The Irish Times view on Ireland's response to tariffs: there is a need for strategic thinking

Irish Times

2 days ago

The outline trade agreement between the EU and the US, provided it holds, removes some immediate economic risk for Ireland. But as well as the initial response, it also underlines the line for longer-term strategic thinking about the Irish economy.
In the short term, there are calls for supports for Irish businesses exporting to the US to deal with the additional cost. Care is needed here. Companies need assistance to look for new markets. And the Government also needs to examine other ways it can improve their competitiveness in the short term.
However, the State cannot provide an ongoing subsidy for businesses to help them to sell to the US at tariff levels that are likely to be in place for some time. Companies can be helped to adjust to the new reality, but there is no point in State support for exports that are no longer economic.
Over the coming months, the Government also needs to reexamine its budget sums. As it appears a full-scale trade war can be avoided, the assumptions made in drawing up the Summer Economic Statement, the key pre-budget document published last week, may need to be tweaked rather than torn up. A lot will depend on the details of how different sectors will be affected.
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Ireland must also focus on the longer term. Ireland's economic model has been based in large part on attracting foreign direct investment (FDI) from the US and acting as a bridge between the American and European markets. Of course the State needs to do what it can to protect this and to hope that the framework trade deal is a sign of somewhat calmer times.
However, Donald Trump remains determined to attract multinationals in sectors such as pharmaceuticals back to manufacture in the US. And, more fundamentally, the era of relentless globalisation overseen by the World Trade Organisation is over, even if what replaces it is far from clear.
And so it is incumbent on Ireland to spread its bets – to diversify its export markets and to work harder to develop indigenous industry. These are both long-term projects and new approaches cannot transform the economy overnight. However, Ireland has focused in policy terms on measures to attract FDI. While domestic firms are supported , too, they often take second place in terms of the allocation of resources and policy attention. This needs to change.
Improving the environment for both FDI and indigenous investment also requires vital upgrading of key infrastructure and also human capital – the skills and abilities of the workforce. These areas have been given insufficient attention for some years now – and the price has become clear. The Government's new strategy for competitiveness, promised in the autumn, needs to take a serious view of these issues. It can not be a rehash of current policy.