For some years, civil servants and advisory bodies have been warning about Ireland’s overreliance on the US pharma and technology sectors. However, developments in these sectors have sent corporate tax revenues soaring – and the story of the boy who called wolf has frequently been invoked in discussing the warnings. The oft-forgotten point of that story is that the wolf does eventually arrive.
Now that Ireland’s exports are under threat from Donald Trump’s tariff plans, there are suddenly fears about the impact on tax revenue and jobs. The pharma sector is at the centre of this story, because of its significant exports from plants here back to the US market. Trump has been clear that he wants these products to be manufactured in the US, rather than offshore locations like Ireland. How this plays out promises to be a high stakes story for Ireland and its economy.
The dominance of big US companies in Ireland has left the State not only reliant on decisions in Washington DC, but also on the health of a few major multinationals. And these companies are not slow to use their influence to try to get Ireland to support the case of the multinationals in the EU. As reported in Tuesday’s Irish Times, big pharma lobby groups have been trying to get Ireland to support their case that proposed EU changes to laws on drug patents would damage research spending by lowering the period for which drugs are protected from generic competitors. And put jobs here at risk.
The details of the lobbying campaign in Ireland, towards MEPs and across the EU are striking, showing the enormous power of big business. Initial proposals from the European Commission were watered down by the European Parliament and it looks likely that the final outcome will involve minimal enough changes in the existing regime. The extent to which it will bring drugs on stream more quickly in poorer EU member states, a key goal of the commission, remains unclear. Amidst all this, pharma companies have let it be known that they feel Ireland should have supported them more wholeheartedly.
That the companies feel able to do this underlines Ireland’s huge reliance on this sector and on US investment in general. In the case of pharma, the attention of this US administration is also on the huge tax payments made by these companies in Ireland, in contrast to low payments in the US, a function of legal “profit shifting” strategies.
Change looks to be on the way, whether in the location of this pharma investment, or where the companies pay tax. Ireland can try to limit the damage, but there are wider messages here for the long-term about diversifying away from such a significant reliance on the US market and from two sectors which have delivered huge growth, but are now at the heart of transatlantic tensions.
