In a sign of the changing times, Ireland was placed on the US Treasury’s “watch list” for its high trade surplus in goods with the US earlier this year. By the same token, the US ran a significant surplus in services trade with Ireland.
However, the trading stats have remained broadly unchanged for several years, yet this is the first time Ireland has been placed on the warning list. On the other hand, the nature of the relationship should see Ireland survive this period of turbulence.
“With 700 US companies in Ireland and close to 800 Irish companies active in the US market, the trade relationship is one of massive substance in both directions,” says Carin Bryans, head of JP Morgan Ireland. “Collectively US investment in Ireland amounts to $446 billion while US affiliate sales generated by Ireland’s investment in the US amounted to $116 billion. Ireland is among the top ten investors in the US and US companies make up three quarters of all foreign direct investment in Ireland.
“I think with the success of Irish investment in the US, particularly over the past decade, and the ever-increasing strategic importance of Ireland for US companies accessing the European market, the trading relationship between both countries has never been more critical,” she adds.
Alan Connell, head of corporate and commercial tax with Eversheds Sutherland, agrees: “The Ireland-US trade relationship is very much a two-way street,” he says. “We look at the trade flows in each direction and the strong commercial ties between the two countries. Ireland’s open, pro-business economy, with very few restrictions on trade, provides significant opportunities to multinational companies across all business sectors for transatlantic trade. This is evidenced by the fact that Ireland remains the jurisdiction of choice for emerging US companies looking to break into European markets and beyond, while leading, internationally focused Irish companies continue to significantly grow their presence in the US.”
Good news
Indeed, the US is the second largest market for Irish investment, behind the UK. “Having regard to US tax reform, and Brexit emphasising the need for Irish companies to identify new markets, it is no surprise that more Irish companies are choosing, for future growth and sustainability, to do business with, and set up operations in, the US. We envisage that this trend will continue into 2020 and beyond.”
And Brexit could actually be good news for once. “Post Brexit, as the last common law, English-speaking country in the EU, Ireland will play an even more central role in promoting the transatlantic relationship, thereby ensuring the continued success of the Ireland-US trade flows.”
That point is echoed by PwC Ireland global trade and customs partner John O'Loughlin. "If you step back and look at it, Ireland and the UK are competitors in attracting investment. We will be the last man standing as an English-speaking country in the EU and will offer a much stronger foothold for US companies expanding into Europe."
His colleague, PwC tax partner Liam Diamond says this impact is already being felt. “A lot of US companies are worried about access to talent following Brexit, and pharma companies have already had to move certification and product registration out of the UK. Tesla announced its new Gigafactory will go to Germany instead of the UK.”
Uncertain relationship
It is not all plain sailing, however. “The trade relationship is changing,” he adds. “The trade policy adopted by current US administration makes it uncertain and challenging. There is the constant threat of additional tariffs, and companies in Ireland are worrying about exports to the US. If they export on a Monday and land on the following Friday, will the cost increase because of new tariffs? And the EU has retaliated and introduced tariffs on Harley Davidson motorcycles, bourbon whiskey and so on. I don’t think we have seen the last of this. There are ways to mitigate the impact of the new tariffs, but you have to know how.”
The historic ties between the two countries will go some way to calming the troubled waters, according to Bryans. "The historical and cultural links between both countries mean that Americans are extremely warm and receptive to growing the already strong business relationship," she says. "The American Chamber, in conjunction with Enterprise Ireland, supports Irish companies looking to enter the US market. Many of the Irish business leaders who have successfully done that will tell you the importance of the Irish connection in opening doors for them in the US. But while opening doors helps, sustaining those relationships relies on our ability to flawlessly deliver on our commitments, something which our members have a strong track record of doing."