Edward Timmins (Wicklow, Fine Gael) | Oireachtas source

We all know the huge benefit international trade has had on this country. On a finance basis alone, of the €97 billion we take in in taxes, more than €50 billion is attributable to our multinationals by way of corporation tax, VAT and PAYE. This supports all the services this State supplies, including health, social welfare and education. I often think this fact is lost on many people.

I wish to raise four specific issues relating to tariffs. First, I will put some context on the current effective tariffs. Second, I will discuss lessons from history on tariffs. Third, I will discuss what Ireland should do in relation to tariffs and, fourth, I will discuss our future international trade strategy.

The US economy is large but the EU economy is also large, being two thirds the size of the US one but equal in terms of purchasing power parity. Similarly, with China. The US does not dominate world trade in the same way it dominates, for example, defence. A 20% tariff on the EU has exactly the same effect as a devaluation of the US dollar by 20% as far as US consumers are concerned. Also, these tariffs are expected to raise approximately $400 billion. This is the equivalent of increasing average income tax on every American worker by about $2,000 per annum, not to mention the fact that the dollar has also weakened. History warns us against tariffs. They are a lose-lose approach to international trade. In 1930, the US introduced the Smoot-Hawley tariffs. This resulted in an average tariff of 60% on imports. Countries in the rest of the world retaliated and imposed their own tariffs. This led to deep division. The tariffs may not have caused the Great Depression which followed shortly after but it certainly contributed to it. It led to anti-Americanism around the world, for example, in Cuba, whose economy collapsed and that legacy remains to this day, 100 years later.

In high-income countries the average tariff on manufacturing goods is now just 1.8%, it is 5.5% on middle-income countries and 14% on low-income countries, so there is a correlation between wealth and low tariffs.

Ireland being part of the EU must do most of its negotiation with the EU but we must also use our unique connection to the US as part of these negotiations. The EU must support us in these efforts. We are more exposed than any other EU country.

Given the vast changing conditions in world trade, Ireland needs to react to these new conditions. For example, we should put emphasis on near-sourcing. This means increasing trade with our nearest neighbour, the UK, and with European countries. This policy also supports a lower carbon footprint in our international trade. Enterprise Ireland recently published its five year strategy. I welcome this strategy and it puts specific targets in place. To support this existing trade and grow future trade, we need to invest in infrastructure. If we do not invest, we will fall behind and stagnate.

Finally, regarding strategy, I urge a cautious approach in negotiations. At this point we should hesitate to retaliate. President Trump will want quick deals and not to have the negotiations drag out.

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