Research by The Economist suggests that Donald Trump as president would be an economic threat to the entire world given that he is so hostile to free trade and has already alienated China and Mexico, while his extreme views on Muslims and terrorism will not endear him to the Middle East. In fact one senior Dubai official has said that Trump becoming president could spark a “clash of civilisations” which would lead to further economic instability not to mention terrorism and war.
But apart from the effects of a possible global trade war what direct effect would Trump have on Ireland and Wexford in particular if he was to be president of the US, given our close links with America over the generations?
2 of his stated policies in particular give rise for concern: His intention to
- scrap the j1 scheme and
- bring US companies back to the US
J1 scheme
The j1 scheme is a work visa programme with a cultural exchange element which gives US businesses the opportunity to have guest workers with specialized skills for a few months, but Trump says it is merely a sap to corporate interests looking for cheap labour.
And to some extent he may be right but the j1 summer has become almost a rite of passage for many young Irish people in or leaving college, with between 7 and 8 thousand of them availing of it each year. For many it is their first real experience of living and working independently. Some do very well work wise but even for those who don’t, it is a broadening experience of life somewhere other than Ireland.
Over 150,000 Irish students have spent summers working in the US since the visa was introduced in 1966, strengthening the US – Ireland relationship by allowing both nationalities to live and work together.
300,000 student workers worldwide go to the US on the scheme every year to work in various companies including Trump’s own hotel. Trump says it is his use of the scheme which gives him perspective on it. According to him, it is something available to him as a businessman and he uses it, but as president he would be looking at the overall good and would replace it with a scheme whereby inner-city youth would get the opportunity to gain work experience. He maintains that 5 decades of various visa schemes including the j1 has resulted in reduced incomes and increased unemployment in the US especially in the inner-cities.
Trump’s plan would be welcomed by many in the US, and would appear to be feasible. There is already a federally funded initiative that trains and matches jobseekers with employers which could be extended to facilitate companies hiring from an American bank of CVs rather than foreign ones.
Our j1 seeking students have already been dealt a blow this year by new employment criteria. Now all applicants must have found jobs before getting a visa. And while this might seem a positive step in so far as students won’t have to risk running out of money while searching for work, it is expected to seriously impact on numbers being able to avail of the visa, leading to a possible reduction of between 60 and 80% until such time as the infrastructure to enable people to get jobs beforehand catches up.
The requirement is likely in the meantime to lead to a rise in students travelling on holiday visas and working illegally giving rise to other issues.
None of this will matter of course if Donald Trump becomes president as the scheme will likely be scrapped altogether.
Bringing US companies home
Trump has committed to bringing American companies home by cutting tax rates to attract the multinationals back. He used Pfizer’s recent move of its tax base here as an example. Pfizer hopes to save $1bn annually due to Ireland’s lower corporate taxes.
Trump pointed out that the US is losing its companies and that there is $2.5 trillion outside the states that should be brought home.
This is a popular stance among Americans both Democrats and Republicans, and is nothing new. The only difference is Trump shouts it louder and claims he will succeed where others have failed.
Obama promised in 2008 to end tax breaks to companies who ship jobs overseas. Not much headway has been made since despite him renewing his promise in the 2012 campaign.
Outsourcing/offshoring/shipping jobs abroad is a powerful political symbol because it seems unpatriotic but, in reality there is more to it than that. It is an element of free trade and works both ways. Most American companies do not come to Ireland simply to avoid tax, but to operate their Irish or European business just as Irish companies trading in US are increasingly opening bases there, creating jobs in increasing numbers, as many customers like to have a local contact rather than a telephone number on the other side of the world. There is an argument that outsourcing strengthens the parent company on either side of the Atlantic and eventually creates more jobs at home.
There is undoubtedly an element of tax avoidance by companies such as Google which is able to save millions in tax here in Ireland alone, by routing profits to Bermuda and claiming huge administrative expenses, these companies employ thousands in Ireland and support many more jobs in services and retail.
Ireland’s commercial links with the US are largely real, and Irish companies also create jobs and trade in the US.
Ireland is not the Cayman Islands where companies are often in name only, simply for tax purposes, so for Trump to specifically mention Ireland in relation to this and claim that he could solve the problem with a 12 minute meeting is probably more rhetoric than substance.
Here in Wexford we have companies like;
Atlantic Industries (Bio Pharmaceuticals),
Clearstream Technologies Group,
Crop Packaging Systems,
IDH Cables Ltd.,
Lake Region Medical Limited,
Parker Snap Tite and
Waters Technologies Ireland,
all providing employment and creating trade and business way beyond their own plants, attracted to Ireland in no small way by our low corporate tax rate, and which we could really do without losing.
However, while all Americans would favour bringing business home there are differing views on lowering tax to our rate and being seen to pander to multinationals. So it might not all work as smoothly as Trump anticipates.
But if some of the leftist election manifestos are to be enacted in a new Irish government, our US companies might be driven out by taxes here before Trump even gets going.
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