Ireland will be severely hurt if Barack Obama sticks to his word, writes Stephen Collins, Political Editor
The wave of congratulations to president-elect Obama from all of Ireland's leading politicians yesterday contained no hint of the underlying worry that, if the new president actually lives up to his election promises, this country could suffer severe collateral damage.
In the Dáil yesterday the Taoiseach, Brian Cowen, the Fine Gael leader, Enda Kenny, and the Labour leader, Eamon Gilmore, fell over themselves paying tribute to the new president but nobody voiced the fear that has been growing since an Obama victory became inevitable, that the wind of change in America has potentially negative consequences for us.
The bottom line is that if Mr Obama goes ahead with promises to provide a range of incentives and penalties designed to force US companies to create jobs at home, rather than abroad, then Ireland will suffer.
Not only would we have to contend with a big slowdown in new foreign direct investment from the US, but a considerable amount of that already here could be put at risk.
The key elements of the Obama platform causing concern are his plan to give US companies a tax break for every job created at home and more, crucially, his promise to use the tax code to eliminate the advantage that countries like Ireland have in attracting foreign investment. Essentially it would mean that US companies who pay the low rate of 12.5 per cent corporation tax here would have to pay the balance to the US treasury.
Although Irish Ministers and policy makers are keenly aware of the implications for the Irish economy if Mr Obama actually delivers on his election promises, so far they are consoling themselves with the hope that he won't actually live up to the rhetoric.
The US Ambassador to Ireland, Tom Foley, who is of course a Republican, gave some comfort to that view yesterday.
He remarked that what people say during election campaigns and what they are actually able to do in office are quite different. He added that trying to prevent US companies investing abroad was like trying to stop the weather.
The Minister for Foreign Affairs, Micheál Martin, also expressed confidence that the global economy did not lend itself to the erection of barriers but he did say that the Government was very mindful of what had been said during the campaign and would be working through its own contacts on Capitol Hill to deal with any implications of new policies.
The Irish Embassy in Washington has been monitoring the situation and reporting back to Dublin on the campaign commitments made by Mr Obama. There is some expectation that the new president will follow through on his proposal for a $3,000 tax credit for US companies to create jobs at home.
That is a relatively minor issue as far as the Irish authorities are concerned.
The big one is whether he will follow that up with action designed to eliminate the tax advantage countries like Ireland can offer to foreign investors.
There is nothing to stop the US revoking or altering various tax treaties, so that its multinational companies would have to pay tax in the US as well as in the host country such as Ireland.
Such double taxation wouldn't stop all US companies from going abroad, but they might think twice about setting up in a high-wage country like Ireland if the scope for tax avoidance and transfer pricing was significantly reduced.
Micheál Martin also made the point that law taxation is not the only reason that US companies come here but there is no disguising the huge incentive it represents.
In view of the unwarranted fears about EU action to end our low corporate tax rate created during the Lisbon Treaty referendum by an avowed admirer of the US like Declan Ganley, it would be ironic if the American administration effectively torpedoed it.
However, the belief among Government Ministers and State agencies like the IDA who are involved in foreign direct investment is that Mr Obama will focus initially on targeting tax havens rather than legitimate low-tax arrangements such as those operated by Ireland and other countries.
The other point made by Mr Martin yesterday was that some of the big multinationals are not simply US companies but global operations. That means they will not easily be corralled by any US administration.
Another point is that Ireland still has powerful friends who are close to Obama and who played a significant part in his election like senators Ted Kennedy and Chris Dodd.
The new vice-president elect, Joe Biden, has Irish roots and is emotionally attached to this country. Mr Obama has already said that the St Patrick's Day party in the White House will continue, and that he will visit Ireland.
If US investment is the potentially big negative for the Government during the Obama presidency the status of illegal Irish immigration is a more minor concern.
There is no belief that the new president will act on the broad issue of immigration so the only prospect of progress lies in a bilateral deal.
In terms of international relations, the election of Mr Obama is regarded as a hugely-positive development by almost all Irish politicians.
Mr Martin reflected this view yesterday when he said that the election of Obama represented an opportunity to rebuild international institutions like the United Nations to deal with issues like global warming.
On a local level, he also said that it provided Ireland with an opportunity to make its view known to the incoming administration that extraordinary rendition should be ended and the Guantanamo Bay detention centre closed down.
For the moment at least, the potential positives of an Obama presidency far outweigh the negatives, as far as Irish politicians are concerned.