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Irish, Ireland, British, Ulster, Unionist, Sinn Féin, SDLP, Ahern, Blair, Irish America

The border — economic asset for North and South

(by Liam Clarke, News Letter)

Even in a recession the potential for cross border co-operation is stunning and will be the big story of the next couple of years.

Expect to hear more about the Dublin-Belfast economic corridor linking the 1 million people in Greater Dublin with the 700,000 in the Belfast travel-to-work area as well as lifting the economic fortunes of centres like Dundalk, Drogheda, Newry, Lisburn and Banbridge.

The surprising thing is that much of this economic potential is fuelled by political partition.

Politicians are discovering what smugglers always knew, the border, with its differential tax and grant regimes, can be used like a natural resource for mutual enrichment. Its potential has been unlocked by the removal of the threat that political unity could be pushed through without consent.

In a past so remote that it is hard to credit it was the same man and not some distant ancestor, someone called Ian Paisley once campaigned for a boycott of Irish goods and currency under the slogan "we don't want your Mickey Mouse Money." It may also have been some earlier Peter Robinson who posed with an automatic rifle and called for a fence along the "frontier" with the republic.

That was a world away when increased cross border investment was announced at Stormont on Tuesday. "For a number of months now Brian and I have had meetings, correspondence and our officials working together to arrive at this position ... we want to ensure that there is the highest level of co-operation to the advantage of both our peoples."

There are good reasons for the change of tone. When Robinson wanted a border wall, the IRA were using the republic as a base for attacks, extradition for terrorist offences was nonexistent, and security co-operation was poor compared to today. Articles Two and Three of the Irish Constitution, claiming jurisdiction over Northern Ireland, made cross border co-operation look like a Trojan Horse and gave the whole idea a threatening character for unionists.

The articles were removed as part of the Good Friday Agreement which, far from lying in a Sadducee's Grave, continues to shape the political architecture of the island. A visit by the Queen to Dublin would have been impossible with the territorial claim in place. Its removal has also silenced any doubts about Dublin's attitude to physical force nationalism. The links between the two parts of the island are now a practical matter to be decided democratically.

The other big change, which calls for closer co-operation, is the economic and social transformation of the republic. Then unionists looked down on it as a backwater where pothole candidates won Dáil seats and the Catholic Church dictated the social agenda. Now it's the north which has the potholes, while the south appears a prosperous, progressive sort of place whose success Ulster wants to emulate and share.

Northern Ireland still relies on an economic subvention from Britain which would cripple the republic, with its smaller tax base, if there was unity in the morning.

The rationale for much of the southern investment in the north would also disappear. Aer Lingus, for instance, chose Belfast over Shannon partly because they could offer differential wages and benefits in the north. As an Irish company it can also use transfer pricing to avail of higher levels of grants here while realising many of its profits in Dublin where corporation tax is 12% instead of the 30% paid in the UK.

The decision by Cowen to allow Dublin based companies to establish subsidiaries in Belfast follows proposals by the Bank of Ireland to move its hedge fund operations here. Both are based on the advantageous fiscal relationship as well as our ready supply of graduates. They can do the work in the north, with its lower overheads and better incentives, while paying much of their corporation tax in the south.

That gives us an edge not enjoyed by Cork, Galway, Limerick or even London. There, JP Morgan, the US bank, predicts that 40,000 workers in the City will lose their jobs as a result of the credit crunch. Let's hope that Cowen and Robinson are right and the new arrangement is allowed by the EU.

In Northern Ireland we have a unique economic niche in difficult times. This unique selling point is a border with a friendly neighbour on the other side of it.

April 20, 2008

This article appeared in the April 17, 2008 edition of the News Letter.