John Whelan: Tariff-free services exports are key to growth for now

Irish Examiner

a day ago

Across the business front, particularly the digital providers, an audible sigh of relief can be noticed as it became clear that the EU's €93bn list of countermeasure tariffs against the US does not include services trade.
The EU's countermeasures will automatically click into force on August 7, said the European Commission, should the US fail to drop the Trump-threatened 30% tariff on all EU exports by then.
The big worry for Ireland's services companies, which are mainly US multinationals, accounting for €115bn in exports sales in the first three months of the year as reported by the Central Statistics Office earlier in the month, was that the EU countermeasure tariffs on the US would include services.
This would have had major implications for the many thousands employed in the sector, likely forcing relocations to other non-EU countries, as well as significantly hitting the Government's corporation tax take.
Now the full weight of the EU-US tariff war is set to fall on the wide range of manufactured goods, inclusive of food and drinks products, which could impact on sales output to our largest customer the US, and in the process hitting State funding.
The implication of this change in trading relationship with the US is the need to bolster support for Ireland's traders in the services sector, in particular, digital trade providers such as Amazon, Google, Meta, and Microsoft.
Foreign-owned enterprises account for 80% of Ireland's services exports, the second highest of the OECD countries, as reported in its Services Trade Restrictiveness Index report 2025. This leaves Ireland more exposed than most countries to US trade pressures, as the vast majority of these Ireland-based multinationals are US-owned.
Retaining these global digital players in Ireland must continue to be a priority for the Government, but also there is an urgent need to do more to develop indigenous Irish companies, to ensure more controllable and sustainable growth of the services exports sector.
Amazon scraps plan for plant
Amazon's scrapping of its plan to build an industrial plant in Dublin, involving a €300m investment which would employ more than 500, because it did not receive the necessary Government guarantees about power supplies the plant would require, is a clear indicator of the challenges faced in retaining the multinationals in Ireland.
This Amazon project loss is a critical blow to our attempts to stay up with the global AI tech race, as the now scuttled project involved the creation of an AI testing and manufacturing facility and not a data centre.
It would also have enabled the training of a fresh cohort of employees, who could in the future enable the setting up of indigenous AI start-ups.
To date, Enterprise Ireland, which supports Irish-owned companies, has failed to significantly grow the service exporting industry. Enterprise Ireland client companies account for under 2% of our total service trade exports. The other 18% of the services exports from Ireland come from entrepreneurs who have built their export businesses without State support. Many of them depend on good access to digital services platforms provided by the likes of Google, Meta, and Microsoft, which again underscores the critical reliance on the connection with the US.
Reducing dependence on the US and deepening EU integration in services could be achieved by encouraging more innovation and stimulating much-needed investment.
An easy win should be with the UK, which last year imported €314bn in services, but only €12bn from Ireland.
Service sector reforms are, of course, not going to be easy, either in their politics or in their execution. The freedom to establish a company in another EU country and the freedom to provide or receive services in another EU country are already established for many services through the EU Services Directive — but implementation has been weak.
Services regulations are complex and highly decentralised. In many EU member states, reforms are often implemented by professional associations, who may have a bias against reforms or even a conflict of interest. Many professions and industries thrive on the fees that regulatory constraints generate — and you and I, as service users, are rarely aware of the costs that these regulations impose on us.
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