Does Chinese investment benefit or damage Ireland?

In May, Irish Minister Dara Calleary marked the 20th anniversary of Huawei's operations in Ireland. Huawei, a major Chinese technology company, has been making significant investments in the Irish economy. This has led to a growing debate about whether such investments are beneficial or detrimental to the country. As of 2020, there were 25 Chinese companies operating in the Republic of Ireland, and that number has continued to rise. Proponents of Chinese investment argue that it provides Ireland with an opportunity to diversify its economy and reduce its dependence on American tech giants like Apple and Alphabet. Additionally, these investments create new job opportunities for the local workforce. However, there is a growing concern among critics that hosting Chinese firms may associate Ireland with serious human rights violations linked to some of these companies. A notable example is Shein, a Chinese clothing retailer that established its European headquarters in Dublin in May 2023. Shein has faced ongoing scrutiny regarding the treatment of its workers, and earlier this year, the company acknowledged issues within its supply chain. The Irish government finds itself in a diplomatically sensitive position, as it seeks to attract Chinese companies while also being aware that some of these firms have been sanctioned by the United States. Huawei, for instance, has been banned from providing telecom equipment in the US since 2022 due to national security concerns. The UK has also taken similar measures, requiring phone networks to remove Huawei components. As a result, many mobile networks in Western countries, including Ireland, no longer offer Huawei smartphones. Another significant player is WuXi Biologics, which has invested over €1 billion in a facility located in Dundalk, near the Northern Ireland border. Recently, the US House of Representatives moved to restrict American companies from collaborating with WuXi, citing national security issues. WuXi's presence in Ireland is substantial, and the Industrial Development Authority, the government agency responsible for attracting foreign investment, has three offices in China. This agency aims to promote Ireland as a gateway to Europe for Chinese investors. Another Chinese company, TikTok, which is owned by Beijing-based ByteDance, has also established its European headquarters in Ireland. Critics of Ireland's approach to welcoming Chinese firms include Barry Andrews, a member of the European Parliament. He argues that human rights and environmental abuses should not be tolerated in Irish markets. Andrews references a report from the US Congress that highlighted significant risks associated with Temu's supply chains, another Chinese company that relocated to Ireland last year. He emphasizes that what may appear to be a bargain for consumers could come at the expense of workers' rights. Some economists question whether Ireland truly needs the jobs provided by Chinese companies, especially given that the country has been experiencing near-full employment for nearly a decade. In August 2024, the unemployment rate in Ireland stood at 4. 3%, only slightly above its historical low of 3. 90% recorded in October 2020. Economists generally consider an unemployment rate of around 4 to 5% to be healthy for an economy. Dan O'Brien, the chief economist at the Institute of International and European Affairs, points out that a significant portion of private-sector employment in Ireland is directly or indirectly linked to foreign direct investment (FDI). He believes that the level of FDI in Ireland is already too high, and the influx of Chinese investment could exacerbate this issue. Ireland's corporate tax rate is one of the lowest in Europe, set at 12. 5%, which attracts many foreign companies. In contrast, the UK has a much higher corporate tax rate of 25%. O'Brien argues that Ireland's reliance on foreign investment is excessive, particularly in a world that is increasingly moving towards deglobalization. He suggests that EU regulations should be actively utilized to discourage Chinese FDI in Ireland. The Irish government has stated that it supports a common EU approach to China regarding risk management, but it emphasizes that this does not equate to severing ties with China. Minister for Enterprise, Trade and Employment, Peter Burke, has remarked that Ireland offers a stable and pro-business environment, which is appealing to multinational companies, including those from China. Some economists view Chinese investment in Ireland as a potential safeguard in case American firms decide to withdraw. There is considerable pressure on US tech companies to reinvest in the United States, and other European nations, such as Poland, Estonia, Slovakia, and Malta, are actively competing for US investments. Dr. Constantin Gurdgiev, an economist at Trinity College Dublin, highlights that Ireland faces competition from countries with lower housing costs and more favorable weather conditions. He also points to the looming threat of global corporate tax reforms that could undermine Ireland's low corporate tax rate. Recently, the European Court of Justice ruled that Apple must pay Ireland a substantial sum due to illegal tax advantages. Gurdgiev believes that Ireland is strategically positioning itself by courting Chinese companies, and he argues that the strong ties between Ireland and the US will likely shield it from potential backlash. He contends that Ireland serves as a neutral ground for both US and Chinese tech firms to operate. However, he warns that this could be a precarious geopolitical strategy for a small economy. Despite the risks, Gurdgiev maintains that Ireland's close relationship with the US provides a level of security for its position in the global market.