International pressure to cut emissions, risks to supply chains, and a phobia about relying on Chinese producers, is pushing Ireland’s manufacturing to the pin of its proverbial collar.
There is a clear shift from the global policies that boosted the rapid growth of Ireland’s industrial base towards protectionism, putting under threat foreign direct investment, the bedrock of Irish manufacturing.
The new IDA chief executive, Michael Lohan, conceded as much in a recent interview, saying the agency is expecting some sort of slowdown later this year in the number of projects out of the multinationals, following a decade of “staircase growth”.
US president Joe Biden’s significant success in getting three major legislative acts pushed into law in the US that bolster US manufacturing is the first of the big flash points.
The Biden administration’s mantra is to enable the US to be more competitive with China and the EU, in areas where it believes the US has lost ground.
The new US laws deploy the biggest package of incentives since the monumental “New Deal” of Franklin D Roosevelt in the 1930s.
The EU Carbon Border Adjustment Mechanism (CBAM) — which will set an import tariff on carbon intensive products, such as iron and steel, cement, fertilisers, aluminium, electricity and hydrogen — is the second major flash point.
CBAM could increase the cost of many inputs for Ireland’s manufacturing industry, which it currently sources from outside the EU.
The US and EU plans present an enormous threat that could lead to the collapse of Irish manufacturing, which provides 250,000 high wage blue-collar jobs, which are mainly located in rural regions.
Ireland’s manufacturing firms will also face increased barriers to entry into the US, their largest market, but will unlikely gain little advantage in Europe, or in the UK which is busy trying to safeguard its own manufacturing base after Brexit.
The US Inflation Reduction Act — which offers wide-ranging tax breaks to makers of electric cars, solar panels, and wind turbines, and other ‘green’ firms — should worry us the most. It will inevitably curtail US corporate investments in Ireland.
But the Infrastructure Investment and Jobs Act, which aims to pump billions of dollars into US corporations to build roads, bridges, public transportation, and energy transmission, is less worrying. Some Irish-based large companies, such as CRH, which make a lot of their products in the US will likely benefit.
Meanwhile, the US Chips and Science Act, which aims to bring home semiconductor manufacturing to the US and to lessen China’s influence, could undermine investment by Intel and others in Ireland.
In a further blow, the bill also introduces a minimum corporate tax of 15% in the US.
The passage of the measures in the US led to something of a panic in Europe late last year: French president Emmanuel Macron attacked the US incentives as “super aggressive”.
European industry heads have since been trying to goad the EU into creating similar incentives.
The European Commission has so far only announced a “Green Deal Industrial Plan”, which includes plans for a simplified regulatory environment, easier funding, better skills, and opening up trade to bolster supply chains.
Ireland requires nothing short of a comprehensive manufacturing strategy that will require huge investments. Ideally, the funds could come from the booming corporation tax receipts.
