Don C. Brunell: Guinness Caught in Brexit Border Crossfire

When the Economist Magazine reported the price of a Guinness pint could increase because of Brexit, it grabbed readers’ attention.

Brexit is the process whereby Great Britain, including Northern Ireland and Scotland, is withdrawing from the European Union. The Republic of Ireland remains with 26 other nations.

EU members benefit from a standardized system of laws which allows the free movement of people and goods. Costly border checkpoints were abolished, but because of Brexit, they may be reconstructed between Ireland and Northern Ireland.

While Guinness is brewed at the historic St. James’ Gate plant in downtown Dublin, it is transported north by tanker trucks to Belfast for bottling and canning. Then it is returned to Dublin for export. Guinness ships 13,000 tankers across that border each year.

Guinness has been brewed in Dublin since 1759. Its dark stout is one of the most successful beers worldwide. In today’s highly competitive beverage market, price and timely deliveries matter.

Bailey’s Irish Cream, a sister company owned by Diageo, receives much of its milk from the north. Its combined ingredients travel across country lines three times before it is bottled and shipped overseas.

The old border checkpoints with watch towers, armed guards and coils of razor-sharp concertina wire are gone. Today, the most noticeable way drivers can tell when they are entering Northern Ireland is the road signs change from kilometers to miles.

Economist writers said it best: “The melting away of the militarized frontier into a mere line on a map was perhaps the most visible achievement of the Good Friday Agreement, the 1998 accord that largely brought an end to three decades of violence.”

The agreement not only brought an end to sectarian warfare, but also brought prosperity. However, the Republic of Ireland economy is already hurting because of Brexit. The Economist reports that Brexit caused a 3.5 percent drop in Irish GDP.

Big firms, such as Guinness may cope with the extra costs, but it is likely to impact smaller businesses with low margins, the Economist reports. For example, Ireland’s farmers and food processors have been hit hard by the drop in the value of the pound sterling since the Brexit vote last year.

In today’s fast paced world, time is money. Guinness estimates that even a short of 30 minutes to an hour delay for customs checks would cost $1.45 million (€1.3m) a year. While many British and Irish leaders are scrambling to avoid re-establishing border crossings, the collision between Brexit and EU laws and regulations seem to make them inevitable.

Nearly a decade ago, I wrote a column about what happens when cross border supply chains are threatened.

At the time, President Obama’s “Buy America” initiative was aimed at making sure that our government procurements, such as water treatment plants, contained only parts made in the United States. Canadian leaders threatened retaliation.

The Campbell Soup Company that I cited as an example is still germane today.

According to Doug Conant, then CEO of Campbell Soup Company, 4,000 shipments of ingredients for its food products cross from our country into Canada each day and 3,500 come from Canada into the U.S. Some of the vegetables cross the border twice when ingredients from processing plants in both countries are mixed, packaged and distributed to retailers across the globe.

While “Buy America” well-intended, it backfired and the President soon learned that unbundling that supply chain would have a catastrophic impact. That applies to Brexit as well.

Ireland and Northern Ireland benefit from open borders. If they must restore borders and checkpoints, hopefully they will find ways to expedite crossings and limit economic consequences.

(Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.)