OPINION: The threat posed by Trump’s policies is real, but our economy is stronger now

It took a while for the significance of Donald Trump’s victory on November 5 to sink in here. Countries such as Ukraine and the UK made pre-emptive efforts to placate Mr Trump. In light of Mr Trump’s declared pre-Russia stance, President Zalenski maintained neutrality through gritted teeth, even though he must have secretly prayed for a Harris victory. The UK, which increasingly relies post-Brexit on its special relationship with the US to sustain the illusion of a role in global politics, made sure to pay advance homage at Mar-a-Lago.
Irish worries were narrower and more specific, but now risk coming to pass. Besides a raft of illiberal social policies mainly of domestic concern, a key element of Mr Trump’s election stump was a promise to protect American businesses behind tariff barriers and to reduce drastically the US rate of corporation tax. Were he to implement such policies, the implications for Ireland are calamitous and obvious.

Protectionist policies
Ironically, tariffs and corporation-tax cuts have been essential Irish policies since the foundation of the State. In 1932, we broke with UK free-trade policy in an attempt to build an Irish industrial base from almost nothing behind high protective tariff barriers. Industrial output grew fairly rapidly in the pre-World War II years, but we never succeeded in breaking into post-war export markets. The demand for labour generated by the new firms fell far short of what was needed to keep unemployment, under-employment and emigration low.
While the intention of Irish protectionist policy was to construct a domestic industrial base, Mr Trump’s intention is to prevent successful US companies from continuing to move activities off-shore in search of cheaper labour and less regulation.
The opening of the economy and the removal of protective tariff barriers kick-started Ireland after the dreadful stagnation of the 1950s. But we were an unattractive investment destination in the early 1960s since we were remote, underdeveloped, unknown, had little by way of natural resources, and had no industrial heritage. The crucial inducement provided to inward investors was a zero rate of corporation tax on manufactured exports, later replaced by a low rate of 12.5 percent on all corporate profits and, in more recent years, international pressure has raised this to 15 percent. These low rates generated a boom in inward investment, assisted by a very proactive IDA policy of supporting new foreign firms to establish themselves in Ireland.
By comparison, the corporation tax rate in the US was 52 percent in 1989 and remains at 21 percent from 2018. So, further reductions of the US rate would erode any tax benefit for US companies locating in Ireland.
The fear is that any move by the incoming Trump administration to erect US tariff barriers and/or reduce the corporation tax rate would threaten to cut off future inflows of US direct investment to Ireland – and precipitate a run-down of the existing base of mainly US firms already here.
The potential consequences could be massive, since the contribution of foreign direct investment to our economy is very large, with about 20 percent of all private sector employment directly or indirectly attributable to FDI. Moreover, the foreign sector contributes 87 percent of total Irish corporation tax receipts, and their employees contribute one-third of total income tax receipts.

The bad old days
As I mulled over these issues during the Christmas break, I was reading ‘An Irish Navvy: The Diary of an Exile’, by Donall MacAmhlaigh (shamefully, an English translation of ‘Dialann Deoraí’). This provided a useful antidote to fears that our recently acquired national wealth and Celtic Tigerdom might be cruelly snatched away by Trumpian antics. If you think that we face problems today, spare a thought for the problems faced by the people who were forced to emigrate when our governments were incapable of sustaining job creation at home.
In March 1951, when MacAmhlaigh emigrated and entered Britain for the first time at Holyhead, the lad ahead of him was obliged by the customs officer to open his case:
“‘Fair enough’, said my lad and drew out of his pocket a bloody big knife with which he cut the rope around the case. The lid jumped up just like a Jack-in-the-Box and out leapt an old pair of Wellington boots that had been twisted up inside it. Devil the thing else was in the case – not even a change of socks. A melancholy wintery little smile crossed the face of the customs officer as he motioned to your man to get along with himself.”
MacAmhlaigh was proud of his country and enjoyed the support and companionship of his fellow Irish emigrants. He was grateful for the opportunity to earn a good living in Britain, albeit undertaking strenuous construction work in conditions that resembled a western form of gulag. His reflections predated the Lemass/Whitaker economic development plans of the 1960s by almost a decade.
“There is work for everyone in this country [Britain] now thanks be to God. And long may it last even if it is a result of a dreadful war. But God help our own poor country that has nothing in it now but unemployment and despair.”
I have witnessed asylum seekers arrive in this country in the last few years who have been limited to what they can carry, and it is a pathetic sight. Yet even these people have more than a pair of worn-out wellington boots. Calamitous as the fallout from Trumpian policies might be, it still seems very unlikely that we will revert to 1951.

John Bradley is a former ESRI professor and has published on the island economy of Ireland, EU development policy, industrial strategy and economic modelling.