The Irish Advantage

The Irish Ambassador to the United States (US) has always had the considerable advantage that there is a very large Irish community in this country very much involved in politics both at the state and federal level. Thus, there is widespread knowledge of Ireland and her traditions. The St. Patrick’s Day festivities once again offered an opportunity for Ireland and the US to renew ties of friendship and kinship and to celebrate the abundant contributions of so many Irish Americans to this country.

Ireland has changed considerably since President Kennedy visited in 1963. In his address to the Irish Parliament and in one of the key texts of post-independence Ireland, President Kennedy said:

It is the present and the future of Ireland that today hold so much promise to my nation as well as to yours, and, indeed, to all mankind, for the Ireland of 1963, one of the youngest of nations, and the oldest of civilizations, has discovered that the achievement of nationhood is not an end but a beginning.

In line with this promise of a beginning, the focus on St. Patrick’s Day has shifted from the traditional gift of shamrocks by the Taoiseach (Prime Minister) to the President of the United States to a more complete celebration of the ties that bind us together today. Rather than solely celebrating our past, we now are discussing our present and committing to our future together.

Developments in Northern Ireland, culminating in the signing of the Good Friday Agreement in 1998, have allowed a different image of Ireland to come to the fore.   Dramatic changes have been wrought on the island which depart from the picture postcard image which for so long captured us. As President Bush noted on St. Patrick’s Day this year, Ireland is now a country of immigration rather than emigration. We are coming to terms with the development of a multicultural society and the immense economic changes that have enfolded us over the last decade.

The story of Ireland’s transformation is complex. Many interwoven strands make up the tapestry of our island today. One of the most important of these is Ireland’s membership in the European Union (EU). Ireland has benefited in many ways from membership—through the opportunities which the European single market offers and through the support which the EU has given to the development of our economy.

Equally important is the part Ireland has been able to play in one of the great ventures for peace in the second half of the 20^th century, the movement towards an increasingly integrated and united Europe which is such a significant partner of the United States. In this process, Ireland has opened out beyond its traditional and continued close relationship with Britain, to reestablish and to renew ties with its other European partners.

The benefits of EU membership to Ireland are matched by our historically strong political and cultural connection to the United States. According to the 2000 Census, 35 million people trace at least part of their heritage to Ireland. This community is aware and proud of its Irish heritage. It is conscious of shared traditions in politics, law and culture. Increasingly, it is conscious of a shared economy.

While Ireland had long sought US foreign direct investment (FDI), even as we were emerging from the protectionist thinking of the 1950s, we were particularly well placed to benefit from US investment in Europe. US FDI in Ireland now accounts directly for 90,000 jobs in Ireland. A recent study showed that the US had invested two and a half times more in Ireland than in the People’s Republic of China in 2003. Reflecting the tone and very nature of our relationship, Irish companies now employ more than 50,000 people in the US. Investment flows both ways between Europe and the US—to the benefit of both our economies.

Membership in the EU and US FDI have offered Ireland crucial platforms for growing and modernizing our economy.

Of themselves, these factors would not have been sufficient to put us on the path to prosperity. Rather it was a series of deliberate policy choices that equipped Ireland to compete more effectively in an increasingly open global economy.  During his recent visit to the US, the Taoiseach Bertie Ahern recently spoke of the “Irish Advantage,” which can best be captured in our approaches to “Education, Innovation and Taxation.”

Historically, education has been important in Ireland. For many it offered the best route to escape from poverty and to earn a living. For others, it was a tool that equipped them for emigration and the search for jobs abroad. Education has traditionally been held in high esteem in Ireland. In the late 1960s, however, the government introduced free second-level education. As a result, education in Ireland has developed tremendously from that time when Ireland still had one of Europe’s lowest rates of completion of secondary education.

Today, we have one of the highest rates of third-level qualifications in the European Union. In the mid-1960s, fewer that 20,000 students were attending college in Ireland while by 1999 this had risen six-fold to 112,000. In 1984-1985, only 40 percent of 18-year olds were engaged in full time education; this figure has now risen to 64 percent.

In addition to increasing participation rates, Ireland sought to introduce programs that would match the abilities of students to the needs of a global economy and to advanced enterprises. This has played a huge role in providing an educated and flexible labor force capable of taking advantage of developments in the global economy as well as developing a more innovative and entrepreneurial spirit.

This is not an area where Ireland can stand still. There is an awareness in both education and industry that we need to go even further. We need to increase the post-graduate and doctoral work underway in Ireland if we are to develop our research and development (R&D) capacity and our ability to innovate to its fullest potential.

The Irish have long been known as a creative people and our ability to create, innovate, and embrace change has helped us become an attractive base for foreign investors. Owing to a lack of some natural resources, and to our island status, we had to target areas where these disadvantages would not count. We have worked to make Ireland a base for high-tech industry, pharmaceuticals and financial services. In doing so, we have sought to develop our indigenous research and development capacity so that we are in a position to provide the resources that investors seek, and to develop our indigenous interests in these sectors to the point where they can compete abroad on the world market.

The EU’s Lisbon agenda for economic reform commits Ireland to increasing spending on research and development.  This requires us to set a target to increase research spending to 2.5 percent of gross national product (GNP) by 2013. Government spending has increased, but it requires matching investment by the domestic private sector as well as research work.

Ireland has established the Science Foundation Ireland (SFI), which is modeled on the National Science Foundation in the US. SFI is investing heavily in developing R&D in order to attract scientists and researchers to Ireland. This will enable Ireland to compete more effectively in the global economy. The success we have enjoyed will continue only if we continue to provide an innovation advantage.  The challenges posed by countries with lower cost bases and larger workforces can only be faced by keeping pace with change. This we intend to do.

A key component in our economic development has been low corporate tax rates, which have allowed us to capitalize on our strengths.

Ireland’s corporate tax rate is 12.5 percent which applies to both manufacturing and services. This has allowed us to attract investment. It has balanced some of our economic disadvantages such as size and location. It is reflective of a pro-business philosophy, which has sought to minimize costs and to reduce the regulatory burden on enterprise.

Since the advent of the new single currency, the Euro (of which Ireland is the only English-speaking member), monetary policy is now decided on a Europe-wide basis by the new Central Bank in Frankfurt. Fiscal policy is one of the key tools available to allow us to manage our economy. Choosing to lower taxes is an expression of sovereignty, as well as a positive policy decision. 

The government also has followed the path of “social partnership” in pursuing its economic agenda. Social partnership has provided a framework and process for govern-ment, business, trade unions and other important sectors of the economy to develop a shared understanding of the forces and the trade-offs driving economic and social progress. By bringing together the key actors in the economy, the employers, the unions and others, government is able to forge consensus in agreements where fixed pay increases were accepted in exchange for productivity targets (which included the modernization of our public service).

The result has been twofold—on the one hand, industrial peace and certainty about labor costs, but secondly a national sense of purpose and direction which has enabled us to become increasingly competitive in the global market.

Ireland also has benefited from a young and growing population. The population is now at its highest since 1871. It fell dramatically in the wake of the Great Famine and continued to decline into the mid-20^th century. The constant hemorrhaging of our young people through immigration during the last century cost us hugely in terms of energy and initiative. It has taken us a long time to recover.  

The situation has changed, and the Irish travel now out of a sense of curiosity and adventure. Our unemployment rate is remarkably low, and we are benefiting from large numbers of migrants from the new member states of the European Union. Ireland decided to allow the full freedom of movement guaranteed by the Treaty of Rome to citizens of the ten new states from the time they joined the EU in 2004, rather than to grant these freedoms on a staged basis.

The remarkable growth of the Irish economy has provided a counterpoint for those whose image of Ireland was formed in earlier times. Ireland has now become a dynamic country playing a full part in the European Union and on the world stage. With economic development comes a new found confidence, and a willingness to play our part in a world that technology and travel have turned into a neighborhood.

These are the fruits of the Irish Advantage.