Thank you, Mr. Chairman. I welcome the opportunity to address the Oireachtas joint committee on this important debate in European affairs, one which IBEC believes should be a priority in the agenda of the Government. The Brexit negotiations must also remain an important priority for Ireland but they must not overshadow or restrict our attention and contribution to the debate on the future of Europe.
It is important to acknowledge from the outset that Ireland has benefitted enormously from EU membership. We have grown from an inward-looking, protectionist economy to a highly competitive country with a strong business sector, providing good jobs and supporting high standards of living for our citizens. The development of the European Single Market and EU trade policy have been critical in the internationalisation of Irish business. These factors have helped diversify markets in and outside the EU, particularly for traditional sectors such as food and drink. For example, we are major exporters of butter to Germany, lamb to France and dairy ingredients and infant formula to a wide range of global markets, including Asia.
Membership of the EU and Single Market has also helped maximise the growth and employment opportunities for a broad range of services businesses from computer to international financial services, including aviation leasing.
Ireland has also contributed to the success of the European project. Our pro-business environment has attracted substantial foreign direct investment, FDI, to Ireland and to Europe. That has helped transform our own economy, with multinational employment increasing from 65,000 in 1985 to nearly 200,000 in 2017. It has also contributed to the building of an innovative ecosystem in Europe in areas such as technology, pharmaceuticals and medical devices - a fact that is all too often not understood or recognised by poorly informed commentators on the Irish economy.
Our continued ability to attract FDI and the success of the Irish business model is based on what the OECD terms "substance". Our 12.5% rate of corporation tax is part of Ireland's unique offering and it is vital that we remain committed to retaining it. However, it is not the only part of our attractiveness for investment. Other factors include our well educated and flexible labour supply, our commitment to world-class high-end manufacturing and our well-developed clusters and participation in global supply chains. Without those additional factors, Ireland could not attract the scale of investment to the EU that we do.
IBEC is committed to Ireland’s continued EU membership and active participation in an EU based on strong values, including openness to investment and trade. However, we recognise that the challenges facing Europe are more intense than ever – with Brexit, dealing with a migration crisis, populism challenging established political norms and an uncertain and more protectionist global environment. Europe's responses to these challenges will determine not only the future of the EU but also Europe's influence in a world badly in need of positive stimuli.
Now is the time to reflect upon what Ireland wants from the EU and how we can continue to both benefit from and contribute to the future of the Union. We are losing our traditional ally and closest neighbour so we need to build stronger alliances with others in the EU. The EU itself is facing numerous challenges, from the shift in its relationship with major global partners, threats of terrorism, the migration crisis and more. Ireland needs to think deeply about what it wants from the future of the EU. We need to be strategic in paving our way forward, taking time to reflect upon what the most important issues are for our businesses and our citizens ensuring that the best way forward for Europe is also the best way forward for Ireland.
This year, the European Commission published a White Paper and five reflection papers on the future of Europe. At his recent annual state of the Union address last Wednesday, the President of the Commission, Mr. Jean-Claude Juncker, outlined his own views on the future of Europe. IBEC supports the positive outlook
on the future of Europe and remains optimistic for what Europe can achieve for businesses and citizens alike with the right approach. The EU is well on the way to full economic recovery after the crisis.
Ireland is a particularly good example
of how well-targeted policies coupled with a well-developed business model have led to strong economic growth and decreased unemployment in the wake of financial collapse. Europe can become an engine for growth in the world.
We welcome the EU commitment to the trade agenda
and further opening of markets across the world. IBEC has been a long-term supporter of trade deals that provide real opportunities for Irish business. We look forward to conclusion of the EU free trade agreement with Japan, our major trading partner in Asia. We also welcome opening negotiations with Australia and New Zealand. Of course, the negotiation of each trade deal must be based on what is to be gained and what is to be given away via access to our EU markets. In this context, negotiations can be complex and difficult. The ongoing negotiations with the bloc of South American countries known as Mercosur is one such example. However, it is essential that the right balance is achieved between gains and concessions, even if this takes longer than one might hope.
We also urge a sense of caution in respect of the investment screening proposed by the President Juncker and the Commission. We accept that there may be a limited role for screening of foreign investment in strategic EU infrastructure assets such as ports. However, we strongly believe that the Commission must not interfere with or delay normal foreign investment decisions by companies and member states.
Full completion of and competition in the Single Market has long been a key demand of IBEC of the European Commission. We were pleased to hear President Juncker reiterate his call for a stronger Single Market and economic and monetary union, EMU. These are the areas in which the EU can add real value, where it can be “big on the big, and small on the small”. We hope that the current Commission and its successor ensure that deepening of the Single Market, including the digital single market, banking union and capital markets, are on the top of future EU agendas.
We welcome President Juncker’s proposal of setting up a task force on subsidiarity and proportionality, ensuring that the EU works only on those areas which it can add real value, and leaves issues best dealt with at national levels for member states’ competencies. One such area is tax policy. Tax policy is, and should remain, fully within the competence of the member states. We are extremely concerned about President Juncker’s suggestion on moving towards qualified majority voting on taxation. Taxation is a sensitive area for member states, intrinsically linked with government spending, the nuanced requirements of member state social systems, infrastructure needs and business models. It is essential that member states maintain full sovereignty when it comes to decision making on all taxation matters. This is essential for Ireland to remain competitive in a post-Brexit world, given the fact that we are likely to be the member state most affected by Brexit.
A clear takeaway from the Commission agenda this year, which is clearly laid out in the White Paper, reflection papers and President Juncker’s recent address, is that Europe is moving towards increased spending on security and defence. This is an unavoidable reality. Cyber-threats are something with which the business community is particularly concerned. Indeed, in June of this year, some Irish companies confirmed that their computer systems had been compromised by a global cyber-attack. These are the types of new challenges that will continue to threaten the security of the business environment in coming years. It is an area of extreme sensitivity, particularly in Ireland, but as our reality in Europe changes, we must face these challenges with a united front and ensure that we continue to be the best place in the world to live and do business.
I would like to conclude by outlining some principles on IBEC’s vision for the future of Europe. It must be an EU that adds value. It should prioritise deepening of the Single Market, including completing the digital single market, capital markets union and banking union. These are the areas in which the EU can have real added value and make tangible improvements in the business environment which, in turn, has positive knock-on effects for citizens through job creation, innovation and better choice. It must be an EU that is more efficient. To prosper, the EU must focus on efficiency and avoid interfering in areas best left to member states. It must respect the principles of proportionality and subsidiarity. Sensitive areas such as tax policy should be dealt with at member state level where they can be developed in a bespoke manner and tailored to the needs of a member state's citizens and business models. It must be
an EU that is flexible and meets the needs of different member states. Member states' individual needs and nuances should also be considered at a European level. Ireland, for example, could benefit from having more flexibility in EU fiscal support and the Stability and Growth Pact rules, which would allow the Government to facilitate essential infrastructure developments, thereby allowing the country to harness growth opportunities and to provide quality housing, transport and health care for our citizens. It must be an EU that is open to trade and investment. The EU should continue prioritising ambitious trade deals with third countries, including with the UK post Brexit. It is essential that the relationship between the UK and Ireland, which goes far beyond the establishment of the European Economic Community, is in no way jeopardised in the future relationship between the UK and EU. This means ensuring that an ambitious trade deal, as similar to the current trading situation as possible, is reached as soon as possible.
I thank members for their attention and the opportunity to present IBEC's initial views on this important European debate. IBEC will further consult with its members in the coming weeks and will be developing a fuller position that we plan to share with the Taoiseach, relevant Ministers and their Departments ahead of the scheduled discussions at European Council meetings later this year. We would also be happy this share that position with the Chairman and committee. I look forward to members' questions and subsequent discussion.
