US elections could cause problems for the Irish economic model

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While much has been written about Ireland’s strong bond with the United States, a wrinkle in Irish-American relations has emerged in recent weeks. US President Donald Trump has verified Ireland’s name several times in his vows to bring pharmaceutical production back to the United States.

“It’s not just China, you are looking at Ireland. They manufacture our drugs. Everyone manufactures our drugs except us, ”he said this month. “We’re bringing this whole supply chain back. No one has to tell me to do it, I’ve been talking about it for years.

This is the second time Trump has nominated Ireland in recent weeks.

The coronavirus pandemic has placed a new emphasis on global supply chains and the United States’ dependence on other countries for the supply of life-saving drugs and medical devices.

US TV channels frequently air talks about returning supply chains to the United States. Trump’s America First policy that helped propel him to the White House in 2016 has taken on new relevance as the coronavirus sheds light on the mechanisms of global trade.

While most of his comments are geared towards China, Ireland has obviously caught Trump’s attention as well.

The value of Irish exports to the United States is enormous.

A recent report by the Congressional Research Service, a non-partisan federal agency that provides information to Congress, found that the United States imported $ 36 billion in pharmaceutical and medical equipment, products and supplies from Ireland into 2019. China’s figure was $ 21 billion.

CSO figures from last week show Irish exports surged in March to € 15.7 billion, mainly due to increased demand for medical, pharmaceutical and organic chemicals.

Much of it is made by US companies with major bases in Ireland such as Bristol-Myers Squibb, Pfizer and Merck.

Two-way street

Irish officials and government ministers have been keen to stress that US-Irish investment is two-way.

Irish businesses in the United States employ more than 100,000 people, the argument goes. But in reality, the majority of those jobs are held by large, publicly traded companies such as CRH – companies that have thrived in the United States by acquiring American companies and employees.

In contrast, a large portion of US investment in Ireland has been “greenfield” or new investment that has created thousands of jobs.

Behind the scenes, Irish officials in Washington struggled to differentiate Ireland from China in discussions with the White House, portraying Ireland as a reliable strategic partner of the United States, unlike China, which is increasingly seen as a geopolitical rival.

This was accompanied by practical measures. Despite the global travel slump, flights from Ireland land in the United States every day carrying goods and equipment.

Likewise, the practical realities of returning production to the United States may simply be too onerous for businesses.

Irish officials breathed a sigh of relief that Trump’s corporate tax cut in 2017 failed to attract many businesses to their country.

However, a new tax reform could be imminent. Senior White House adviser Larry Kudlow has indicated that corporate tax could be reduced from 21.5% to 10.5% for companies that agree to relocate to the United States.

Rare agreement

Any hope that the problem will go away if Trump loses the November election may be misplaced.

Joe Biden, the alleged Democratic candidate, has also pledged to crack down on companies that keep profits overseas. The desire to repatriate American jobs is not confined to Trump’s White House, but enjoys broad support across the political aisle in Washington.

While Ireland can overcome the current threats of the US President, the move towards global protectionism is worrying given the Irish economy’s deep dependence on foreign investment.

The coronavirus could turn out to be a turning point in the history of globalization, the defining economic policy of recent decades.

Countries around the world – not just the United States – are turning in on themselves, as nations pump money into their economies, close borders, and rediscover the allure of self-sufficiency.

Like many aspects of the impacts of Covid-19 on our lives, it is not clear whether this new challenge to globalization is here to stay or a passing phenomenon.

Ireland has already been forced to close loopholes and make changes to its corporate tax regime under pressure from the EU and the OECD, as it has become clear that international public opinion is shifting. turned against low corporate taxes. The pandemic may mean Ireland cannot settle for the low-tax, open-market inbound investment model that underpins the economy.


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