Address by Minister of State Dick Roche
Sénat de France
Committee on European Affairs
Paris, 2 February 2011.

M. le President (Senateur Jean Bizet), Senateurs, Mesdames et Messieurs

It is a pleasure to be with you today in this historic place. Thank you for your warm welcome.  I greatly appreciate your invitation to engage in this important dialogue.

I must begin of course by thanking Senator Humbert for his visit to Ireland last December, in connection with the report which is before you today. Your colleague has had a longstanding interest in Franco-Irish friendship, which we in Ireland value most highly.

I think it is very welcome that this Committee has taken the time to assemble its own report on the recent economic and financial developments in Ireland.  There is much media reporting and comment around, but it is vital that governments and parliaments get the best information available, and get it directly. 

I have studied Senator Humbert’s report and while of course I mightn’t agree with every single nuance of its analysis and conclusions, I think it shows an excellent understanding of the situation in Ireland.  You recall the mistakes that we in Ireland have made in the past and you set out the extent of the challenge facing us.  You also make clear the realistic and determined response of the government and of the Irish people.

You note the solidarity and support that we in Ireland have received from our partners and friends in Europe and further afield - as together we have faced a crisis, responsibility for which is widely shared and whose effects have spared none of us.

You prove, I believe, that so much of Ireland’s economic strength and further potential as a country has endured the crisis and remains a solid basis on which we will re-build growth, employment and prosperity into the future.

You note accurately that Ireland “does not suffer from a competitiveness deficit” and commend our productivity and flexibility as a people. It is these characteristics above all which will help us in our export-driven recovery now underway.

As you will be aware, we continue to build the smart, green economy of the future with a particular emphasis on high value investment in Research, Development and Innovation.

M. le Président,
While I am delighted to discuss any issues which you may wish raise, I wanted - in my initial remarks – to give you my view of Ireland’s economic situation in the context of our common membership of the European Union and of the Eurozone. 

As is well known, Ireland’s experience of EU membership has been hugely positive. It changed our country, from being - as the great French writer, Michelet [one of your analysts] put it – “une île derrière une île”, and broadened our horizons politically and psychologically. In this way, it greatly contributed to paving the way for the peace process in Northern Ireland.

And Ireland’s economic advance and achievements since joining the European project speak for themselves.  In 1973, Irish GDP per capita was just 58% of the European average. However, over our 37 years of membership, we achieved average GDP growths rate of 4.5%, which has allowed our economy and living standards to converge with the rest of the EU. Our current, very considerable economic and financial challenges must be seen against this background. We have come a long way and we are addressing these challenges from a position of relative strength. We do so with many positive assets which have been won in recent decades – in other words, assets which we were not so fortunate as to inherit from our history over preceding centuries.

As a small open economy, we are by necessity a trading people – exporting 80% of all the goods and services we produce.   Indeed, Ireland has just been ranked by Ernst and Young as the second most globalised economy in the world.    Being part of the EU single market has been of major benefit to Ireland. Over the last three and a half decades we have managed to diversify our export markets greatly reducing our dependence on the British market for our exports - from 55% to a more balanced 18%. Over the same period we have increased our exports to the rest of Europe from just 21% to around 45%.

Our EU membership has been one of the key factors in attracting foreign direct investment (FDI) into Ireland: access to the vast Single Market of 500 million people has been vital.  Almost 1000 foreign companies have set up shop in Ireland, and this investment has been responsible for creating huge numbers of jobs. 

In absolute terms, we have naturally not been as successful in attracting FDI as France has been, given the advantages conferred on you from history, the large scale of your domestic market, your central geographical location and the many supports offered by your government. It is no surprise that France is perennially in the top three performers in the world in attracting inward investment.
But for our size we in Ireland have done well.

Of course, we have lost investment too over the years, sometimes to lower- cost competitors. That underlines the importance of moving up the value chain, and of innovation in general, a theme our Heads of State and Government will address on Friday.

For many years, our corporation tax rates have had a part to play in attracting this investment. But they are only one element in a broader suite of factors which have driven our economic development and attracted investors; a strong culture of entrepreneurship among our people; a political and social consensus that underpins strong State support for enterprise and especially for innovation; the consensus understanding in Ireland that the country has to remain competitive in order to continue to prosper. “Competitiveness” is nowhere a dirty word in Ireland. Our workforce is young, educated, technologically highly qualified, and in particular, it is dynamic and flexible. It is strongly proficient in English and in other languages. In recent years, we have developed better infrastructure and a more competitive cost environment for business. All of these factors exist, of course, within the context of our EU membership and the enormous benefits which it has brought.

If these factors did not exist, not even a zero rate of Corporation Tax would be sufficient to attract overseas investors to our shores, or to build indigenous investment.

As Minister for Europe, I am naturally aware that as Ireland has gained from Europe, so also have we made our contributions as a committed and engaged member of the Union.  Irish governments – and individual Irish officials – have been among the most committed and active Europeans and servants of the institutions at the highest level. Irish Presidencies of the Council of the EU have been universally well regarded, as we have strived to place our domestic priorities behind our duty - as Presidency - to the Union as a whole. Most recently, in 2004 – and against the odds – the Irish Presidency facilitated consensus agreement among the 27 member States (ten of which had joined the Union only six weeks earlier) on the text of a draft Constitutional Treaty.

Many of you will I am sure know Pat Cox who had a distinguished career in the European Parliament, including as its President. We have played an active part in every area of European endeavour, from trade to development aid to agriculture to security and defence, often in positions remarkably similar to those of France.  As recently as 2010, over 400 Irish soldiers stood shoulder to shoulder with French troops in the EU mission to Chad, and an Irish General commanded the EU operation from an EU headquarters here in Mont Valérien in Paris.

Ireland and France go back a long way.  Indeed, Saint Patrick was taught here and the Irish flag is of course inspired by your Republican tricolour.  But our links are also modern and growing.

A few hundred metres from this room, behind the Panthéon in the Rue des Irlandais, stands the largest and most venerable Irish Cultural Centre in the world. It is no surprise that the
Also Ireland is preparing – in the timeless spirit of fair play – to welcome to Dublin on 13 February the French national Rugby team, reigning Grand Slam champions in Europe. Once again, we will see and hear the mutual respect and affection that these two nations share, one for the other. I must say that with France winning the Grand Slam in 2010, after Ireland won it in 2009 – this is the kind of “alternance” that we would like to see continue, indefinitely!

The French affection for my country – which Irish people appreciate deeply -  is also to be read in the works of Michel Déon (a longstanding resident of Connemara) and Michel Houllebecq (whose Prix Goncourt winning novel is partly set in Ireland) – as well as in the singing of Michel Sardou at the Olympia this week!

Ireland and France have always worked closely together to advance the cause of viable, competitive and safe agriculture and food production in the EU, which today is more important that ever in the context of rising global population, food security and climate change challenges.

We have €8 billion or so in goods trade between us and Ireland is one of your top ten sources of tourism. Today, there are about 9,000 French citizens living and working in Ireland.  Despite our small size, there is impressive Irish investment in France, ranging from heating systems to food to glass manufacturing, green cement products, agricultural engineering and services.   I am told 10,000 people work for Irish companies here in your country.

French companies too have a strong presence in Ireland, winning business in environmental services, insurance, transport equipment, energy, pharmaceuticals, food and fashion to name but a few. Their business is helped grow by their work in Ireland and their partnerships with Irish companies. Our Embassy here in Paris carried out a study a couple of years back on the extent of research co-operation between France and Ireland, discovering hundreds of academic and business partnerships in this area of the future.

France remains Ireland’s fourth  largest merchandise trading partner.  The balance of trade has tended to be in our favour but still, in the first 10 months of last year, French merchandise exports to Ireland were valued at an impressive €1.5 billion.  This, however, was down from €1.8 billion for the same period in 2009 and it is fair to conclude from this that a prosperous, growing economy in Ireland is of benefit not just to Irish workers but also numerous workers in France.

Ireland is often caricaturised here as a magnet for foreign investment and no more.  A number of French firms do, indeed, have interests in Ireland.  Dublin’s light rail system is operated by Veolia and the trams were built by Alstom.  Often, however, French involvement is by way of acquisitions.  Thus, for example, Pernod Ricard has acquired the whiskey group, Irish Distillers, and BSN has a significant stake in Irish Biscuits. 

When you take all of this together: what could illustrate better the living reality of free movement, interchange and cross-fertilisation, which the Union and its single market have brought about?

M. le Président, chers Sénateurs, Mesdames et Messieurs,
I wanted also to give you my assessment of the steps Ireland is taking to address the current economic crisis.  We are addressing our present fiscal and financial difficulties head on, making our own tough decisions but relying also on the support of the EU and the international community.  We depend on export-led growth to get us through the current crisis, and I am pleased to be able to say that our economy is responding well to this expectation.  FDI will help us reach our target of growth and jobs, a target to which all of us in the EU subscribe.

The economy has stabilised; virtually all analysts expect resumption of positive growth this year and beyond.  Significant competitiveness improvements are underpinning a return to export-led growth. Export growth is robust and is one of the strongest in the EU.  Conditions in the labour market have also stabilised. Tax revenue has stabilised and is ahead of forecasts, discretionary spending has been reduced and the deficit is being reduced.  Indeed, all of the main political parties in Ireland agree on the objective of reducing our deficit to 3% of GDP by 2014, or 2015 if necessary.  The National Recovery Plan allied to the EU/IMF programme provides certainty and enables Ireland to navigate a path to a sustainable economic position.

Of course, it is vital for our return to growth, and for the stability and prosperity of the EU as a whole, that nothing be done which would impede our efforts to encourage the export-led recovery.  For us to take measures – such as corporation tax increases – which would damage our growth prospects would be self-defeating, for us and for Europe as a whole.  I spoke in more detail earlier today about our corporate tax rates, and I see that Senator Humbert has addressed this issue seriously in his report   I would like therefore to talk primarily about economic growth.

Our National Recovery Plan contains measures which will boost our competitiveness, restore order to the public finances and, most importantly, remove barriers to growth.

Growth, as I have explained it as the heart of recovery strategy.  Forecasters may differ on the detail of the projections but no-one is predicting anything but growth for the Irish economy this year and next year.

Recent research by the OECD points to the importance of low corporate tax rates to encourage growth.  In ranking taxes by their impact on economic growth, corporate tax was found to be most sensitive. Governments seeking additional tax revenues are advised, therefore, to consider increasing all other types of tax before increasing corporate taxes.

The Finance Act adopted last week by the Irish Parliament introduced numerous tax rises and very few Irish people looking at their payslips today would accept the charge that Ireland is a low tax economy.  But we would all agree that setting our own rate of corporation tax is a matter for decision at national level and, indeed, there is a cross-party consensus among all parties in Ireland  - Left, Right and Centre - on keeping our rate at 12.5%.  As you know the European Union is based on a delicate balance between community and national competencies  - 1.2 million Irish people endorsed this approach as recently as 2 October 2009 when they voted in favour of the Lisbon Treaty by an overwhelming majority of 67%. 

Ireland has used its corporate tax strategy since the 1950s to encourage growth, not just through attracting FDI, but also in encouraging Small and Medium Sized enterprises, as well as innovation across the economy.

M. le President, I know that the economic challenges facing Europe are the key priority for France also at this point, and that collectively we must not miss the opportunity which 2011 provides to make the changes necessary to strengthen our currency and our economies. 

Our heads of state and Government had been working on this issue, and improved economic governance of the EU is already a fact. The European Semester has begun, and work is also underway on the package of six EU legislative acts intended to ensure tighter EU budgetary and macroeconomic policy coordination.  Discussions on new ideas and new ways to defend our economies will continue, informally at Friday’s European Council, but more substantially at the March European Council meeting.  France has always played a leadership role in this discussion, which I welcome.  Of course, we will differ on some of the details and on some of the approaches even if the goal is one we both share.

We must look for new and innovative ideas to address this economic crisis. We must have an open debate.  But when we in Ireland – and perhaps especially someone in my position as Minister for European Affairs – look back at the economic progress that has taken place in Europe over the past 50 years, it is inescapable that the EU and its structures have served us well.  The EU has provided the engine, the chassis and often the driver of our economic development.   In a crisis, such as the one facing us now, we should not reject the arrangements and processes that have served us well and brought us this far, in search of a quick fix; we should work with and through the institutional framework of the EU to address our problems as far as we can.  A rules-based approach, which provides certainty, fairness and predictability, within the EU institutional framework would seem the natural and best choice.

Finally, I wish to pay tribute to Senator Jean-François Humbert for his long-standing interest in Ireland and to Senator Jacqueline Gourault, President of the Franco-Irish Friendship Group here in the Senate, and all the members of the Group.   I am a firm believer in the value of cooperation between our respective Parliaments as a means to further develop our bilateral relationship and enhance mutual understanding.   I hope that my presentation here today has contributed to that goal. 
M. le President, I would be happy to continue this discussion, to hear your views and to respond to any questions your committee may have.
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