The EU and the border

Our text for today is Graham Gudgeon’s piece in the Irish Times, which makes a number of questionable claims.

First, he argues that

An accurate version of Ireland’s economic history is important. This is because, contrary to what we are continually told, EU membership does not seem to have had a noticeably beneficial impact on Ireland’s economic growth, even if this seemed to be the case during the great construction boom occasioned by overly low interest rates inside the euro zone.

I don’t think any economic historian or economist believes that the EU has not been massively good for Ireland’s economic growth: just compare our experiences pre- and post-1973.

Maddison’s numbers show per capita growth of 3% p.a. 1950-73, and 4.1% p.a. 1973-2008. 4.3% p.a. 1973-2000, in case you want to strip out the Celtic Bubble years and the first year of the crash. That’s before we even get into the important issue of what was happening to the number of capitas. GDP grew by 3.2% p.a. 1950-73, and by 5.1% p.a. 1973-2000. 5.0% 1973-2008. And there is an even more important point to be made. The period from 1950-73 saw extremely rapid growth throughout Western Europe: our growth rates then were disappointing in that context. Growth slowed everywhere after 1973: our growth rates since then have been very strong in that context.

Our whole development strategy has been to serve as an export platform for multinationals selling into the EU market. You might think that we should be diversifying, and I might agree, but everyone accepts that the strategy has worked, massively, to date.

From the text, it seems that Gudgin may be confusing EU and Eurozone membership. I’m one of those who thinks that the Euro has been a damaging failure, but let’s not confuse the EU, and the Single Market’s four freedoms that have worked so well for us, with a flawed monetary union.

Gudgeon then goes on to say that

Ireland should ally with Germany and the Netherlands in arguing for continued free trade between the UK and the EU. This will greatly ease any pressures for Border controls in Ireland.

In fact, as Ben Kelly has usefully reminded us, unless the British decide to stay in the EU customs union either permanently or as an interim measure (or, most implausibly, succeed in negotiating a free trade agreement with the EU within two years of Article 50 being triggered) there will have to be tariffs between Ireland and the UK. There will be no choice in the matter: for the EU not to impose tariffs on UK exports would leave it in breach of its WTO obligations. And unless the UK has zero tariffs on everything from everyone, WTO rules would similarly oblige it to impose tariffs on EU exports.

Unfortunately for us, it seems likely that the British are intent on leaving the customs union, as Robert Peston points out here. There is therefore a fairly strong possibility that we will see tariff barriers between the Republic and Northern Ireland in the not too distant future (unless the North can get a special dispensation to stay in the customs union, and the tariffs are imposed across the Irish Sea instead).

There are those who would like to see Ireland leave the EU. Expect them to argue in the years ahead that any border controls between the Republic and the North are arising because of “pressure” from the Continent. Expect them to further argue that this shows that our true friends are in London rather than the European mainland. On the contrary: any border controls that arise will be as a result of British decisions, and British decisions alone. And to date there is no indication whatsoever that those decisions are taking any heed of Irish interests.

9th Annual Irish Economics, Psychology, and Policy Conference

9th Annual Irish Economics, Psychology, and Policy Conference

Queen’s University Belfast

November 25th 2016
The ninth annual one day conference on Economics and Psychology will be held on November 25th in Queen’s University Belfast, jointly organised by researchers in QUB, ESRI, Stirling and UCD. The purpose of these sessions is to develop the link between Economics, Psychology, and cognate disciplines throughout Ireland. A special theme of these events is the implications of behavioural economics for public policy. If you would like to attend, please register on the following link. There is no registration fee but we require advanced registration in order to provide access to the building etc.,
As well as the annual workshop we have developed a broader network to meet more regularly to discuss work at the intersection of economics, psychology, and policy. This has had six meet-ups so far, as well as some offshoot sessions. Anyone interested in this area is welcome to attend. A website with more details and a mailing list to sign up to is available here. There are currently 226 people signed up to the network and the events have been, at least in my view, very lively and interesting. There are several more planned for throughout 2016/2017 and we welcome suggestions.

830am – 850am: Registration

850am Welcome

9am to 10.40am: Behavioural Science and Policy Case Studies (Chair: David Comerford)

Katja Fells (RWI) “Behavioral Economics and Energy Conservation – A Systematic Review of Innovative Interventions and their Causal Effects”.
Nicole Andelic (QUB) “Debt advice is better delivered face-to-face than via telephone”.
Thomas Conway (NUIG): “Investigating the effects of the Great Recession on the mental health of Irish third-level students.”
Mark McGovern (QUB) “Disparities in Early Life Investments and Children’s Time Use”.
Cathal FitzGerald (DCU) “Surprisingly Rational? The Case of 100% Mortgages in Ireland in 2005”.

10.40am to 11am: Coffee

11am to 1pm:  Measurement, Method, and Behavioural Science (Chair: Pete Lunn)

Carla Prentice (QUB): “Time Discounting as a Mediator of the Relationship between Financial Stress and Health”.
Seda Erdem (Stirling): “Discrete Choice Experiments and Behavioural Economics”.
Aine Ni Choisdealbha (ESRI) “Harnessing habitual behaviour in the laboratory: an experiment on how busy consumers respond to environmental information”.
Arkady Zgonnikov (NUIG): “Using decision space visualisations to characterise individual decision makers”.
Marek Bohacek (ESRI) “Investigating a central mechanism of economic decision making: the ability to trade-off incommensurate attributes”.
Danny Campbell (Stirling): “Discrete Choice Experiments and Behavioural Economics”.

1pm to 140pm: Lunch

140pm to 320 pm: Regulation, Policy, and Behavioural Science (Chair: Liam Delaney)

Clare Delargy (BIT): “Behavioural Insights and Public Policy”.
Michael Daly (Stirling): “Self-control, health, and public policy”.
Maureen Maloney and Alma McCarthy (NUIG): “Automatic enrolment and employee risk:  An analysis using a bounded rationality framework”.
Leonhard Lades (Stirling) “Self-control, well-being, and normative measures of welfare”.
Karl Purcell and Laura Watts (IGEES). “Behavioural Economics and Irish policy”.

320pm to 330pm: Coffee

330pm to 415pm: Keynote Speaker 1: Professor Muireann Quigley (Newcastle Law School) “Libertarian Paternalism & Nudging: On Alluring Concepts and Public Policy”.

415pm to 5pm: Keynote Speaker 2: Professor Michelle Baddeley (UCL) Title TBC “Behavioural Economics and Regulation”.

The Apple Ruling: What do we know?

It’s just over a week since Commissioner Vestager announced the state-aid ruling on the tax treatment of Apple in Ireland.  We only have the press release and the Commissioner’s statement to go by so it’s still too early to be definitive on what the Commission are actually doing.  It could be months before the full ruling is available here but that doesn’t mean we can’t have a stab at what might be going on.

There has been a lot of reaction to what the ruling means for Ireland’s Corporation Tax regime.  While there has been massive reputational damage (possibly irreparably so) the ruling does not have any implications for Ireland’s Corporation Tax rate or even for any of the rules that Ireland applies to Corporation Tax.

Unlike previous instances the Commission is not looking for any change in Ireland’s Corporation Tax regime.  In this instance looking for changes would likely have been overreach but that is not what the Commission is seeking.  Nor is the Commission seeking to retrospectively impose alternative transfer pricing standards which was a central focus of the recent White Paper from the US Treasury.  If the Commission’s case required a change of rules or the application of new standards it would have had little hope of standing up to an appeal.

Continue reading “The Apple Ruling: What do we know?”

How much of Ireland’s “fiscal space” will climate inaction consume?

Here’s a guest post on the very important potential fiscal costs of climate mitigation by the IIEA’s Joseph Curtin. 

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The basic imperative to reduce emissions is easily understood. From March 2015 to July 2016, in each successive month the previous highest global temperature for that month was broken. July 2016 was the warmest of any month on record in the period of historic measurement. Given this record goes back roughly 160 years, the odds of this occurring without man’s input in the form of greenhouse gas emissions is infinitesimally small.

Reducing emissions is a political challenge that is difficult to grapple with, in Ireland as in many other countries. In welcome developments, we now have a Government Department with “Climate Action” in its title, and the newly established citizens’ assembly was given the goal of exploring “how the State can make Ireland a leader in tackling climate change”.fig1.png

But on the ground there are few examples of “action” and “leadership” to draw upon. There has been no plan to reduce emissions since the previous strategy expired 4 years ago. As we can see from the EPA’s latest inventory report, since the end of the recession in 2011 Irish emissions have more or less flat lined. In fact emissions will probably increased in 2015 (although EPA data have not yet been published) and are projected to continue increasing in the years ahead.

Continue reading “How much of Ireland’s “fiscal space” will climate inaction consume?”

DEW Annual Conference – programme

The programme for the Dublin Economics Workshop annual conference, which takes place on 23/24 September in White’s of Wexford, is available via this link [PDF]. Hopefully all sessions will be of interest the readers of this blog, but I might highlight the two keynote addresses, one by Máirtín Ó Muilleoir, Northern Ireland’s Minister of Finance, and the other by Sharon Donnery, Deputy Governor of the Central Bank,  as well as sessions on Irish national accounts (in the light of 26% growth) and on Irish fiscal and financial stability (in the light of #appletax), and one led by Liam Delaney on using behavioural economics to shape public policy.

Given my own interests, it will not be a surprise to learn that there is a session on housing supply (including expert views on why construction costs are so high in Ireland) and on real estate more broadly, while there is also an interesting session on life beyond the M50, looking at politics, agriculture and funding for the arts, taking place on Friday afternoon.

Bookings for the conference can be made on the DEW’s website, here.

(And on behalf of the new organising committee, I apologise for the delay in this going live!)