Will the Irish economy go Dutch after Brexit?

A few years ago, King Willem-Alexander of the Netherlands, who occasionally used to moonlight for fun as a pilot for the Dutch airline KLM, bumped into the Ryanair chief executive, Michael O'Leary, at a conference.

O’Leary was characteristically bombastic and facetiously invited the royal to work for Ryanair instead. It isn’t hard to imagine O’Leary smirking in self-admiration at his temerity in wiping the eye of a monarch in a slagging match.

Ryanair subsequently became embroiled in a damaging industrial relations war with many of its pilots, leading to strikes in some countries before a peace deal was struck last year. Its difficulties were compounded at one stage by a staff scheduling crisis that forced Ryanair to cancel thousands of flights.

For a time, O’Leary’s well-won reputation as an aviation genius lay in tatters. Sensing an opportunity to get his own back, the Dutch king sat down at his computer and composed an email to O’Leary, asking him if he was still looking for pilots. By some accounts, the Ryanair boss struggled to see the funny side.

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King Willem-Alexander, who appears to have a mischievous streak of his own, had a twinkle in his eye as he regaled a handful of Irish journalists with the story last week in a grand room in Noordeinde Palace in The Hague.

The invite to Irish media was extended by the Dutch king ahead of his three-day state visit to Ireland next week, when he will be accompanied by his wife, Queen Máxima, who was born in Argentina.

The Netherlands is, of course, a parliamentary democracy and the king’s role is largely ceremonial. But he isn’t coming to Ireland simply to eat biscuits and drink tea, nor to discuss the exploits of his favourite football team, Ajax.

The state visit is being conducted as the spectre of what could be the largest economic and political earthquake to affect Ireland or the Netherlands since either joined the European Union looms: Brexit. A republic and a constitutional monarchy are largely united in similar cause as the two countries proportionally most affected by the UK's exit from the EU.

This State and the Netherlands have extensive trade links – the Republic exports more than €6 billion in goods there each year – and near doppelganger economies fuelled by technology and foreign investment. Both also have reasonably similar national outlooks on a range of fiscal issues with the exception, perhaps, of agriculture.

Officials on both sides have been busy surveying the likely post-Brexit landscape, weighing up the potential for new alliances. When their mutual British ally leaves the EU table, expect the Irish and Dutch to shuffle a little closer.

Economic emphasis

State visits always include an element of pomp and pageantry, especially when royals are involved. But as far as the main priorities go for the upcoming Dutch state visit, in the words of Bill Clinton, it’s the economy, stupid. The economic emphasis of King Willem-Alexander’s trip, which begins next Wednesday, is clear from the itinerary.

After the obligatory formalities on the first day at Áras an Uachtaráin with President Michael D Higgins, followed by the laying of memorial wreaths and standard greetings with political figures, the next stop on the royals' Irish tour will be Dogpatch Labs, a Dublin start-up hub.

The Irish and the Dutch both see themselves as tech sector bastions. Both are prepared to use tax policy for an edge (the “Double Irish” had a “Dutch sandwich”). Both compete heavily for tech investment from mostly US web giants.

Ireland and the Netherlands will also sign an updated double taxation treaty during the royal visit, while there will also be a jaunt to the deepwater terminal in Cork to emphasise the importance of the maritime industry – Rotterdam is Europe’s largest port and the entry point to the EU for much of this State’s goods exports after the UK land bridge.

The Dutch delegation even includes a trade mission led by the Netherlands foreign minister Stef Blok and its trade minister, Sigrid Kaag.

“We [Ireland and the Netherlands] are both long-time members of the EU with a strong tradition in free trade,” Blok told Irish media in the Hague ahead of the state visit. “Both are strong in agriculture. We both attach great value to rule of law. We both think taxpayers’ money should be spent wisely at EU level.

“Brexit is also an enormous challenge. There is common interest for the future that binds us. ”

Blok also highlighted both countries’ shared interest in pushing back against the mostly French-led drive to co-ordinate tax policies at EU level, which could threaten both states’ investment platforms.

“In the future, we will need each other even more,” said Blok.

Media blitz

A small Irish media pack was shepherded around the Netherlands last week for a three-day blitz on the economy of the Netherlands, highlighting its similarities to Ireland and echoing the themes of the royal visit.

If the so-called Silicon Docks area of Dublin is the epicentre of the Irish tech industry, then the pretty town of Delft is its equivalent in the Netherlands. Dutch start-ups gravitate to the area, which has a strong university links.

YesDelft! is a start-up hub in the town, which focuses on nurturing young tech companies with “worthy” aims, such as helping the environment or solving complex social problems. Think in terms of Dublin’s Dogpatch Labs, but with added conscience instead of just pure commerce.

YesDelft! brings together founders, funders and mentors in what it calls an “ecosystem”, neatly capturing a millennial zeitgeist. The organisation that runs it does not take equity in the start-ups, nor do any of the mentors. But YesDelft has helped arrange more than €400 million in seed funding for participating start-ups.

About 80 per cent of them are still active, an impressive run rate in a sector where failures are commonplace.

Ireland has little to learn from the Netherlands in terms of attracting foreign tech giants that like lower tax bills. But when it comes to encouraging indigenous start-ups, this State could do worse than observing how it is done in Delft.

And then there is farming. We love our farming in Ireland. But so, too, do the Dutch. The Netherlands is the biggest agrifood exporter in Europe, second globally only to the US. Irish and Dutch perspectives can differ, however, at EU level on the common agricultural policy. Farmers in Ireland rely on CAP payments more than those of the Netherlands.

Both states are relative powerhouses in dairy. Anton Stokman, a laid-back Dutch farmer with a penchant for high-tech gadgets, runs a large dairy operation in Emmeloord in the north of the Netherlands. For Irish farmers looking for a glimpse of the future, Stokman's farm may provide a window. His cows wear monitors that provide data on everything from their milk production and health, to their likelihood to welcome the romantic company of a bull.

As well as helping Stokman makes practical decisions onsite, the information is also fed into a co-ordinated network along with data from other farms. There, it can be accessed by academic researchers, tech developers and other companies with an interest in building products or services designed using paid access to the data. The farmers control access to their own information.

“The farmer gets an email requesting access to his information, you push a button, and the data starts flowing,” said Stokman. “The challenge is to not be sitting in front of a computer all the time.”

In addition to the data innovation, the farm also includes curios such as a biogas operation using cow effluent, a relaxing outdoor bath for the animals (Stokman calls it a “jakoezie”) and waterbeds for them to sleep on. Stokman claims it helps them to produce more milk.

Customs union

After agriculture, a broad swathe of the Irish exporting sector is most heavily exposed to Brexit. Nobody yet knows what the UK’s trading relationship with the EU will look like, or whether it will remain in any form of customs union.

For a long time during the Brexit negotiations, the Government didn’t want to give the impression that this State was preparing for a no-deal Brexit, or the reimposition of a Border with the North to protect the EU single market. But in Rotterdam, the sprawling 40km-long port with deepwater facilities, through which about 470 million tonnes of goods flows annually, they had no such political sensitivities with which to contend.

Dutch officials were last week keen to highlight that Rotterdam is Brexit ready. Up to €400 million was invested in the port last year by authorities, according to Leon Williams, an executive with the Port of Rotterdam.

“We felt the most sensible thing to do was to prepare for the worst when it came to Brexit,” he said. “That means a no deal Brexit on World Trade Organisation terms.”

Although Rotterdam is a deep-sea port with arrivals and departures from all over the world, UK-Rotterdam short-sea movements alone account for about 9 per cent of the total throughput, or about 40 million tonnes annually.

That is more than the entirety of goods through Dublin port. The Dutch port authorities estimate that, depending upon how “hard” Brexit turns out to be, it could cost Rotterdam between 2 and 4 per cent of its total output.

Port authorities have pushed British and Dutch companies using the port to register with its Portbase information-sharing system. They have also built swathes of extra parking spaces for British trucks carrying goods, in anticipation of them being held up by customs checks.

The port will hire an extra 750 staff, even if the British strike a free-trade agreement with the EU. If it is no deal, that number will balloon well beyond 900. About 500 have already been recruited, with more than 300 of them already trained at a new onsite facility.

Rotterdam expects to deal with a third more customs declarations because of Brexit, with up to 10,500 extra vessels to be checked annually on each-way trade with the UK.

"We haven't had to check UK goods for 35 years," said Hans Klunder, the Brexit programme director for customs in the Netherlands. "Brexit has really become a life-changing event for Dutch customs."

Border controls

Back in the Hague, foreign minister Blok was keen to accentuate the positive for Ireland-Netherlands relations in a post-Brexit world.

But when it came to the thorny issue of the potential need to erect a hard Border across this island to protect the single market in the event to a no-deal Brexit, he was clear in what the Dutch government will expect of its Irish counterpart.

“I cannot pretend that, if there is a no-deal Brexit, we wouldn’t be in need of border controls,” he said, when asked if peace should not take precedence over protection of an economic union.

“We have to be sure that goods entering the EU at whatever border are controlled there on their conformity with EU rules. We stand with the Irish. We understand your position is even more complicated because of the Northern Ireland conflict. [But if future UK product regulations] are lighter than we like in EU, there should be border controls,” said Blok.

Ultimately, despite the positive glow surrounding Irish-Dutch relations from next week’s state visit of King Willem-Alexander, the shadow and the potential complications arising from Brexit remain impossible to escape.