Joe Biden is the most Irish president of the U.S. since JFK. Or even more than JFK. Biden's love for his roots seems genuine and emotional, whereas there sometimes seemed to be a degree of calculation in JFK's embracing of his ancestors.
So it's not surprising that the inauguration of President Biden has caused a great deal of excitement among the authorities here. He's already been invited, of course, and his response – “try and keep me out!” -- sounded like even more evidence that he will have our back whatever the future holds. He has roots in Ballina in Co. Mayo and Carlingford in Co. Louth and has made many visits here, with his visit as vice president to Ballina in 2016 an unforgettable time for the locals.
His first visit as president may well come in June if Air Force One stops off at Shannon on the way to or from the G7 summit in Cornwall in the U.K. There is optimism here that this will happen although the Covid cloud still hangs over everything so nothing is certain. If it does happen, such an early visit in his term would add to the confidence here that the Biden presidency is going to be something special for Ireland.
Sure he's even a practicing Catholic! What could possibly go wrong?
Well, quite a lot actually. Apart from anything else, the challenges facing Biden -- getting Covid under control, reversing the Trump legacy of division, restoring the economy, lowering racial tensions, repositioning the U.S. on the world stage, etc. -- are so immense that he will have little time to think about us, no matter how much he loves Seamus Heaney.
The reality is that there are no quick and easy solutions to these problems, and the trillions of dollars being eaten up by Covid and support payments will make achieving the kind of progress that people will feel in their pocketbooks even harder. The money just won't be there.
Even with a better-managed vaccine roll out it's going to take at least another year before a new beginning can start. And even then the revival will take several years.
Platitudes are all very well in speeches and Biden does them better than most U.S. politicians. But in the real world, compromise and choosing the least worst option are often as good as it gets for a president (as Obama pointed out in his White House memoir).
Some of America's problems are so deep-rooted and intractable that a change in the White House will not be enough. Getting rid of Trump will help, but it's not like flicking a switch and suddenly all is well again.
An example is Biden's priority (apart from tackling Covid) of bringing America together again. The reality is that the deep divisions in American society predate Trump. He certainly made them worse but they're not going to vanish now that he is no longer in the White House.
There are real issues involved which the liberal elite on the coasts either don't get or refuse to accept. Nice words alone will not be enough to close that division. So with all this on his desk, Biden is going to have his hands full.
He will be well disposed towards Ireland, something we have seen recently in his concern about the damage Brexit might do to our open border with Northern Ireland. But beyond that, he may not have either the time or the latitude to do us any favors. Certainly, there will be no room for sentimentality when it comes to the most important item on our agenda -- the economy.
Before we begin to look at the more complex area of Ireland's low tax regime and the American multinationals which provide over 150,000 jobs here, let's consider the simpler topic of tourism. In the past few days, it has become clear that the Biden administration will continue restrictions on travel to the U.S. from Ireland, most of Europe, and some hotspots like Brazil and South Africa. The Trump administration had planned to relax some of those this week, but now they are to remain.
Given what's happening with Covid both in Ireland and elsewhere on this list, that makes complete sense from a U.S. perspective. And Ireland is not being singled out. But it's still bad news for us.
Tourism is vitally important to us and the American market is a very valuable part of that. Around a quarter of the nearly ten million tourists a year who come to Ireland in normal times are from the U.S. and Canada, with the U.S. counting for most of them.
This is worth close to €2 billion a year to the Irish economy, with American tourists staying longer and spending more. With them gone, it's not just the airlines and hotels that take the hit but thousands of small businesses on the tourism trails around the country.
Until the U.S. gets Covid under control and its case numbers down to minimal levels, a resumption of tourism from the U.S. will not happen. We are dependent on Biden winning that battle and, as he himself has indicated, it's not going to be a quick fight but a long war. And the battle is not going to be made easier by the disturbing number of virus and vaccine skeptics in the U.S.
It's unlikely that Biden and his team will even think of Ireland in relation to Covid. We are a tiny part of a much bigger picture.
But the success of the U.S. in tackling the virus is vital for our economy. Apart from direct tourism here from the U.S., Dublin Airport (with its U.S. pre-clearance) had become a big hub for trans-Atlantic travel, with more than four million passengers a year and close to 200 flights a week passing through on the way to around 20 cities in North America.
Now there are just a handful. Getting all that business back is not going to be easy when the pandemic is over.
Tourism from the U.S. is vital to us, but even that is less important than the presence of the U.S. multinational companies which provide so many jobs here. All the giant global players are here, both in IT and pharma (Google, Facebook, Apple, Amazon, Pfizer, etc.) with a number basing their EMEA (European, Middle East, Asian) headquarters in Ireland, along with much of their intellectual property.
This allows them to run so much of their global profits through Ireland that, despite our low effective tax rates -- around two percent instead of the claimed 12.5 percent -- they still contribute billions to the Irish Revenue each year.
This has been so good for us that foreign multinationals now account for 65 percent of all corporation tax here. Each year our Department of Finance, as part of the budget process, calculates what they expect corporation tax to be in the year to come. Over the past five or six years, we have taken in an extra €8 billion in windfall corporation tax above what they had predicted. It's been that good for us.
Instead of saving this bonanza for a rainy day, however, the government has spent it each year so that our annual budget now depends on it. That has worried economists who keep pointing out that it is an unpredictable revenue source that could rapidly diminish or vanish. If that happens we are going to be in deep trouble, which is why Biden's approach to this issue will be so important for us.
In 2017, Trump tried to get U.S. multinationals to move their operations home by putting a 10.5 percent tax on excess profits they booked abroad in low-tax countries like Ireland. (He specifically mentioned Ireland at the time.) So far this has had little effect, but Biden has proposed doubling this to 21 percent which could have a big impact.
He has the pharma sector -- which has prospered during the pandemic -- in his sights. That could have a devastating effect here.
We still tend to think of things like butter and Baileys when we talk about Irish exports. But more than half of Irish exports are pharma products and we are one of the top two outside suppliers of drugs into the U.S. where drugs are notoriously expensive. It will be a surprise if Biden does not do something about this.
There is a wider context to all this than just pharma and IT. Biden was elected thanks to the support of ordinary workers in key states and, unlike Trump who was all talk, he will want to make serious efforts to help them, including protecting them from unfair company tax arrangements overseas.
Part of that will be sorting out international tax, trade, and tariffs so that the U.S. is not at a disadvantage. And that would affect Ireland in many sectors.
We have already mentioned butter and Baileys. Around €1 billion of food and drink exports go from Ireland to the U.S. every year. Even if you exclude pharma, around 20 percent of all our exports go there.
So it's a vital market for us, with so many jobs here depending on it. That is vulnerable to the ongoing trade tensions between the U.S. and the EU that resulted in tariffs under Trump.
We don't yet know how Biden will act on all of this. One of the difficult areas will be the determination of the EU and the OECD to get the big tech/media giants (all American) like Facebook, Google, Apple, and Amazon to pay their fair share of corporation tax in countries in Europe.
What they are getting away with at the moment is disgraceful, even if it benefits Ireland. Biden may want to do the right thing, but there are so many American jobs involved in this he won't find it easy. And there could be fallout for Ireland.
No one doubts Biden's love for the home of his ancestors. But no one should fool themselves into thinking that Ireland will get an unfair special deal from the U.S. because of it.