How might the outcome of the US Presidential election impact on Ireland’s future economic prospects?
The U.S. Presidential election has brought into sharp focus the issues of tax and trade and how they might impact on Ireland’s future economic prospects. Given Ireland’s track record of attracting inward investment (and the resulting multiplier value of the employment and tax revenues generated) and Ireland’s record of investing in and trading with the US – what impact might the US election result have for Ireland?
From an inward investment perspective there are three main factors to consider, namely tax, market access and trade.
Investment in Ireland has benefited from a competitive, transparent and stable tax regime for many decades. The stated policy of President-elect Trump is to reduce US corporation tax to 15% and that will, if implemented, make many US corporations conduct renewed assessments of their international operations. Our view is that it is likely that they will continue to pursue international investment activity. However, a revised U.S. tax policy could dilute some of the tax benefits of investing here. Whilst Ireland will remain tax competitive, US tax reform will bring into focus the perceived value of what else Ireland has to offer – namely our talent, track record, pro-business environment and the fact that we are an English speaking EU Nation.
While tax may have played a significant role in the establishment of many U.S. operations here, these are the factors that have allowed those businesses to flourish and put down deeper roots.
One clear benefit of investment in Ireland is that of market access to the EU. US businesses with global ambitions need a beachhead into the European Union. Ireland has a proven record in this area based on the English language, a skilled and flexible workforce, ease of access to the US and strong business and cultural links. None of these in isolation is a game changer, but their cumulative effect matters. Moreover, Ireland’s steadfast commitment to EU membership is a significant and certain benefit.
The benefits of free trade should not be taken for granted. Protectionism from the US - combined with Brexit - could have a very poor effect on economic growth prospects worldwide and Ireland would inevitably be affected. For example, according to the CSO exports of food, live animals and beverages to the USA totalled €758 million in 2015, an increase of €255 million (+51%) compared with 2014 .This brings into sharp focus the benefits of free trade and the need for advocacy to help protect this trade. Ireland is at risk in this regard – including from Brexit but also from the prospect of broader trade disputes. We are pro-active supporters of government, state agencies and the American Chamber of Commerce in Ireland in stating the case for the benefits of international trade and in choosing Ireland as a gateway to Europe.
Whilst there are obvious limitations on Ireland’s influence given our small size and modest economic power, it is important that government and business stays focussed on the economic policy measures that can help weather the potential negative consequences of world events and leverages our considerable soft power.
Business decisions are often made on choosing the best relative outcome. In Ireland’s case this means staying competitive, rewarding enterprise and ensuring that the human capital and infrastructure that supports jobs and investment is maintained.