Until 2008 Ireland boasted one of the most vibrant, open economies in the world. The "Celtic Tiger" period of the mid- to late 1990s saw several years of double-digit GDP growth, driven by a progressive industrial policy that boosted large-scale foreign direct investment and exports. GDP growth dipped during the immediate post-September 11, 2001 global economic slowdown, but averaged roughly 5% yearly between 2004 and 2007, the best performance for this period among the original EU 15 member states. During that period, the Irish economy generated roughly 90,000 new jobs annually and attracted over 200,000 foreign workers, mostly from the new EU member states, in an unprecedented immigration influx. The construction sector accounted for approximately one-quarter of these jobs. However, the Irish economy began to experience a slowdown in 2008. The Irish property market collapsed, putting pressure on the Irish banks, which had a significant portion of their loan books in real estate. This, in turn, caused a collapse in the government’s finances because of a large dip in the amount of revenue raised from value-added tax and tax on property transactions. As of March 2009, the government was looking for ways to cut expenditures over the next five years in order to drive the budget deficit down to 3% of GDP by 2013. As of March 2009, the government was predicting a 4% fall in GDP, deflation at 3.5%, and double-digit unemployment. The government also committed to a $9.5 billion recapitalization of Ireland’s two biggest banks and has nationalized the third-largest bank.
Economic and trade ties are an important facet of overall U.S.-Irish relations. In 2007, U.S. exports to Ireland were valued at $9 billion, while Irish exports to the U.S. totaled $30.4 billion, according to the Bureau of Economic Analysis. The range of U.S. exports includes electrical components and equipment, computers and peripherals, drugs and pharmaceuticals, and livestock feed. Irish exports to the United States represent approximately 20% of all Irish exports, and have roughly the same value as Irish exports to the U.K. (inclusive of Northern Ireland). Exports to the United States include alcoholic beverages, chemicals and related products, electronic data processing equipment, electrical machinery, textiles and clothing, and glassware. Irish investment in the United States steadily increased during the economic boom times. Ireland is the 10th-largest source of foreign direct investment in the U.S., with Irish food processing firms, in particular, expanding their presence.
U.S. investment has been particularly important to the growth and modernization of Irish industry over the past 25 years, providing new technology, export capabilities, and employment opportunities. As of year-end 2008, the stock of U.S. foreign direct investment in Ireland stood at $875 billion, more than the U.S. total for China, India, Russia, and Brazil--the so-called BRIC countries--combined. Currently, there are approximately 620 U.S. subsidiaries in Ireland, employing roughly 100,000 people and spanning activities from manufacturing of high-tech electronics, computer products, medical supplies, and pharmaceuticals to retailing, banking, finance, and other services. In more recent years, Ireland has also become an important research and development (R&D) center for U.S. firms in Europe.
Many U.S. businesses find Ireland an attractive location to manufacture for the EU market, since it is inside the EU customs area and uses the euro. U.S. firms year after year account for over half of Ireland's total exports. Other reasons for Ireland's attractiveness include: a 12.5% corporate tax rate for domestic and foreign firms; the quality and flexibility of the English-speaking work force; cooperative labor relations; political stability; pro-business government policies; a transparent judicial system; strong intellectual property protection; and the pulling power of existing companies operating successfully (a "clustering" effect). Factors that negatively affect Ireland's ability to attract investment include: increasing labor and energy costs (especially when compared to low-cost countries in Eastern Europe and Asia), skilled labor shortages, inadequate infrastructure (such as in the transportation and Internet/broadband sectors), and price levels that are ranked among the highest in Europe.
Information by U.S. Department of State