The Irish trade minister came to the UAE this week as Europe’s fastest-growing economy seeks to avoid being caught in a protectionist pincer closing in from the East and West.
If Brexit was a body blow to Irish trade, a Donald Trump administration could be a haymaker punch that lands with concussive force.
Dublin now faces the prospect of anticipating multiple scenarios that will affect how it buys and sells goods and services with its two most important trading and foreign direct investment partners.
Last week, it was about hard or soft Brexit. Now, it is also about hard or soft Trump.
Confronted with the potential of losing old taxes from the left and paying new tariffs to the right, Ireland finds itself in uncharted territory as the prevailing trade winds of the post-war world start to show signs of shifting – spurred by the rise of populism and wagging the fat tail of protectionism behind.
There are about 700 US companies in Ireland that employ 140,000 people – including Google, Facebook, Apple and Microsoft – all attracted to varying degrees by the country’s 12.5 per cent corporation tax rate, which is among the lowest in the European Union.
So the big question now is whether the US president-elect will deliver on his pre-election pledge to slash corporation tax from 35 per cent to just 15 per cent and repatriate a proportion of profits held offshore.
The red flag for Ireland is really the red baseball cap worn by Mr Trump and his supporters at rallies up and down America’s swing states in the days leading to the election. Embroidered on the front was the message: “Make America Great Again”.
Making America great again may mean making American multinationals return by reducing the higher taxation that made them leave in the first place.
Come January 20, 2017, when America’s 45th president is inaugurated, Ireland will be hoping that the red baseball cap goes back inside the West Wing wardrobe for good.
In the meantime, analysts on both sides of the pond are trying to read the tea leaves.
Dermot O’Leary, the chief economist with Dublin-based Goodbody, sees both general and specific worries arising from some of the still-undefined economic policies of the next US administration. But he also expects the new president to roll back on some of his more dramatic campaign pledges.
“There is a general concern we will see a period of more protectionist policies globally,” he said in a telephone interview from Washington. “The specific thing is corporation tax reform, which is now a more realistic prospect than at any time in a number of decades.”
Six years ago, when Ireland was in bailout talks with the EU and the IMF following the near- collapse of some of its biggest banks, maintaining its low tax rate was the definitive red line in the tense negotiations.
It represented a cornerstone of the country’s success in attracting foreign direct investment and was therefore non-negotiable.
When Christine Lagarde, the managing director of the IMF who was then the French minister of economic affairs, suggested the negotiations should include changes to the Irish tax regime, it was swiftly shot down by Dublin.
Now Ireland finds itself squeezed between the rock of Brexit Britain and the hard place of Trumpenomics.
Ireland was the main recipient of US foreign direct investment, according to a 2015 American chamber of commerce study that said US companies had invested more than US$277 billion in the country since 1990. Ireland and Britain trade more than €1 billion (Dh3.94bn) in goods and services every week, making the UK its most important market and supporting 200,000 jobs, according to an Irish government fact sheet.
On Monday night, the supermoon illuminated the terrace of the Irish embassy residence in Abu Dhabi, where Charlie Flanagan, the country’s minister for foreign affairs and trade, led a group of Irish companies hoping to penetrate markets including the UAE and Saudi Arabia.
Many of the assembled entrepreneurs were from the technology sector, which has thrived in Ireland, helped in many cases by the proximity of some of Silicon Valley’s biggest names that have established European headquarters in the country.
The last time the supermoon shone so big and so brightly was about 70 years ago. But you have to go back even further to the Anglo-Irish trade war of the 1930s to pinpoint a time in the country’s history when the outlook for foreign trade was more uncertain.
In an interview with The National on Monday, Mr Flanagan stressed the strength of political and economic ties between the US and Ireland and the Irish heritage of some of its past presidents.
That special relationship could become crucial as the Mr Trump trade agenda, if it yet even exists, becomes clearer in the weeks ahead.
Historical Irish-American ties were emphasised again when Mr Flanagan met John Kerry in Tipperary last month as the now outgoing US secretary of state accepted a peace prize.
Among the topics mentioned in the official Irish government release covering the visit was Brexit and its implications for Ireland.
But there was no reference to what a Trump presidency might mean for the country – perhaps an early indication that his subsequent victory over Democrat rival Hillary Clinton not only surprised London, but also Dublin.
Still, Enda Kenny, the Irish taoiseach, was reportedly the first EU leader to receive a call from the new president-elect – a flattering gesture, if not necessarily a reassuring one.
It was also in Tipperary, two months earlier, that a mushroom company was forced to close with the loss of 70 jobs. It was a big blow for a small town. But the reason it made national headlines was that it was blamed on Brexit.
Schiele and McDonald Mushrooms could no longer sell its produce profitably to customers in England, where it derived most of its business, because of the sharp slide in sterling that followed Britain’s vote to leave the EU.
The collapse of the company was seen at the time as the canary in the coal mine for how Britain’s withdrawal from the EU might affect the wider Irish economy – even if its collapse was really because of sterling strength specifically, rather than Britain’s planned withdrawal from the bloc per se.
Today Ireland itself may be the canary, as 70 years of post-war progress in global trade liberalisation begins to unravel.
It is not just mushroom exporters but entire economies that risk becoming collateral damage from the tariffs, trade barriers, walls and fences that increasingly feature in populist rhetoric.
The slogan of Brexit Britain was “Take back control”. The Trump campaign went with “Make America Great Again”.
Both use backward-looking language. They evoke a kind of dewy-eyed yearning for past glories that struck a chord with voters from the silent pit valleys of South Wales to the furnace-free mill towns of America’s Rust Belt.
In both nations, the depth, strength and momentum of that post-industrial obsolescence was almost entirely missed by an out of touch, depleted and Twitterised media that lived in a very different world and was informed by hopeless pollsters.
The wider electorate was influenced by what came to be described as post-truth politics and news, rapidly disseminated misinformation delivered with great efficiency by social media.
Today, Oxford Dictionaries declared “post-truth” as its international word of the year and suggested it could become “one of the defining words of our time”.
In the early morning of June 24 in Britain and on November 9 in the United States, millions felt the haymaker land before they saw it being thrown.
But for trade-driven economies such as Ireland, the real pain is yet to be felt.
If there is a silver lining to the protectionist storm clouds that threaten to converge over the country, it is that Ireland has over the decades become a textbook case study in how to attract overseas investment.
It was one of four model economies that were studied and emulated during the creation of the Abu Dhabi Economic Vision 2030. Ireland punched above its weight in generating trade and investment and Abu Dhabi sought the same transformative effect.
Now Ireland may have to draw on all of that experience to avoid being buffeted by the rapidly changing trade winds reshaping the global economy and changing life in border towns from Tyrone to Tijuana.
scronin@thenational.ae
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