if they prepare or not for the “Brexit”).
The theoretical advance that this research could bring is knowledge that farmers could
use for their businesses.
1.6 Research Objectives
As mentioned by Saunders, Lewis and Thornhill (2016, p. 45), the research objectives
are better seen when the researcher is very clear in the purpose and the direction of the research.
These objectives give support to put in practice the steps to answer the research questions. In
this sense the objectives of this study are:
– To identify why the UK is important in the Irish agri-food industry,
– To understand what the farmers consider at risk in their businesses in the context of a
possible “Brexit”,
– To have a better comprehension of what farmers think about the debates related to a
possible “Brexit” and how they think it affects their businesses.
– To help Irish farmers how to prepare for the possibility of similar economic events’ in
the future.
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1.7 Suitability of the researcher and interest in the subject.
This research was chosen because of the importance that the subject can bring to
Ireland’s economy in the agriculture sector, which has an important significance in Ireland. As
mentioned by Food and Drink Industry Ireland (2016), Ireland is the largest net exporter of
dairy products, beef and lamb in Europe. The “Brexit” could raise concerns for farmers and the
Irish economy as a whole. The study of this event, and of the concerns that it brings to farmers
and economists, are interesting not only for today, but for the possibility of another external
event which could impact this sector. This topic was also chosen for its interest in studying the
reaction of people that are directly affected by alarming events, and how this reaction
effectively affect their business and their decision making processes.
1.8 Approach to the dissertation
The first step of the approach to the dissertation is to understand the importance of the
UK in the Irish agri-food sector through literature review. As the “Brexit” debates are a new
topic, newspaper articles will need to be studied to know how a possible “Brexit” can affect
the Irish agri-food sector: there are very few scientific studies yet.
To understand better what farmers think about this event and how they are reacting to
it, the literature review will also focus on cognitive biases affecting the decision making process
in the context of uncertainty. We will also study how businesses adjust to major
macroeconomic changes in order to better understand the resilience farmers can expect.
Another important topic of study in the literature review is the volatility of the Irish
agricultural market, including the influence of external events and how these events affected
the economy.
This dissertation will also contain a research methodology and primary data. The
primary data will be made through interviews with farmers and an economist’s analysis to have
a better understanding of how these debates can affect the Irish agri-food industry.
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1.9 Scope and limitations of the research
The “Brexit” Referendum is a very recent event and there are many debates about the
subject, however there are not many studies about it.
In the Republic of Ireland there are 139.800 family farms according to Teagasc.ie
(2016). As the time for this research is limited, it is hard to know what the majority of the
farmers think about the event. Therefore the sample of farmers interviewed was limited.
In fact the sample was made of only five Irish farmers. Therefore, the answers to the
questions addressed cannot be regarded as representing the feelings of all Irish farmers toward
a Brexit.
1.10 Organisation of the dissertation
This dissertation will contain 6 chapters, which will be organised as follows:
Chapter 1 – Introduction
This chapter gives a general view of the topic chosen for this study. It also explains the
background and questions to be discussed through this dissertation.
Chapter 2 – Literature Review
This chapter will approach the importance of the UK in the Irish agri-food sector. Also,
to better understand why the farmers’ point of view on the Brexit Referendum is important, it
is paramount to understand how uncertain events can affect business decision making and how
the farmers are adapting to this possible event.
How can businesses change because of external reasons? The study of the historical
volatility of the Irish agricultural market will help to answer this question.
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Chapter 3 – Research Methodology
Chapter three will outline why the chosen research methodology was best suited to the
subject matter of this dissertation. It will also discuss this author’s chosen method of data
collection.
Chapter 4 – Data Analysis
This chapter will examine the primary research findings. The interviews carried out
with farmers will be analysed by an economist to provide academic insight.
Chapter 5 – Conclusions and Recommendations
This chapter will focus on findings of the dissertation, providing details of the
objectives and reflecting upon whether they were achieved or not.
Also, this chapter will add some recommendations to farmers regarding their decision
making processes in the eventuality of a “Brexit”.
Chapter 6 – Self-Reflection on Own Learning
In this last chapter, there will be an analysis of personal learning and what this
dissertation brought to this researcher’s own knowledge as well as knowledge in the field of
study.
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Chapter 2 – Literature Review
2.1 Literature Introduction
In the next chapter a few themes will be discussed and analysed, with the objective of
having a better comprehension of the subject area of this research.
To have a better comprehension of the farmers’ opinion on this topic, first of all it is
essential to know how influential the UK is to the Irish agri-food sector.
Irish farmers are being confronted with a significant risk to their businesses. This leads
to concerns and emotional decisions that can have long term effects. With this event, even
considering that it will take a few years to take effect; it is critical that farmers understand their
range of options in the face of this challenge in order to generate strategies for their businesses.
In order to understand this topic with clarity, we will examine the volatility of the Irish
agri-food market. Our focus will be on how this market can be affected, directly or indirectly,
by a possible alarming event such as the “Brexit”.
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Figure 2: Business risks possibilities with the Brexit.
Source: IBEC
The Brexit will have an impact on a number of sectors. As reported by Woods (2016),
IBEC estimates that the Brexit will create a lot of uncertainty between Ireland and the UK
while the UK negotiates new trade agreements with the EU. This uncertainty will possibly lead
to a fall in the trade by 20% or more. As mentioned before, the Irish agri-food sector will suffer
the most. Teagasc reported that the Irish agri-food sector is likely to lose more than €800
million per annum. However, it is expected that Ireland, as the only English speaking country
in the EU, will benefit as an attractive region for foreign direct investment (FDI). On the other
hand, the UK is very likely to have a reform of its own FDI strategies to make it even more
attractive: As a non-EU member the UK does not need to accept the same trade conditions as
Ireland. Considering that the Sterling is decreasing in value, the Irish exports and industries
will become less competitive compared to the British ones.
The Taoiseach Enda Kenny stated that there is a big possibility that the borders between
Ireland and Northern Ireland will return. According to him, this will undermine years of
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negotiation as part of the peace process between the two countries. IBEC says that even
considering that the Northern Ireland is not vital for the Irish exports, the borders can obstruct
the business between north and south weakening the island economy.
According to PWC Ireland (2016), the Irish industries that will be more affected by the
Brexit are:
–
Financial Services: corporation tax, VAT, capital and currency controls and
passporting will be adjusted and companies might consider where they are located. The Brexit
will bring more expenses for companies that will need to be in two different regions (UK and
EU), regulatory frameworks, and changes in capital structures among others.
–
Energy: 85% of the Irish energy is imported from the UK. The emergency
supply is relying on the UK and controlled by EU rules. With the UK leaving the EU the
relationship in this sector will change and it is inclined to increase charges to households and
business.
–
Pharmaceutical: it is predicted that the Brexit will impact on regulation and the
supply chain.
–
Agri-food: the UK is a major trade partner for Irish exports and imports.
Competition with non-EU countries will be higher, amongst other issues, and the increase of
costs regarding the border controls will have to be considered.
We will now focus on the impact on the agri-food sector.
2.2 Theme one: Irish Agri-Food Sector
In order to better assess the impact of the Brexit on the agri-food sector we will now
focus on examining what this sector consists of:
2.2.1 Generalities
The Irish agri-food sector provides the value of €24 billion to the Irish economy, as
reported by The Department of Agriculture, Food and the Marine. The sector creates 6.3% of
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the gross value added, 7.7% of national employment (almost 10% if marketing and processing
are included) and nearly 10% of Ireland’s exports (see Teagasc.ie (2016)).
The agri-food sector in Ireland is the most influential local manufacturing sector,
employing 150,000 people. The sector contains 600 food and drinks companies that exports to
more than 160 countries. Studies reveal that compared to other sectors the return made in the
agri-food sector is higher than the investment made on it. The reason is that it is locally sourced,
as 71% of the raw material is provided by Irish sources.
The Central Statistics Office studies revealed that the agri-food sector (agriculture,
food, drink and tobacco) represents circa. 7% of GDP and along with primary agriculture
representing circa. 2.5% of GDP.
2.2.2 Historical volatility of the Irish agricultural market
As mentioned by Munier (2012), “agricultural and more generally commodities prices
have become more volatile than ever”. The cause of this new pricing behaviour is unclear to
traditional economists. At the same time, parts of the world are suffering from the lack of food.
Over 30 countries have had riots during the first decade of the 21st Century. It should not be a
surprise that these issues happened when basic food prices rose massively. Producers have seen
their incomes decreasing because of the unpredictability caused by this new condition in the
market. National leaders are not sure of what to do as the reasons for this volatility are not well
known.
As reported by Agriland Team (2016), the Irish milk price is facing volatility and there
are ways to solve this issue, such as getting the right soil fertility, maximising grass growth and
utilising and increasing the financial knowledge of this business. Diarmuid Donnellan, AIB
Agri Adviser, showed that we are in a volatile world in the milk price market, with the average
milk price over the last 5 years being 34.7 c/L and the 10-year average being 32c/L.
Moran (2016), mentioned that the milk price in January 2016 compared to January 2015
suffered a decline of 12% to 29.28c/kg from 33.50c/L. This was the biggest decline in the
European Union.
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Another product that is important in the Irish agri-food sector as mentioned before is
meat. As reported by Hogan (2015), the Department of Agriculture’s Annual Review and
Outlook stated that over the next ten years the beef prices will continue to fluctuate.
The purpose of studying this theme is to know that the volatility of the market of
significant products in the Irish agriculture happens because of external reasons. This volatility
potentially increases in conjunction with decisions made while subject to cognitive biases
(studied further in 2.5.3), and it is a hypothesis that the volatility increases severely as a
consequence of the debates on the Brexit.
Figure 3: Raw milk price evolution in January 2016 compared to January 2015
2.3 Theme two: The UK Market
The first theme is related to the importance that the UK has to Ireland in the agri-food
sector and that is the reason why farmers are concerned about the possible “Brexit”.
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The agri-food sector in the Republic of Ireland is indeed more connected to the UK than
the rest of the Europe. Meaning that in the case of a possible “Brexit”, the Republic of Ireland
would be the most damaged country in the agri-food sector in the EU. As mentioned by
Matthews (2015a), the value of Irish agri-food goods exported to the UK in 2013 (excluding
fish) was €3.2 billion whilst goods imported into Ireland from the UK were valued at €2.6
billion.
As mentioned before, the UK represents over 40% of the Irish agri-food exports. As
explained by the Irish Farmers’ Association (2016); over 50% of Irish beef, 60% of Irish cheese,
pork to the value of €350 million and nearly 100% of Irish mushrooms are exported to the UK.
It is important to mention that the UK is Irish agri-food business’ most significant market as
they have a common language and overall, similar tastes in food. In 2016 the Sterling has
weakened, mostly because of the uncertainty over the referendum. This alone already decreases
the competitiveness of the Irish exports.
As mentioned by Matthews (2015b), 53% of Ireland’s total agri-food is imported from
the UK. The “Brexit” will involve a substantial interruption of Irish food trade with the UK.
Border controls will be necessary to trade with Ireland, which is the only country with a
common land border with the UK, and this border would be very difficult to manage.
Another important role that the UK has in the Irish agriculture is that it provides 12%
of the EU’s budget and it is the main contributor to funding this European budget. The
contribution of the UK in 2013 to the EU was €17.1 billion. On the other hand the investment
of the EU in the UK was €6.3 billion meaning a profit of €10.8 billion. “Irish agriculture is a
significant beneficiary from the CAP budget, receiving over €1.5bn annually through Direct
Payments and the Rural Development programme.” (See Irish Farmers’ Association
(2016)).The UK leaving the EU means that this void will need to be fulfilled in other ways,
such as decreasing expenses or an increase in contributions from the other members of the
European Union.
As reported by Lowry (2016), the confidence on the “Remain” vote could be seen prior
to the 23rd of June as the FTSE 100 (London Stock exchange) in London closed in its highest
level on Thursday 23 evening compared to the last two months. However on the next day,
following the leave vote, “£120bn wiped off the value of the FTSE within minutes of the
opening”. Considering that the Irish market is well connected with the UK, it also suffered
losses. The following Friday and Monday, the ISEQ (Ireland Stock Market) had a decrease of
19
17% as investors believed that the Brexit will be unfavourable for Irish businesses. Many big
agri-food companies had to face big losses such as Origin Enterprises (-13%), Aryzta (-11%)
and Glanbia (-10%).
To have a better understanding about the Brexit, it is important to know how the
European Union works and this is our next topic.
2.4 Theme Three: The European Union
According to Europa.eu (2016), the European Union is composed by 28 European
countries that are economically and politically united.
The European Union was created after the World War II, with the purpose of promoting
economic collaboration between the countries, having in mind that countries that become
economically interdependent would avoid conflicts.
In 1958 the European Economic Community was created through the treaty of Rome,
with economic cooperation among six countries: Belgium, Germany, France, Italy,
Luxembourg and the Netherlands. Since then, the single market was created and still works on
its full potential.
“What began as a purely economic union has evolved into an organization
spanning policy areas, from climate, environment and health to external relations and
security, justice and migration” (see Europa.eu (2016)). As a consequence the name the
European Economic Community became the European Union in 1993.
The EU is based on treaties, voluntarily and democratically agreed by its member
countries.
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“The EU is also governed by the principle of representative democracy, with citizens
directly represented at Union level in the European Parliament and Member States represented
in the European Council and the Council of the EU”.
Figure 4: Countries that are part of the EU over the years
Source: BBC News (2016)
The EU has achieved more than half a century of peace, stability, and prosperity, it
helped to improve living standards in Europe and introduced the Euro. The EU won the Nobel
Peace Prize in 2012 as a result of its accomplishments.
Citizens of member countries in the EU can travel freely over most of the continent
with the end of border controls between member states. Also, it is easier for citizens from the
EU countries to work, study and live abroad.
The single market is the most important economic generator of the EU, enabling most
services, goods, money and people to move easily.
The core values of the EU are human dignity, freedom, democracy, equality, the rule
of law and the human rights and one of the main ambition is to globally promote the human
rights.
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2.4.1 Overview of trade policies in the EU
As explained by the Delegation of the European Union (2013), trade is very important
for the European Union and has been, since the start. The idea of countries that fought against
each other trading and therefore avoiding future wars was the beginning of the modern EU.
The European Union has been at the forefront of attempts, since the 1950’s, to have a global
trade.
The European Union is the biggest single participant in the World Trade Organization
(WTO). As the world’s largest trading block, it strongly adheres to a rules-based international
trading system. The trade policy is controlled by the EU, which speaks for the interests of the
EU members, even though all of its member countries are individually part of the WTO.
Trades are important tools to stimulate economic growth and jobs. The European Union
persists in Free Trade agreements between its member countries. This facilitates both
liberalising trades and launching markets.
The EU benefits developing member countries by raising their economies through an
array of advantageous trade agreements. The aim here, of giving trade preference to these
members, is to rescue them from their pre-existing poverty cycle. “Substantial incentives in the
form of preferential association agreements and more recently, deep and comprehensive free
trade agreements are available to those willing to adopt such closely held EU values as
democracy, the rule of law, respect for human rights, and sustainable development”.
One of the EU’s exclusive powers is the trade policy. The European Commission on
the behalf of the EU discusses international trade negotiations. This is made in partnership with
the EU’s “co-legislators”, the Council of the EU (the Member States assembled) and the
European Parliament.
The Council, which is based on a mandate suggested by the European Commission,
needs to approve the start of the negotiation. The final negotiation can only be accepted by the
European Parliament and the European Council. In some cases the Member State ratification
is requested, when the negotiation is subject to Member State jurisdiction.
The European Union has Free Trades Agreements (FTAs) with global partners. These
agreements provide privileged access to countries that consider non-tariff barriers to trade. The
FTAs contribute to more investment opportunities, cheaper and faster trades, easier transit,
22
establishment of common standards, predictable trade policies and encouragement of
sustainable development.
Stabilisation and Association Agreements are being made with the Western Balkan
countries. These agreements are offered by the EU to support these countries in going forward
into a full commitment to EU membership. Part of this process is the continuous establishment
of a free trade area.
The EU proposes a powerful relationship with its closest neighbours, through the
European Neighbourhood Policy, the Eastern Partnership, and the Union for the
Mediterranean. Deep and Comprehensive Free Trade Agreements suggest countries with
interest to have a closer integration with Europe and give a bigger liberalisation of trade in
investments, goods and services.
The UK provides 10.5% of funding to the EU budget, as reported by Hennessy (2016).
Of all of the EU budget, 37% is directed into the Common Agriculture Policy (CAP).
Considering this, the Irish Minister of Agriculture Michael Creed said this will have a big
impact on the CAP from 2021. A study made by Farm Europe shows that the UK contributes
only 5% of the budget for CAP and therefore the farming organisation says that they can
manage the Brexit. Using 2013 as a guideline, the UK received €3.9bn from CAP whilst
providing €6.8bn to CAP’s budget. This gives an idea of how the Brexit can impact the CAP,
meaning that the CAP budget will have less than 5% of contribution, or about €2.9bn per year.
According to Luc Vernet (Farm Europe co-founder), “the impact of a Brexit is first and
foremost concentrated on the UK’s farming sector and on trade with many uncertainties,
mainly for UK farmers”.
Another big concern that the Brexit brings forward is what trading arrangements the
EU and the UK will agree upon. As explained by Mooney (2016), these arrangements can
obstruct Irish exportation. The UK has a number of options and the less popular is that it would
leave and trade with EU member states under WTO rules. In the case of Ireland, the best course
of action would be that the UK negotiate an appropriate trade agreement with the EU, because
the UK is very significant to the Irish economy.
The problem is, that this does not mean that the UK and the other members of the EU
would agree on that. The Brexit means completely leaving the agreed conditions of the EU.
Some English voters disagree, for example, about whether people from other EU countries
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should have free work entry. The best option would be to let the UK have full access to the EU
market, for both Imports and Exports. However, this would bring other negotiations related to
free work entry of EU citizens or the UK contribution to the EU budget. This would be great
for Ireland, as the trade with the UK would continue.
2.5 Theme four: Risk Management
2.5.1 How can Decision Science help managing the “Brexit”
Decision Science is the science of making decisions. It goes from vote theory, (that was
admittedly born in 1770 with the works of Borda (1781)), which applies when communities
need to make a common decision; to game theory (fathered by John Nash), which applies when
maximum gains are sought in a system where “players” have choices to make that change the
system and its outcomes; and to more complex approaches such as multi-criteria decision
analysis (MCDA) that helps decision-makers to inform alternatives in complex systems where
different criteria are to be considered.
MCDA is typically used by corporate decision makers through a number of methods
that can be found in the studies of Figueira, Greco and Ehrgott (2005). Companies make
decisions based on criteria chosen according to their impact on the business. MCDA helps
companies to make the best decision by better understanding the relative importance of these
criteria and how they interact to achieve a specific outcome. An example would be to assess
the relative importance of health and safety, finance and other sectors in the agriculture
industry. This method is very significant when facing uncertain events, such as the “Brexit”,
as it can be used as a method for risk management.
2.5.2 Risk Management as the main component of decision science in face of
“Brexit”
When uncertainty is high some specific methods of decision science, such as risk
management, need to be used.
According to ISO 31000, risk is the “effect of uncertainty on objectives” and
an effect is a positive or negative deviation from what is expected.
