Saturday, November 22, 2008

Northern Eurland

I'm just back from a brief visit to the ancestral home in Dungannon. The same thing struck me as strikes me every time I go North: the day the UK joins the euro is the day the retailers of the Republic may shut up shop (and the car dealers and the publicans). The price differences are not just huge: they're getting bigger. Cross-border economics in an anecdote: I bought the exact same bottle of South African wine in Sainsbury's today for 35% of the price I paid for the same wine here in Dublin two weeks ago.

Sure, some of it the euro/sterling exchange rate - but a lot of it is down to consumer behaviour. Northern consumers simply won't be ripped off like their Southern counterparts: the prices they pay reflect their willingness to shop on price and retailers respond accordingly by keeping them low. Which is why exhortions by the likes of SIPTU for shoppers in the Republic of Ireland to do their patriotic duty and buy 'local' are doomed to failure.

It is only by being willing to shop on price that consumers will send the signal to retailers and others to cut their prices. But businesses can only do so much: the biggest price distortions are created by the Government through its imposition of a panoply of duties, tarrifs and taxes. One reason why petrol and diesel prices are still lower in the Republic of Ireland than in Northern Ireland - it isn't just the Irish Government that distorts prices.

So be sure to fill up your fuel tank before you head out on the road to Newry. And be sure to demand a level playing field of your local politicians by levelling the cost of Government down. That's one 'race to the bottom' I'll be rooting for.

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