US Protectionism a Bigger Risk to Irish Economy than Brexit
The risk to Foreign Direct Investment posed by US protectionism is a bigger risk to the Irish economy than Brexit and EU Tax Challenges, warned Mark Kennedy, managing partner, Mazars, one of Ireland’s largest accounting firms.
Speaking at the Trinity Economic Forum, Mark Kennedy said; “There is no doubt that large reductions in the US corporate tax rate will reduce the incentive for companies to locate activities outside the US, including in Ireland. Our dependence on US FDI is illustrated in the flows of direct investment into Ireland. CSO data shows that in 2015 €100 bn of the €170bn of foreign direct investment in Ireland came from the US. Over 140,000 people are employed by US companies in Ireland and they also contribute significantly to the Exchequer”.
“The good news is that we have time to react and plan. In the short term, the sunk costs of existing multinationals based in Ireland mean that our FDI economy would be slowly changed rather than seeing a dramatic rush to the exit. Now is the time to refocus our energies on competitiveness and on developing other incentives to make Ireland an attractive investment location for investors from the US and elsewhere”, he said.
Mr. Kennedy said that it is clear that the US will be more protectionist than it has been for a very, very long time and “I suspect it will not have a particularly special relationship with any European country, including the UK, in the mid-term”.
Commenting on Brexit, Mr. Kennedy said that while there seems to be a school of thought that Brexit is an unmanageably chaotic mess, economic positions are beginning to become discernable. “The European Union will continue to be a large, economic and monetary union, with some sort of trade agreement with the UK. Here in Ireland, we will remain in the European zone, with the possibility of some sort of special arrangement, structured to the benefit of Northern Ireland, the rest of the UK and the Republic of Ireland for reasons beyond economics. The UK itself is headed towards a world of free trade agreements, negotiated doggedly with nations and blocks of national interest. Asia will continue to be vibrant driven by strong fundamentals while China will throw an ever longer shadow, as the US becomes more and more inward-looking”, he said.
Mr. Kennedy said that businesses and economies will have to adjust to the new economic order. “The rules of the game will be different, to those we have grown used to over many years. It will be a tough adjustment for many businesses and economies, particularly for those of us who have significant relationships with the US. The impact on some sectors – notably agri-business – will also be very significant in the short term. Government, both here and in Brussels, needs to plan for this”, he said.