Economic Foundations of Irish Foreign Policy

I was asked to write this chapter for a forthcoming RIA volume on Irish foreign policy. A summary:

A country’s foreign policy is largely driven by what it perceives to be in its economic interests. That this does not provide a complete picture is evidenced by the fact that Irish development assistance has never taken the form of tied aid. Nor can the influence of powerful vested interests be discounted. A case can be made that Ireland turned protectionist again once membership of the European Union had been achieved. Agricultural and sheltered-sector interests have sought to stymie the liberalisation efforts of the WTO and the European Commission respectively. A further complicating factor is that a society’s own economic interests can occasionally be miscalculated. Joseph Lee has noted that “while the ‘political’ skills of Irish representatives in negotiating positions are widely acknowledged… there seems to be no comparable criterion for assessing the calibre of conceptualisation of the Irish case.” Irish foreign policy through the years has nevertheless recorded many successes in defending the economic interests of the citizens of the state.

The paper considers the political and economic determinants of Irish trade policy, the evolution of its inward foreign direct investment strategy, and the country’s position on international migration and on the broadening and deepening of European integration. A separate case study focuses on how successive governments have sought to defend and exploit the advantages of Ireland’s low corporation-tax regime in international negotiations.

14 thoughts on “Economic Foundations of Irish Foreign Policy”

  1. Impress the owners with your servitude and thats it I am afraid – I can’t get the Albert Reynolds goverment return from Europe out of my mind – waving the prosperity in our time documents.
    Also Jack Lynchs published conversations with Edward Heath comes to mind – we are just born to be servile.
    A sad pathetic bunch really.

  2. Prof Barry,

    Thanks for publishing this – the paucity of replies on this important topic speaks volumes about lack of interest in this topic. I agree with a lot of what you have to say – especially key point on our interest being in a liberalised free trade regime

    However, Couple of observations/criticisms

    1. Its interesting (and instructive) that this chapter fails to mention the greatest foreign policy failure in Irish history (if not of any small European country since 1945) – the forced socialisation of private debts equivalent to 50% of GDP at the level of the Irish taxpayer at the behest of large foreign powers , followed by/resulting in the effective loss of sovereignty via the Troika programs. And from what I understand, the Minister or Department of Foreign Affairs were not part of/engaged in the

    While clearly a failure driven by the economic and diplomatic tactics and “strategy” since 2008 – it reflects a deeper fundamental failure of Irish foreign policy. For example, what rational entity would surrender total control of its lender-of-last-resort to a supranational entity to which:

    a. Due to size, we cannot ever hope to exercise influence within

    b. To whom, we will never be important or strategic (e.g. if a million Irish people hit the refugee lines, they’d end up in Britain not Berlin).

    Irish engagement with the European project has been a curious mix of starry-eyed elite-driven europhilia (Fitzgerald et al) combined with some short-term opportunistic “begging bowl” stuff (remember all that boasting over structural funds) – with no long-term hard-nosed calculation of what would be good for Ireland.

  3. Part II

    2. Fundamentally, I think the roots of this lie deeper:

    a. Our sole/overriding long-term foreign policy has lain in distancing ourselves from Britain likely representing at different times either genuine national self-interest or some sort of deep seated tribal self-esteem thing.

    (Think for your example of your use of the phrase “lessening our trade dependence on Britain” rather than “diversifying into new markets”. Given our commonalities of geography, language, laws, consumer tastes, migration, etc – one would think it natural and economically optimal that our core trading relationship would always be with Britain!!!).

    A lot of stuff (some good/but most bad) has flown from that – the Economic War, Neutrality post-WW2, Entry into the EEC and breaking the link with Sterling/entering the Euro. The first and last decisions were clearly economic disasters – I can’t think of 2 countries in Europe that more that represent a clearer example of an optimal currency area.

    b. A great counter-example I think would be Canada/USA? It seems to me that Canada (while prickly over some elements of its diplomatic priority) has sought to deepen economic relationships with the US.

  4. 3. Apart from 2., I think there is a serious “competence” (and confidence?) issue with the Irish political elite when it comes to foreign policy. This probably rests on a few different things:

    We’re a young nation and, since 1922, have faced only a narrow and minor range of diplomatic/foreign policy challenges (no empires to run down, no invasions, no involvement on the front lines of the Cold War, never had to send anyone to War, never participated in the councils of NATO, party to peace treaties).

    Our method for recruiting our politicians rewards 2 things in a spectacular way = a. Ability to do retail politics at local level, b. Family relationships/parentage. Add in the anti-intellectual element of political culture that Basil Chubb identified, and you’ve probably got the system less likely to produce leaders who understand and can judge (or in good times care) what happens in other societies, especially in the corridors of power there.

  5. remnant,

    Haven’t read your comments, but Re: “paucity of replies”,

    people ARE interested but are busy (some of us work) and can’t (and shouldn’t) just knock off a quick reply from the hip, especially to an important interesting researched piece by a professional. People should read, digest, think, and not emote all over the keyboard.

    And there’s a lot of other serious non-work things to catch up on aswell.

  6. I must say I had a good laugh with the “Ireland Corporation Tax Regime: the International Dimension”. I suppose it was not intended as a comical piece ,but it is pretty good .It could have other alternative titles like: “How to pick your neighbours pockets in five easy lessons”, or “Talleyrand and Metternich reincarnated as little green elves”.
    As an exposé of immorality in international relations it is hard to beat. I hope it will be translated in all the European languages and be made widely available on both sides of the Atlantic before the Irish Corporate tax is again discussed, which should be soon.

  7. “A country’s foreign policy is largely driven by what it perceives to be in its economic interests”

    True, but a number of international relations specialists have begun to acknowledge the importance of other, less rational, determinants such as ideology built around historical narratives. Id wonder how important this has been in

    ” society’s own economic interests can occasionally be miscalculated.”

    Also backed up by remnants post, specifically part 2

  8. Only key foreign policy focus that I can think of at the mo … is … at least a 50% write off of vichy-banking system DEBT.

    @overseas commentator

    No bother with a little chat on corporate tax … let’s begin with your own and we do a little comparison – nominal and effective please.

  9. I hope you bring this topic up again, because comments require a lot of forethought and that, I believe, is the reason for the low number.

    For what it’s worth, I think the main thrust of Ireland’s foreign policy has been correct. We are a nation of talented, sociable, and sometimes incorrigible people with a fragile sense of self confidence living in a country with a complex, often unfavorable, strategic position. That, I believe is a fact and we have to deal live with the cards we have been dealt.

    Our relationship with England is one of dependence and we have nomilusions about that country’s motives because we have lived through many iterations whereby our notion of nationality has clashed with England’s notions of class.

    We have often idealized other countries in the EU, most notably France and Germany, but that is mainly because we see them as more sophisticated and, above all, friendly to Ireland’s interests. We sometimes forget, that these large countries are, in essence, the same as england. They are looking after themselves and, for the first time in our history, we have come face to face with “big boy” diplomacy in which France and germany have played us for fools. We, in 2008, were innocents to the slaughter. We were bullied and snubbed until we bent to their agenda. Now we have to learn.

    Today, I perceive a real disillusionment with the DU, and because of our fragile sense of confidence, that means a relative warming up tot he UK. We don’t need to feel this way. I freely admit that we were only admitted to the EU because England was admitted and I fully understand that many of the large countries see us as the equivalent of Cumbria in England. An interesting, exotic place from their point of view, but in the end irrelevant.

    We don’t have to be that way. We can’t be europe’s bread basket and we can’t escape hthe large country that sits between us and France. But we can exercise our right to veto, and we can look to our strengths. irish people have, on balance, done well wherever we went. Mainly as lawyers ( the incorrigible sociable thing I believe). We MUST maintain our education system and we must foster high tech creative pursuits. We should worry less about who our friends are and more about what we have to offer. If we can hold that philosophy, we will find we have many friends. If we don’t, we will have none.

  10. Thank you very much for sharing your excellent paper. I hope that some of the other authors will make their chapters available online.

    With reference to Ireland’s aid programme, you write:

    “A country’s foreign policy is largely driven by what it perceives to be in its economic interests. That this does not provide a complete picture is evidenced by the fact that Irish development assistance has never taken the form of tied aid.”

    And later:

    “The issues of human rights, the environment and development policy are considered elsewhere in the present volume. This chapter focuses on the more narrowly economic dimension of Irish foreign policy.”

    I agree that Irish development assistance has not been driven by self-interest, and long may that continue. However, it would be wrong to conclude that it was therefore not in our economic self-interest. On the contrary, the goodwill that our missionaries, NGOs and overseas aid have engendered gives Irish companies an advantage when dealing with or investing in African nations. The point was made several times at last month’s Africa-Ireland Economic Forum. The Department of Foreign Affairs and Trade hopes to encourage greater investment in Africa by Irish companies. The Department’s new Africa Strategy sets out a framework for Ireland’s business, political and development relations with Africa.

    Interestingly and laudably, the motivation behind it is to promote development rather than to assist Irish companies, even if it is likely to end up doing both.

    There are also indirect benefits from our aid programme. Our leadership and reputation on international development increases our soft power with countries rich and poor.

  11. In Ireland we interpret the world through our green lenses, loaded to the gills with emotion and distortions of reality. The main distortions from which we are quite incapable of recovering is Britain is hostile and malicious, has always been that way, is now and will continue on that path. America the good, our friend, ally and refuge in the past, present and future has always and will forever be the altruistic and trusted friend of the Irish. Europe, we show disinterest by the lack of foreign language skills and little or no attempt being made to rectify the lack of utility of Primary, Secondary and post Secondary education.

    We do show our interest as we jockey for material advantage in Strasbourg, Frankfurt, Brussels, Basel, Paris and Berlin. Are we fair weather friends bent on lining our pockets at the expense of the taxpayers of Europe, time will tell.

    As for the Irish and strategy we have always voted strategically as in which candidate will dispense the most candy and for a reasonable amount intervene with the national and local bureaucrats and politicians to give each one of us personal advantage. Of course getting a passport renewed and delivered to your door within five days ranks high in the selection process. See even I have pull!!!

    As to what can be done, it will take generations because the problems are firmly entrenched in the culture and bred in the bone. At some point before reaching age twenty five we should read Carl Von Clausewitz’s book On War. We must stop placing all our faith in cheap fixes, the low corporate tax being one of the more simple minded tactics. Our attachment to Gaelic failed fifty years ago but large amounts of money and time are still expended flogging a dead horse.

    Remember, as C. Von C. stated “Nations do not have friends, they have interests.”

  12. But we are in the EU and we are in the Euro. Ireland’s big foreign policy decisions (independence, neutrality in WW2, membership of the EU, and the break with sterling) we all, in my view, the correct ones. It is true that we have a distrustful attitude to the UK, and we have always idealized Europe and the US, because relative to the big shadow cast by the UK, we could paint them as benevolent counterweights to the big ogre.

    We may have made a huge mistake in our negotiation of the bank bailout, and our government was definitely guilty of hubris when it guaranteed bank deposits and all of the liabilities. We were right though to separate our currency from sterling when we did, because why should an emerging industrializing country, however small, link itself to a declining, de-industrializing currency?

    Today we are in the EU and we still have the relationships in the US that allowed us to fund out struggle for independence. I even suspect that we have the foundations for an excellent, constructive relationship with the UK too. We need only be confident enough to accept this and act accordingly.

    that

  13. Great comments. A couple of responses:

    Brooklyn-rentr

    a. The US government did not support or fund Irish independence in 1919-21. In fact, quite the opposite – Woodrow Wilson refused to see Dev, etc. Contributions came from Irish and 2nd generation amercians. The relationship between the US state and Irish nationalism has never been that war (post-1945 – British interests took precedence. The US administrations was very unhappy with our decision to remain neutral in WW2, and to not join NATO – regarding us as freeloaders).

    c. The relationship with the UK is, IMHO a multi-layered and complex one, and there’s very powerful forces operating in _both directions_ here (think of the number of folks in the UK with Irish parentage or who are Irish). The “emotional” component of that has consistently led to bad decisions in terms of rational self-interest.

    I’ll short-cut and just deal with the economics. Given our small scale and their proximity, language, commonlaw, tastes, etc. We read their papers, watch their TV – we send them TV presenters, use their electricity voltage. Its the first place an Irish person will move to get a job – to the extent that there’s almost a common labour market, Ireland is now just a slightly adjusted “bolt-on” component of the regular supply chain of big UK retailers, etc, etc. 50% of tourists are from Britain, etc. These all create massive economic linkages and trade that benefit folks in both countries and that is a _good_ thing. (If you don’t believe this – just look at how our non-traded/sheltered sectors behave!).

    In monetary terms, I also think we’re fairly similiar – and in actual fact a lot like the Americans. Not hyperinflationists like, say Italians, but willing to print it and tolerate moderate inflation. Semi-soft money people….

    I think the creation of a punt is open to question – but I believ the decision to join a currency union was simply nuts where:
    a. We influence no control
    b. Bad economic outcomes in Ireland have no consequences for core EZ members

    Linked to a declining de-industrialising economy? If you’ve seen the demographics for Germany/Italy, I’m not convinced my grandkids won’t end up paying their pensions!!

    d. In the interests of a broader discussion, I’d appreciate any insights folks might have around some analogues of small country with BIG neighbour:
    a. Netherland vs Germany? – I’ll go into a currency cause I think we’re both hard money people.
    b. Swiss economic diplomacy? – loads of free trade but I’m keeping my currency
    c. Canada and the US – ditto

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