David McWilliams: Official Ireland has it all wrong - we could win big if UK opts for Brexit
Published 18/05/2016 | 02:30
Yesterday, the American Airlines flight from Dublin to Charlotte, North Carolina, was jammed. There were five flights leaving Dublin airport for the United States between 8am and 9.30am. The very friendly American immigration official at the US immigration in Dublin told me that 3,000 people travelled from Dublin to the States on average every morning. That's a huge amount of people and, obviously, it only gauges the punters going one way. There must be a similar number coming the other way. He told me that when college term is finished, that figure will go up to 5,000 leaving Ireland for the US every morning.
The majority of people on my flight were US tourists heading home after spending time in Ireland. Americans from all over the US are coming here and they are not just from the traditional heartlands of the Irish North East. In short, lots of Donald Trump supporters, who believe in the right to bear arms, are coming here too.
The special relationship between Ireland and the US is becoming more and more significant and this will not change if Trump wins the election, which looks less remote by the day.
As the US economy has recovered in recent years, we've seen a big rise in the number of Americans coming here. Last year, the US figure jumped by 14.7pc to 659,200 visitors while this contrasts with an overall figure of 11pc growth in all visitors. The renewed interest from Americans has helped drive the total record figure of 3,876,200 visits to the country last year.
Of course, visitors are only one example of the deep bonds we have with the US; the other obvious one is direct foreign investment.
US direct investment stock in Ireland totalled a record $310bn in 2014, according to data from the US Bureau of Economic Analysis (BEA). Ireland's share of US investment stock in Europe has soared over the past decade, with Ireland's share amounting to 11.1pc of the total in 2014 versus 6.2pc in 2004.
US investment flows to Ireland surged to a record $58.1bn in 2014. Ireland performed strongly within Europe during 2015, accounting for nearly 20pc of total US investment flows to Europe in the January-September period. The comparable shares for France and Germany were 3pc and 2pc, respectively.
Ireland's investment stakes in the US are also significant, with Irish affiliates estimated to have generated some $90bn in sales from their US operations in 2014 and $35bn in US economic output. Whether through rising output, employment, or R&D expenditures - Ireland's local presence in the US bestows a host of benefits to that country.
We are two nations intertwined. Ireland is a significant part of the American supply chain and we have to be aware of that.
Since 2008, Ireland has been second only to the Netherlands in attracting more US investment flows to the eurozone on a cumulative basis. However, the UK remains the king of inward investment, receiving almost one euro in every three invested into Europe.
This fact undermines the notion that the euro is the reason for US and other international flows into Ireland. Obviously, if being in the euro were a significant factor, the UK with its sterling would suffer - but it doesn't.
The reason the US companies are here has little to do with the currency and is more cultural, linguistic and tax-based - and, of course, there is the obvious fact that they have been making money here for a long time and this track record speaks for itself.
And the links are getting deeper. Corporate America does not just produce in Ireland, it banks in Ireland - this is evidence of the profundity of the commercial links between both countries.
Yesterday, Bloomberg reported that Ireland emerged as America's fourth-largest creditor, following China, Japan and the Cayman Islands, after the US government revised the way it reports the figures.
Investors in Ireland owned $264.3bn of Treasuries at the end of March, based on official data issued on Monday - less than $1bn off a record high of $265.1bn in December. China is the biggest holder of US bonds with a $1.24 trillion stake. Japan is next with $1.14 trillion, followed by the Cayman Islands with $265bn.
How could this be?
The answer is in the IFSC. Corporate America makes profits in Ireland which it doesn't want to repatriate to the US because the companies will have to pay the difference between the Irish 12.5pc corporation tax and the 30pc in the US. Therefore, they choose to keep the money in Ireland and put it on deposit in American banks in the IFSC. They "park" the money in the safest asset they know, which is US government debt. And they do this via the IFSC in Dublin.
So it's not Irish people who are financing the US government. What is happening is that US companies are financing the US State through their Treasuries in Dublin.
The fact that this huge trade is going through Ireland is something we should note. The benefits of Ireland are small compared to the benefits to both the US companies and indeed the US government, which is being financed by these companies.
In the years ahead, our relationship with the US is going to be deeper. We are not really a European economy but part of the US world game, with a European passport.
If the Brits decide to leave the EU and this undermines the UK as a location for investment (as the official view suggests), then some of the US investment in the UK will be diverted. If this is the case, where will this investment be diverted to? Ireland is an obvious answer.
When we stand back, it is clear that our strongest strategic economic relationship is the one with the US. This will not change whoever is in the White House. Trump talks about building walls and bringing US companies home but in truth he will not be able to get this through Congress, so it will just become another "elite" target to sloganeer against.
He fully understands this, but having permanent "bogeymen" to rail against is part of the Trump strategy. This won't change if he wins office.
As for Brexit, we could win big if it's a vote to leave. But you wouldn't think that from listening to the Government's efforts to agitate for a 'Remain' vote. Not for the first time, Official Ireland has misread the situation.