Winds of change could chill IDA’s strategy

Between Brexit, Trump, the pandemic, climate change and war-related upheaval within the global economy, if there is one thing we should all have gleaned from the past half decade it is that nothing is static, that “everything, everywhere is moving forever”, as Succession’s Logan Roy would put it. Or as Paschal Donohoe said (rather more prosaically recently), we could well be entering a period in which the global economy is more prone to shocks and, consequently, more uncertainty.

That could be bad news for a small, open trading state such as this one. But it is particularly worrying when our economy’s over-reliance on US multinationals is taken into account. While that is, by now, a well-worn fact, it is one laid especially bare in IDA Ireland’s latest annual report. Multinationals supported by the State agency contributed to 72 per cent of Irish export sales in 2021 and 70 per cent of corporation tax receipts. Out of a total of 275,384, a troubling 190,147 or close to 70 per cent, of IDA-supported jobs were in US companies, while more than half the number of multinationals supported by the agency in Ireland were American.

Outgoing IDA boss Martin Shanahan remains confident that the US will continue to be a reliable source of foreign direct investment (FDI). Companies will always need to “internationalise” and Ireland is, after all, still an important gateway to Europe, he told reporters on Wednesday. But in 2018 Shanahan acknowledged that the Trump administration’s isolationist policies were forcing US companies to rethink their investments. Seeing the protectionist writing on the wall as early as 2014, IDA Ireland had attempted to reduce its dependence on individual sources of FDI, diversify and pivot towards growth markets such as China and other Asia-Pacific countries. The success of that decision spoke for itself, with IDA Ireland landing investments from the likes of TikTok and Huawei. But the pipeline has been bruised by the pandemic and “it may take some time” for the region to recover from its “post-Covid hangover”, Mr Shanahan said.

It means that Ireland remains utterly addicted to American FDI at a time when political winds could well be blowing back in the political direction of Trump’s splendid isolationism. While the transatlantic alliance between Europe and the US is currently in a honeymoon period, midterm elections are coming up and the prospect of a second Trump run for the White House in 2024 is starting to look very real. Might more upheaval be just around the corner?