Tariffs Part 3: What I Learned From a Few Months Shadowing the Dáil’s Enterprise Committee And What It Means for Our Economy
Since my last post on this subject, I’ve been regularly attending the Dáil’s Enterprise Committee meetings and met with a lot of business groups both through the committee and outside of it. I got a high level of exposure to some of the issues different parts of the private sector were grappling with, and learned a lot about how others are thinking about the future of the Irish economy.
To recap on my previous posts (Part 1 and Part 2):
- Donald Trump’s driving economic vision, beyond enriching the already very-wealthy, is to revitalise rural formerly-industrial communities in Republican heartlands
- My belief is that his “America First” agenda leads him to do so at the expense of other countries (and American consumers) primarily though tariffs
- Our economy is internationally unique, in that it’s dominated by foreign (predominantly American) multinationals for its high-income employment and the State’s fiscal position
- As a result our indigenous sector is predominantly made up of smaller local domestic companies serving the local market
- And we have a real challenge in growing a strong indigenous industrial exporting base which other countries have
In the last several months, a few other dynamics have come to the fore:
- Tourism numbers have plummeted
- Liquidations of Irish companies are on the rise
- Officially reported redundancies seem to have also increased
- Unemployment is moderately climbing
- Our generation of high-potential startups and commercialised research has been reported to be virtually stagnant (video of me pointing that out to the Minister here)
- The worst effects of American tariffs have been so far been avoided
One of the more interesting conversations I had in the last few months was with IBEC when discussing the various tariff scenarios. They were quite concerned for 2 major industries – one dominated by domestic companies and one by multinationals, and both major exporters and employers in Ireland.
The first one, the drinks industry, has much smaller margins – and even small tariffs could have a sizeable impact on the viability of smaller producers (think of brands like newer whiskeys or gins or your favourite local craft brewery). The best example here is probably the recent shocking closure of the great Cork institution of the Franciscan Well Brewery.
The second area IBEC was concerned for was the medtech industry. Thankfully, the worst case scenario of a 30% tariff didn’t come to fruition, but if it had, there was real concern that the industrial base of medtech in Ireland would become unviable, in particular for exports to the US. Given that Westport produces the world’s supply of botox, for example, there would have been real issues had tariffs approached worst-case scenario territory (or if Trump is minded to renege). That was particularly worrying because of the reliance of many localities on these kinds of manufacturers and the high-income jobs they create.
Separately, tariffs have a chilling effect on continued or additional investment. That can be seen from the closure of plants, like the Merck closure in Arklow, which are worrying from the perspective of the pharmaceutical leader’s commitment to continued investment in Ireland. My sincere hope is that this is just an aberration, but it may be a portent of things to come.
The consistent position of this government and previous governments has been to put all our eggs in one basket – i.e. the multinationals. Public agencies like the IDA, which have been very successful in cultivating a strong multinational sector, got the lion’s share of attention from various TDs and Senators at the committee. The argument for infrastructure development in the recent budget and National Development Plan was almost entirely driven by the asks – and concerns – of multinationals made to government and the IDA.
The other area that the committee’s members and discussions centred on was local businesses – the retailer, the restaurant, and other local businesses, which isn’t surprising given that so many TDs come from that background. It meant that the very expensive VAT9 cut for restaurants, which somehow also included major fast food chains, played a huge part in the recent budget. But other major concerns for smaller businesses like access to credit and finance or the huge inflation in supply or energy costs went completely unaddressed. The cost of doing business and ‘power-up’ grant announced in Budget 2025 and delivered this year spent over €400 million, or over €5,000 per business. In 2026, no such relief is coming (like the other one-off energy credits or supports for people reliant on disabilities or carers payments), suspiciously when it’s not an election year.
Add into the mix that everyone seems to be under the impression that the Draghi report wants us to reduce regulation rather than simplify it, and that FG MEPs join the far right in the European parliament to water down regulations on large corporations, and the result is that we get a lot of people talking about a lot of things that have nothing to do with how to plan for the future of the Irish economy where we all share in the prosperity.
By concentrating all of this effort into supporting multinationals (whose shareholders are doing better than ever) and catering to the lobbying demands of small businesses reliant on the local economy (who are pocketing the VAT cut), we’re prevented from focusing on the engines for prosperity for the Irish economy: growing indigenous exporting businesses.
There was hope, though, in one session at the Enterprise committee with economists from NERI and ICTU in September, where we spoke at length about the kind of transformation the Irish economy requires to work for workers and businesses alike.
The core philosophical debate, in my view, is not about the costs of doing business (although they definitely matter, particularly for small local businesses), but rather the poor productivity in the indigenous sector. Economists define productivity as how valuable the stuff you produce is to how much it costs to produce it (usually denoted by its labour costs). In Ireland, we have some of the most productive workers in the world in the multinational sector, but once you strip that out, you see a much less ‘productive’ workforce in the indigenous sector. This is mostly accounted for by the high value of the goods and services produced by multinationals vs. their indigenous counterparts (think of computer chips from Intel being compared to potato chips from Tayto and you get the point).
What that means, as NERI reported, was that labour productivity is flat and when you strip out labour from the multinational sector, real wages particularly for the young are not keeping up. Combine that with a reliance on the income taxes from the multinational sector vs. say taxes on capital or the very wealthy, and you get a real Tale of Two Cities kind of vibe to the Irish economy. I think most of us that work in and around communities in Ireland understand that inherently just by observation, but the economics bare it out.
The solution is pretty simple, but it is radical and it will require significant policy transformation and political courage – we have to make major investment in creating and growing Irish companies that can compete with high value products on international markets. Catering to multinationals and throwing a few hundred million at restaurants just won’t cut it anymore, and puts us in very risky economic territory at a time of major geopolitical flux. This will probably require an EU-level intervention in our industrial development. Of course, from a Social Democratic perspective, we’d like to see a thriving economy like this so we can have more sustainable revenues to fund public services and increase real wages for everyone.
What I’ve been disappointed in generally has been the Government’s apparent obliviousness to this challenge and opportunity, especially at EU level. Very little of the recent budget went into this kind of reimagining of industrial strategy, and without it, we’re going to fall even further behind. By contrast, we focused on it a lot in the Alternative Budget of the Social Democrats, for example by doubling Enterprise Ireland’s funding of new Irish start-ups along with a host of social justice measures.
Key to this industrial strategy is making big bets on the future of the economy – things like companies that are building the climate technologies of the future or the kinds of high-tech products our modern life depends on. But it’s also about doing that the right way – not leaving it to the market, but getting the State to be a major player in shaping the conditions for businesses and workers in them to thrive. That hasn’t been the philosophical position of this government, but it is urgently required if we’re to succeed.
I’m hoping to work with my parliamentary colleagues on this economic vision for the future. Not to be too dramatic, but I sincerely believe our country’s future prosperity and the security of our people depend on it. I hope you’ll support us in that endeavour.