Ireland has a high level of foreign direct investment (FDI) as it is used as an European base for many US companies. This will likely increase due to the Chinese firms that have been choosing to locate in Ireland (Belton). There are many aspects to consider when understanding the implications of increased Chinese investment in Ireland and we will be taking a look at some of them.

Tax Implications

Ireland is actively courting Chinese companies to encourage them to move to Ireland. The Industrial Development Authority is Ireland’s agency that focuses on attracting foreign investment and they have three offices in China as they want Chinese companies to use Ireland as their way to access Europe (Belton). Ireland has also one of the lowest corporate tax rates in Europe which makes it attractive for Chinese companies; although, this has recently increased to 15% due to the OECD Two Pillar Agreement.

It is interesting to note that when the European Court of Justice found that Apple had to pay Ireland 13 billion euros in unpaid taxes, Dublin argued against the need for the tax to be paid (Croft). Countries are inclined to offer tax incentives to companies in order to drive investment and employment, but this creates unfair advantages for companies that tend to already be major players in the market. Hence, while Ireland may benefit from the 13 billion euros, they also will not want to create a reputation that Ireland is not able to apply their own laws accurately or that they give preferential tax treatment to a company to the detriment of others.

Job Opportunities

Countries who have low corporate tax rates enjoy the position of being more attractive to companies who want to set up abroad. This comes with advantages such as creating jobs and increasing the employment rate. Long term effects can also help improve the infrastructure of a country. However, Ireland already has high levels of FDI and so some economists question whether Ireland needs the jobs that Chinese investment would create (Belton). Paired with this is the consideration that Chinese investment in Ireland will have reputational consequences which may drive away US firms or have other economical effects which would disadvantage Ireland in the long run.

Moreover, while FDI promotes economic growth, there are arguments for focusing on promoting domestic industries and creating jobs through that avenue. In recent years, it’s been clear how globalization has affected economies globally due to events occurring elsewhere. Hence, while we may have been in a hyper-globalization period, recent crises like Covid-19 and the Russia-Ukraine conflict shows the risks of relying on external dependencies (Keller and Marold). So while currently China may be investing in Ireland, it is worthwhile to note the long-term impact on focusing on FDI in a world that may be moving towards deglobalization.

Diversification

Since Ireland’s economy relies on FDI, some economists appreciate the fact that there is now investment from China as it serves as an insurance policy should US companies leave Ireland (Belton). Bringing jobs back to America has been an important political point for some time and during the 2024 elections both presidential candidates pledged to bring manufacturing back to the US. There are economists who are skeptical that the strategies discussed so far would actually bring back those jobs back to America (Lopez). Trump has promised to end outsourcing if he was elected in 2024, but his first presidential campaign made similar promises and he was not able to follow through (Unity Communications). Nevertheless, the desire to bring jobs back to America exists and considering the pressure on US tech companies to go back to the US, it could be a useful strategy to diversify investments (Belton). While some may be reluctant to see a further increase in FDI, Chinese investment may prove to be the failsafe needed should US firms pull out of Ireland- this failsafe is important considering the Irish economy’s reliance on FDI.

Reputational Affect

However, it is also important to consider that welcoming these Chinese firms could affect Ireland’s reputation. This would be due to the claims of violations of human rights that companies like Shein have. Shein has discovered child labor in its supply chain and has been subject to multiple allegations on their working conditions (Kulkarni). There are also companies like Huawei which contribute 800m euros to the Irish economy but have been sanctioned by the US due to national security concerns and the UK has followed suit by removing Huawei parts from phones (Belton). While Ireland may enjoy the benefits that come with Chinese investment, they have to consider whether it is worth it and if they want companies associated with human right abuses or that have been banned by multiple Western countries to be operating in their country.

Ireland enjoys a close relationship to the US and this may protect it from some of the reputation effects of engaging with the aforementioned companies (Belton). However, it does send a certain message to the international community and could reflect on the standards that Ireland holds. Hence, Ireland needs to continuously weigh the benefits of welcoming Chinese investment.