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Amid Brexit chaos, Ireland seeks international opportunity

Posted 01 February, 2019
(opens in a new window)Liam Kennedy, (opens in a new window)University College Dublin

As the drama of (opens in a new window)Brexit unfolds and the UK’s land border with the Republic of Ireland becomes its defining issue, relatively little international attention has been paid to Ireland’s post-Brexit future.

Even as it responds daily to the manifold challenges Brexit poses, the Irish government has also been seeking fresh opportunities and building alliances both in the EU and the US. For nearly half a century, Ireland has had to carefully manage its relationships with the UK, the EU and the US. Brexit has raised the stakes in this complex diplomatic and economic positioning. It is a challenging scenario for a small state, as these more powerful entities are also in the midst of reconfiguring their relations with each other.

Boston or Berlin

Ireland and the UK joined the European Economic Community (ECC) at the same time, in January 1973, but their relations with what would come to be the EU have significantly differed. The UK entered truculently and remained sceptical and begrudging of membership, generally resistant to further integration of the union. While the Leave vote in 2016 was a shock to many, the British distaste for Europe was a deep and abiding undercurrent.

Ireland entered more gratefully, in sore need of the economic benefits membership would bring. It has not always been a smooth relationship but it has brought wealth and trade. Paradoxically, it also helped to naturalise relations with the UK and to set it on a trajectory away from dependency on the former colonial masters. In many ways, joining the EU was a moment of “(opens in a new window)psychological liberation” for the young state.

Even as it took advantage of EU membership though, Ireland had a strategic gaze on foreign direct investment from the US as key to its economic future. The strategy proved remarkably successful, fuelling the Celtic Tiger economic growth of the 1990s and early 2000s.

That booming economy led to fresh considerations about EU and US influences on Ireland. In 2000, the then deputy head of the Irish government (the Tanaiste) Mary Harney remarked on Ireland’s position between a Europe, representing social inclusion and government regulation, and the US, which promoted the free market and minimal government involvement. She (opens in a new window)concluded that “spiritually we are probably a lot closer to Boston than Berlin”. It was a conclusion that reflected the optimism of the time. Ireland was the new poster child of globalisation.

Whether that’s still true is unclear. The pushback against globalisation is growing in force and, in any case, Boston and Berlin no longer symbolise what they did in 2000. As Ireland seeks to maintain and market itself as a nimble open economy it must redefine its relations on both sides of the Atlantic.

Life after Brexit

Brexit is viewed by the Irish government and its diplomats as an opportunity for Ireland to expand its relevance both within the EU and in US-EU relations. There is an expectation that its role in the EU will grow with the UK leaving, but precisely how that role will change remains vague and uncertain.

Ireland entered the EEC as an agrarian backwater in need of aid – it now more confidently maintains EU membership as a modern hi-tech, open economy. In 2014, it went from being a net beneficiary to a net contributor to the EU budget. With such growth comes responsibilities and, with the EU demonstrating strong support for Ireland during Brexit, there may have to be payback – or at least some tough decisions to be made regarding such issues as corporate taxation and contributions to European defence.

Ireland’s globalised economy is highly dependent on investment by US multinationals. At present, approximately (opens in a new window)700 US companies have investment in Ireland, employing around 150,000 people. In 2017 they paid €4.25bn into the Irish exchequer.

In 2016 Ireland accounted for 1% of the European economy yet attracted 12% of US foreign direct investment. It must be added that it has benefited more than any European country from profit-shifting by US companies – a point of some tension with EU partner countries.

For over 30 years, Ireland has promoted itself to American companies as “a gateway to Europe” – a pitch that has even greater resonance sinc ethe EU referendum. The government and its agencies have been seeking to capitalise on this messaging as Brexit nears, promoting the country as even more attractive for investment, and also positing an enhanced presence in Washington as a close EU partner.

But that may also mean that a greater economic challenge for Ireland than Brexit will be the slowdown in growth in the US, and pending trade wars between the US and China and/or between the US and the EU.

During his visit to Washington in March 2018, the prime minister (the Taoiseach) Leo Varadkar stated: “We see ourselves as a global country, not so much an island behind an island at the edge of a continent, but rather an island at the centre of the world.” This shifting of the axis of Ireland’s economic and political worldview is ambitious and yet requires careful diplomatic engagement and leverage to secure the vision.

For Ireland, Brexit may prove to be another important moment of psychological liberation, but is also a precarious moment portending an uncertain future.

(opens in a new window)Liam Kennedy, Professor of American Studies, (opens in a new window)University College Dublin

This article is republished from (opens in a new window)The Conversation under a Creative Commons license. Read the (opens in a new window)original article. The Conversation