NOT SINGLE SPIES
Just when the public, and the government, began waking up to the potential extent of the difficulties posed by Brexit, involving Ireland’s largest trading partner, along comes Donald Trump, with a hard- nosed programme part of which at least could impact on Ireland’s fragile prosperity by threatening inward investment from Ireland’s largest source of FDI.
And as if that were not enough there are noises from a freshly emboldened EU Commission about a major push on removing tax sovereignty from member states and vesting it in a ”European sovereignty.” With the heavy hitter against such a move in the departure lounge, holding the line on tax could prove fraught. The apparent certainties on which the current inter party governmental arrangement, cobbled painstakingly together six months ago, was based are no longer there. One of the adapted jingoes going the rounds here takes inspiration from the 70s hit “Stuck in the Middle with You” – “Trump to the Left of Us, Brexit to the Right….” All we need now is Tarantino.
It will be some time before the extent of any damage done to us by Brexit becomes clear, with the exit waters generally muddied considerably by a Court decision, currently under appeal, requiring consent by Britain’s Parliament before the process of leaving can begin. As I write, a leaked consultant’s study has shown official disarray, lack of organisation and a paucity of qualified (or trained ) negotiators and staff to handle the complex process of unravelling forty plus years of EC membership with its thousands of directives, regulations and transposed legislation. Factor in some evidently lukewarm British Ministers and the exiting process could involve hard pounding for some considerable time. Even after the Article 50 process is initiated, the two year timescale envisaged looks wildly optimistic (Who thought of that period anyway? Some fool in Brussels?)
But damage there will be, and already is. At my son’s wedding two weeks ago a young farmer who exports beef to Northern Ireland told me of his woes, with margins disappearing as sterling plummeted against the euro – a vista looming right across the foodstuff sector, heavily dependent on exports to Britain. The Irish consumer is already voting with her feet by heading north to avail of lower prices as the busy Christmas holiday season approaches. Our tourism figures from our largest market seem destined to take a hammering. That’s just some of the economic aspects. A territorial squabble is threatened over the “ownership” of Lough Foyle, with Britain seeking to claim the lot. And, while we have tended to focus on the border problems likely to be posed for us by a hard Brexit, there is also the likely stance of EU partners and institutions that will baulk at Britain using the Border as a convenient back door for exports into the EU free of EU regulations.
Bertie Ahern told a British Parliamentary Committee recently that, such was the importance of the threat posed by Brexit right across our economy and institutions, the government should appoint a special Ministerial supremo for Brexit. He modestly did not suggest himself for the role. The suggestion was not taken up but perhaps should be looked at again, and one properly resourced, now that there will be additionally a new and radically different US President come January. Our bureaucracy is a small one and fighting on two fronts, three if the Commission gets bolshie over tax, may well be a step too far. There’s already a small but vocal group now questioning whether we should not follow Britain out of the EU. Small, arguably insignificant at present, but we have seen how things can change quickly.
So far Ireland has avoided contagion from that sense of alienation which bred Brexit, Trump’s election and threatens to impact decisively in elections in several EU states, but these sands could be shifting. February’s election demonstrated record levels of rejection for Ireland’s traditional political parties and we should not forget that the core anti-EU vote, as measured in various referenda over the years, is certainly 30% or more.
The anti- EU argument as most recently elaborated is a variation of the “what have you done for me lately?” line. The answer as trotted out is “Not Much.” We are now net contributors to the EU budget (a constant compelling whinge of the Brexiteers), something likely to increase. The €40-odd billion we have received from the EU over the years is more than offset by the €60-odd billion we paid to bail out the banks – at Brussels’ ( or worse, Frankfurt’s) insistence. Our own profligate spending on public sector wages and unsustainable social welfare benefits together with a populist erosion of the tax base during the Noughties is ignored or discounted as is the fact that the EU dug us out of a hole, sustaining us when no one else would lend us money to keep the country afloat.
Our near neighbour, major market and co-guarantor of the Peace Process is departing and, geopolitical considerations being what they are, our role and influence in the European Institutions is diminishing (12 out of 751 members of the European Parliament, plus more and more issues in Council decided by QMV) while we have no guarantee that our critical national interests will be fought for during the Brexit negotiations to come. Simplistic, yes; but as Brexit and the Trump election have shown, simple messages get across. Remember our own Nice and Lisbon experiences. And being bullied over tax sovereignty will not help.
Trump’s election platform promise to slash U.S. Corporation Tax rates from 35% to 15%, in a bid to stem or reverse the flow of US companies overseas, poses a threat of a different order. Ireland has been remarkably successful in attracting investment from US multinationals, based in no small part on the very attractive 12.5% company tax rate on offer. For several years we have been in the sights of US officialdom and politicians over what are seen as tax avoidance schemes (remember the “Double Irish”) and as constituting a type of tax haven.
Up to now there has been much talk but little action. This may now change, but to what extent existing US investment here will be affected is unclear. The tax break was just one of the planks in our investment package and arguably in the high-tech sector we have achieved critical mass. It’s difficult to see some of our Silicon Valley offshoots relocating to Youngstown Ohio, or elsewhere in the Rust Belt. But new investment COULD be affected – big time. These are very early days, and, as with Brexit, it could be several years before the effects on Ireland are felt. Meanwhile we in in Ireland watch in fascination as the Trump Era unfolds.
Heading into the New Year there are more clear and present dangers to face, particularly in the industrial relations area where a cave –in to the police on pay is prompting widespread copycat demands across both public and private sectors. That and the other known and threatened knowns requiring resolution promise an interesting 2017. Still, it will be difficult to top 2016 which was quite a year. Whether watershed or aberration remains to be seen.