Ireland: From dragging its feet to breaking into a sprint

You are reading the Ireland chapter from the ETNC Report 2023 "From a China strategy to no strategy at all - Exploring the diversity of European approaches". Go back to the main page.

by Alexander Davey

Ireland does not have an official China strategy, yet a pattern of approaches can be tracked via that of successive governments. The Irish-Sino bilateral relationship is predominantly focused on trade opportunities, and over the past 10 years Ireland’s economic relationship with China has had a positive trajectory keeping it at the center of the relationship. Certain challenges in recent years, however, have brought attention to relations and spurred on Ireland to accelerate its alignment with the EU’s strategy, transitioning from a passive to active recipient of EU China policy. The government must carefully navigate this policy transition, yet ministerial departments’ differing and varying degrees of interest in China could undermine a coordinated approach to balance competing policy goals.

2022 marked the 10th anniversary of the China-Ireland strategic partnership for mutually beneficial cooperation.¹⁸⁹ Since signing this reciprocal partnership, the Republic has proved to be an important political partner for China on a bilateral level. The relationship is characterized by continued high-level strategic coordination and reciprocity.

Ireland is a small open nation with an outward facing economy that the Irish government presents to China as the “gateway to Europe” for trade and investment. ¹⁹⁰ Its economic model, underpinned by a relatively low corporate tax rate to incentivize exporters to manufacture there, facilitated Ireland to typically enjoy a trade surplus in goods with China.

Among all indicators of economic relations, exports to China (or China’s demand for Irish goods) are the determining factor for Ireland-China interdependence. In 2022, Ireland was the only EU member state to maintain a trade surplus in goods with China.¹⁹¹ And even though the country is the EU’s 14th biggest economy, it is the bloc’s fifth-largest exporter to China (EUR 13.033 billion). The consistent trade surplus may be a cause for concern with regard to potential dependencies on or even vulnerabilities to the Chinese market. Under certain specific conditions these could threaten the country’s economic security. The composition of trade exports reveals whether such risks exist. Based on customs data, integrated circuits are by far the dominant export to China, though most of which involves an internal transaction between Intel’s Ireland-based frontend and China-based backend facilities.¹⁹²

Ireland’s parliamentary budget office attributes the high share of Ireland’s main China export – described broadly as “Electrical machinery, appliances, transport equipment” – to its replacement of the US as the largest export destination of these goods in 2018.¹⁹³ In 2022, 77 percent of Ireland’s exports of integrated circuits went to China. Of the country’s total exports to China last year, integrated circuits make up a whopping 63 percent, while agricultural products, traditionally seen as Ireland’s dominant export to China, make up a mere 4.4 percent.

However, Ireland’s maintained trade surplus is understood within Irish policy circles to signify the stability of its trade relationship, yet this confidence may instill a belief that the trade relationship does not constitute a potential vulnerability. For instance, such potential vulnerabilities include a sudden halt on the export of integrated circuits for reasons linked to the US imposing restrictions on exports of critical technologies – see US chip ban¹⁹⁴, China’s banning of specific semiconductor firms’ chips from critical infrastructure – see Micron¹⁹⁵, or China’s economic coercion of a country for political reasons – see the case of Lithuania¹⁹⁶.

Regarding FDI, the Republic’s enterprise-friendly environment has coaxed US multinational companies to invest and set up their European headquarters on its shores. Likewise, the Irish government is welcoming Chinese investment and companies, potentially creating a site of strategic competition between the two. Currently, there are more than 40 Chinese companies in Ireland concentrated mainly in IT, finance and aviation leasing – the most notable being Huawei Technologies, Bytedance’s Tiktok and Wuxi Biologics – numbering more than 3,000 employees on the island.¹⁹⁷ In 2023, fast-fashion retailer Shein is building out its team in Ireland198, its rival Temu has set up its EU base in Dublin¹⁹⁹ and its parent company PDD holdings has moved its HQ from China to Ireland, potentially to avoid geopolitical risks.²⁰⁰ Vice-versa, by the end of 2020, Ireland had established a total of 501 foreign-invested enterprises in China, with a cumulative non-financial actual investment of USD 2.73 billion. Well-known Irish companies such as Ornua, Kerry Group, Glanbia and CRH have set up factories and R&D centers in China. ²⁰¹

Ireland’s enterprise and political officials carry out a balancing act between maintaining good ties with the US tech industry while quietly inviting more Chinese companies to invest on the island.²⁰² Public diplomacy carried out annually on St. Patrick’s Day shows how this balancing act is performed. Taoiseach203 Leo Varadkar travelled to Washington DC to meet with President Biden, while Minister for Transport, Climate, Environment & Communications Eamonn Ryan travelled to Beijing²⁰⁴ to meet with his counterpart Huang Runqiu, China’s Minister for Ecology and Environment.²⁰⁵ Both meetings would involve increasing Ireland-US and Ireland-China economic trade and investment relations.

At the same time, the Irish government has signed on to letters in collaboration with other countries, made statements about China’s human rights abuses in Xinjiang206 and Hong Kong207, and gone as far as to suspend its extradition treaty with the former colony.²⁰⁸ Yet, Irish diplomats have stated that they do not publicly confront China over human rights issues but bring up their concerns privately and in a bilateral manner. The tension between Ireland’s pro-business policies and values-based outlook can lead to policy contradictions. If not dealt with appropriately this could undermine the credibility of the Republic’s approach to China.

The Irish government is now juggling multiple demands of drawing investment from both the US and China while attempting to minimize risks by navigating between the interests of the two and the complex internal politics of the EU. The convergence of global economic and security issues with competing US and Chinese interests means Ireland may find itself squeezed between the two.

EU membership, neutrality and Brexit have been decisive in shaping thinking and policies of successive Irish governments towards China. First, the Irish government claims to align itself in many ways with the policies of the EU and supports the EU’s current three-pronged – cooperation partner, economic competitor, systemic rival – approach as a framework for navigating relations with Beijing. Second, the non-membership of military alliances is the cornerstone of Ireland’s neutral status and explains why it is not a member of NATO and has remained neutral throughout its integration into the EU thanks to its “triple lock” mechanism. As a result, Ireland wields “soft power” among non-aligned countries like China for its militarily neutral status and continued provision of peacekeeping forces to the UN which allows for Ireland to exert its influence.

Third, Brexit has pushed the Irish government to diversify and look for alternative markets to the UK. This has brought Irish and Chinese trade closer. In 2018, in the wake of Brexit, then Minster for Foreign Affairs Simon Coveney stated that “Ireland is ready to step into the gap created by Brexit and wishes to replace Britain as China’s new “trusted friend.”²⁰⁹

Ireland’s two largest parties, both center-right Fine Gael (FG) and Fianna Fáil (FF), and the center-left Green Party (GP) form Ireland’s current coalition government, led by Taoiseach Leo Varadkar (FG) and Tánaiste210 and Minister for Foreign Affairs Micheál Martin (FF). There is not much difference between Ireland’s main political parties regarding their stance towards the PRC, each seeking to maximize economic opportunities when in government, while using the EU – to both provide cover and greater impact as a united body – to criticize China on certain issues.

The Industrial Development Agency (IDA)211 and Enterprise Ireland²¹² in tandem with the Department of Enterprise, Trade and Employment are the main drivers for trade and investment between Ireland and China. The Department of Agriculture maintains strong engagement with its Chinese counterparts in consistently seeking market access to export Irish produce – from dairy products to pigmeat, crab, salmon, beef and sheepmeat. However, considering the minimal share food commodities constitute of the total share of Irish exports (as seen in the above graph) it could be said that there is an overinvestment of government resources and time on opportunities (10 trade missions to China since 2012) that offer only a marginal increase in return.

To make best use of opportunities and manage risks, that is, to shape a coherent China policy, Ireland needs greater China competency. Although the Republic has 13 current politicians as IPAC213 members, there is an absence of indicators of China competency within government and the civil service, and of China-related coordination efforts among government ministries, suggesting a weak capacity for the Irish government to formulate a coherent China policy.

While the Irish government does not have a public dedicated China strategy, only an “Asia Pacific Strategy”²¹⁴ from 2020 that briefly mentions China, its balancing between fostering an economic relationship with the US²¹⁵ with that of quietly inviting Chinese investment^{216 217} could constitute an unofficial strategy by Irish policymakers and legislators.

More recently however, following swiftly in the footsteps of EU Commission President Ursula von der Leyen’s speech on China and not long after Biden’s state visit to Ireland²¹⁸, Foreign Minister Micheál Martin echoed the Commission President in outlining his government’s policy shift on China. He called for Irish stakeholders to be aware of their level of exposure to China, citing von der Leyen’s reference to “de-risking” relations with China, defining it as “developing our economic and systemic resilience to, in turn, protect our values and interests.” ²¹⁹ He added that this does not mean turning their backs on important relationships with China and that his government would continue to work with Chinese companies established here – something Wang Yi asked Martin for on the sidelines of the MSC. He went on to state that Ireland “… will also work with European Union partners to shore up our economic security,”²²⁰ hinting to greater alignment with EU China policy.

Government actions towards China show that there is still quite a bit of confusion in how to approach China. Yet it appears that the overarching goals are to maintain and expand the trade surplus, compete for FDI, and seize upon investment opportunities in China. The actions of different government departments towards China illustrate a variety of competing interests. Comparing departments such as the Department of Business, Enterprise and Trade, and the Department of Agriculture with that of the Department of Foreign Affairs, there is a higher level of China-oriented engagement among the former two department ministers than that of the latter.

Despite its generally more neutral and business-oriented stance, Ireland’s approach to China is coming under pressure to align with that of the EU. In autumn 2022, then Irish Foreign Minister Simon Coveney stated that Ireland would soon put into place the foreign direct investment (FDI) screening measures developed by Brussels to safeguard vital assets.²²¹ Similarly, with regard to national security in relation to Chinese telecommunications vendor Huawei, the Irish government is establishing the European Electronic Communications Code that allows the government to take measures to safeguard the supply of critical components by “vendors considered high risk” to protect the security of Ireland’s telecommunication networks.²²²

The slow processes of implementing both measures suggest an element of reticence to enforce them for fear of decreasing Ireland’s attractiveness as an FDI destination and potentially upsetting relations with China.

Ireland looks to remove barriers within the EU single market. As a small economy it does not support industrial policies – posed to tackle the “China challenge” – to provide state aid for “European Champions” as it is unlikely to be able to compete with larger economies of Germany and France.²²⁹ The absence of Irish companies from Important Projects of Common European Interest (IPCEI) shows just how Ireland’s economic model is ill-aligned to EU industrial policy. Therefore, the Irish government’s likely perspective towards “de-risking” is to be one focused on a level playing field in specific sectors in order to maintain a pro-free trade slant rather than one that aims to loosen state aid rules.

Like the EU, Ireland subscribes to a “One China” policy recognizing the People’s Republic of China as the sole government of China. It does not maintain official diplomatic relations with the Republic of China’s government or recognize Taiwan as a state.⁴⁰ In January 2012⁴¹, Ireland closed its Institute for Trade and Investment office in Taipei due to “austerity measures,” three months before it signed a Strategic Partnership Agreement with China. In 2021, then Deputy PM Leo Varadkar stated that IDA Ireland handles the Taiwanese market from Singapore and has no plans to open a new office in Taipei. Enterprise Ireland’s office in Hong Kong and a consulting firm in Taipei provide marketplace services to Irish companies looking to do business in Taiwan.⁴²

Given its interest in increasing trade with China, Ireland has until recently opted for a less confrontational and balanced approach to the PRC. This had allowed for trade in goods and services to grow and FDI to take place in both countries. Nevertheless, this growing interdependency needs to be managed and assessed for potential risks. If any economic or strategic dependencies are deemed critical, de-risking rather than decoupling should be the goal.

1. Ireland’s export-dependent model of trade with China raises concerns of trade overdependence, especially with regard to electronic integrated circuits. A US govern- ment export restriction on its producers in Ireland or a PRC government import ban to China of US ICs fabricated in Ireland would have a significant impact on Irish jobs and corporate tax revenues.
2. Sudden political upheavals arising from China’s role in Russia’s invasion of Ukraine, a potential invasion of Taiwan, or an inflection point in US-China tensions could strain Ireland-China relations, further threatening economic security. Also, a negative economic shock in China on trade would affect the overall EU economy which could lead to second order negative effects on Ireland’s economy. In the unlikely event of a trade war between the EU and China, small open economies such as Ireland are set to lose most (welfare losses of −2.04 percent). ²³³
3. The Irish government needs to evaluate whether inter-ministerial, vertical, or horizontal cross-sectoral coordination mechanisms on China are needed to address the lack of China coordination. Similarly, bolstering China-related expertise and capacity in the civil service, reviewing the reactive methods of diplomacy towards China, and evaluating the capacity to take a more pro-active approach in shaping and receiving EU policy on China could prevent future incidents such as the cases of Richard O’Halloran’s exit ban or the establishment of the Fuzhou Police Overseas Service Station.

Endnotes

189 | ‘Joint Statement between The People’s Republic of China and Ireland on Establishing Strategic Partnership for Mutually Beneficial Cooperation’. 2012. Ministry of Foreign Affairs of the People’s Republic of China. 28 March 2012.  https://web.archive.org/web/20230117211226/https://www.fmprc.gov.cn/mfa_eng/wjdt_665385/2649_665393/201203/t20120328_679324.html.

190 | ‘Speech by Minister Heather Humphreys’. 2019. 31 January 2019. https://web.archive.org/web/20220723121220/https://www.gov.ie/en/speech/ba0596-speech-by-minister-heather-humphreys/.

191 | ‘China-EU - International Trade in Goods Statistics’. 2023. Eurostat. March 2023. https://ec.europa.eu/eurostat/statistics-explained/index.php?title=China-EU_-_international_trade_in_goods_statistics. Though, the latest data from the Irish Central Statistics Office showed that from January to December 2022, imports from China (EUR 14.541 billion) were larger than exports (EUR 13.789 billion, over 6 percent of Ireland’s total exports) showing a trade deficit.

192 | Murray, Daniel. 2021. ‘The Chips Are up: How Irish Companies Are Cashing in on the Microchip Rush’. Business Post. 4 April 2021. https://www.businesspost.ie/news-focus/the-chips-are-up-how-irish-companies-are-cashing-in-on-the-microchip-rush/.

193 | Parliamentary Budget Office (PBO). 2022. ‘Ireland’s Economic Relations with China A Statistical Overview’. 25. Houses of the Oireachtas. https://data.oireachtas.ie/ie/oireachtas/parliamentary-BudgetOffice/2022/2022-10-25_ireland-s-economic-relations-with-china_en.pdf.

194 | Bluhm, Michael. 2022. ‘Biden’s Hugely Consequential High-Tech Export Ban on China, Explained by an Expert’. Vox. 5 November 2022. https://www.vox.com/world/2022/11/5/23440525/biden-administration-semiconductor-export-ban-china.

195 | Hmaidi, Antonia. 2023. ‘China-Central Asia and G7 Summits + Local Protectionism + Micron’. Think Tank. MERICS China Essentials (blog). 25 May 2023. https://merics.org/en/merics-briefs/china-central-asia-and-g7-summits-local-protectionism-micron.

196 | Andrijauskas. n.d. ‘An Analysis of China’s Economic Coercion Against Lithuania’. Council on Foreign Relations. Accessed 24 March 2023. https://www.cfr.org/blog/analysis-chinas-economic-coercion-against-lithuania.

197 | ‘China’s High-Tech Hub Shenzhen Holds Investment Promotion Conference in Ireland - People’s Daily Online’. 2022. People’s Daily Online. 24 November 2022. https://web.archive.org/web/20221130214807/http://en.people.cn/n3/2022/1124/c90000-10175890.html.

198 | ‘China’s Shein Set to Build out Irish Operation as It Eyes US IPO’. 2023. The Irish Times. 8 March 2023. https://www.irishtimes.com/business/2023/03/08/chinas-shein-set-to-build-out-irish-operation-as-it-eyes-us-ipo/.

199 | ‘Chinese Fast Fashion Dresses the World: Shein Rival Temu Sets up EU Base in Dublin’. 2023. Independent. 6 April 2023. https://www.independent.ie/style/fashion/fashion-news/chinese-fast-fashion-dresses-the-world-shein-rival-temu-sets-up-eu-base-in-dublin-42391378.html.

200 | Olcott, Eleanor, and Cheng Leng. 2023. ‘Pinduoduo Owner Moves Headquarters to Ireland amid US-China Tensions’. Financial Times, 4 May 2023. https://www.ft.com/content/801ac5c4-9863-444e-986a-1e40280ea07f.

201 | 商务部国际贸易经济合作研究院, 中国驻爱尔兰大使馆经济商务处, and 商务部对外投资和经济合作司. 2021. ‘对外投资合作国别（地区）指南 爱尔兰(Foreign Investment Cooperation Country Guide Ireland)’.

202 | Paul, Mark. 2022. ‘Ireland Must Tread Carefully with Dance-Craze Chinese Platform TikTok – The Irish Times’. Irish Times, 4 November 2022. https://web.archive.org/web/20221104051900/ https://www.irishtimes.com/business/2022/11/04/ireland-must-tread-carefully-with-dance-craze-chinese-platform-tiktok/.

203 | Prime Minister

204 | ‘Assistant Foreign Minister Hua Chunying Attends the Reception of the National Day of Ireland’. n.d. Accessed 12 April 2023. https://archive.ph/C0APx.

205 | ‘Minister of Ecology and Environment, Huang Runqiu, Met with Ireland’s Minister for Environment, Climate, Communications and Transport [CN]’. 2023. 17 March 2023. https://archive.ph/5nSNk.

206 | ‘The “22 vs. 50” Diplomatic Split Between the West and China Over Xinjiang and Human Rights’. 2019. Jamestown. 31 December 2019. https://jamestown.org/program/the-22-vs-50-diplomatic-split-between-the-west-and-china-over-xinjiang-and-human-rights/.

207 | ‘Statement by Minister Coveney on National Security Law in Hong Kong’. n.d. Accessed 15 January 2023. https://www.gov.ie/en/press-release/ffdab-statement-by-minister-coveney-on-national-security-law-in-hong-kong/.

208 | Reuters. 2020. ‘Ireland Suspends Extradition Treaty with Hong Kong’, 23 October 2020, sec. World News. https://www.reuters.com/article/uk-hongkong-security-ireland-idUKKBN2781XA.

209 | ‘Ireland Wants to Replace UK as China’s “Trusted Friend” in Europe’. 2018. South China Morning Post. 23 March 2018. https://web.archive.org/web/20221206171944/http://www.scmp.com/news/china/diplomacy-defence/article/2138554/ireland-wants-replace-uk-chinas-trusted-friend-europe.

210 | Deputy Prime Minister

211 | The inward investment promotion agency of the Irish Government

212 | The agency responsible for supporting Irish businesses to start, innovate, and scale up, both domestically and internationally.

213 | Inter-Parliamentary Alliance on China

214 | Department of Foreign Affairs. 2020. ‘Launch of the Asia Pacific Strategy: “Global Ireland: Delivering in the Asia Pacific Region to 2025”’. Gov.Ie. 9 January 2020. https://web.archive.org/web/20220723002848/https://www.gov.ie/en/speech/f1601-launch-of-the-asia-pacific-strategy-global-ireland-delivering-in-the-asia-pacific-region-to-2025/.

215 | Burne, Louise. 2023. ‘Leo Says Ireland Will “roll out Red Carpet” as Joe Biden “Comes Home” in Visit’. Irish Mirror. 15 March 2023. https://www.irishmirror.ie/news/irish-news/politics/taoise-ach-leo-varadkar-says-ireland-29466365.

216 | ‘Govt and IDA Ireland Welcomes News That TikTok Is to Create a Further 1,000 New Jobs’. 2022. IDA Ireland. 10 June 2022. https://web.archive.org/web/20220707170549/https://www.idaireland.com/latest-news/press-release/govt-and-ida-ireland-welcomes-news-that-tiktok-is-to-create-a-further-1,000-new-jobs.

217 | ‘Huawei to Open New €150 Million European Cloud Services Hub in Ireland Creating 200 Jobs’. 2022. Government. Department of Enterprise, Trade and Employment. 18 October 2022. https://web.archive.org/web/20221031190904/https://enterprise.gov.ie/en/news-and-events/department-news/2022/october/202210181.html.

218 | White House readout of Biden’s meeting with PM Varadkar in May 2023 states that they discussed “the challenges posed by the People’s Republic of China.”

219 | Lehane, Mícheál. 2023. ‘China’s Worldview Is Different from Ours, Says Tánaiste’, May. https://www.rte.ie/news/2023/0502/1380220-ireland-china-tanaiste/.

220 | McQuinn, Cormac. 2023. ‘How Is Ireland Approaching Relations with China?’ The Irish Times. 2 December 2023. https://www.irishtimes.com/politics/2023/05/02/how-is-ireland-approaching-relations-with-china/.

221 | Bermingham, Finbarr. 2022. ‘Ireland Doesn’t Want to Shut Door to China, Says Foreign Minister’. South China Morning Post. 12 November 2022. https://web.archive.org/web/20221219030601/ https://www.scmp.com/news/china/diplomacy/article/3199326/ireland-doesnt-want-shut-door-china-despite-growing-strains-says-foreign-minister-simon-coveney.

222 | Oireachtas, Houses of the. 2022. ‘Communications Regulation Bill 2022 – No. 86 of 2022 – Houses of the Oireachtas’. Text. Ireland. 26 September 2022. https://www.oireachtas.ie/en/bills/bill/2022/86.

223 | Oireachtas, Houses of the. 2023. ‘Screening of Third Country Transactions Bill 2022 – No. 77 of 2022 – Houses of the Oireachtas’. Text. Ireland. 25 January 2023. https://www.oireachtas.ie/en/ bills/bill/2022/77.

224 | ‘Government Agrees Measures to Enhance the Security of Electronic Communications Including 5G Networks’. 2021. 23 November 2021. https://www.gov.ie/en/press-release/71ff9-government-agrees-measures-to-enhance-the-security-of-electronic-communications-including-5g-net- works/.

225 | Oireachtas, Houses of the. 2022. ‘Communications Regulation and Digital Hub Development Agency (Amendment) Act 2023 – No. 4 of 2023 – Houses of the Oireachtas’. Text. Ireland. 26 September 2022. https://www.oireachtas.ie/en/bills/bill/2022/86.

226 | ‘Commission Publishes a Toolkit to Help Mitigate Foreign Interference in Research and Innovation’. 2022. 18 January 2022. https://research-and-innovation.ec.europa.eu/news/all-research-and-innovation-news/commission-publishes-toolkit-help-mitigate-foreign-interference-re- search-and-innovation-2022-01-18_en.

227 | ‘Informatie- en contactpunt voor verzoeken uit China’. 2021. RVO.nl. 4 January 2021. https:// www.rvo.nl/onderwerpen/overheden/informatie-contactpunt-china.

228 | European Commission. 2022. ‘Updated In-Depth Review of Europe’s Strategic Dependencies’. Text. European Commission - European Commission. 23 February 2022. https://ec.europa.eu/ commission/presscorner/detail/en/IP_22_1124.

229 | Strupczewski, Jan, and Jan Strupczewski. 2023. ‘Seven EU Countries Oppose New EU Funding as Response to U.S. Subsidy Plan - Letter’. Reuters, 27 January 2023, sec. European Markets. https://www.reuters.com/markets/europe/seven-eu-countries-oppose-new-eu-funding-response-us-subsidy-plan-letter-2023-01-27/.

240 | Irish Government News Service. 2012. ‘Strategic Partnership Agreement between People’s Republic of China and Ireland’. Irish Government News Service. 28 March 2012. https://archive.ph/ xhh8A.

241 | ‘代表處歡迎詞暨代表處簡介’. 2022. 駐愛爾蘭台北代表處 Taipei Representative Office in Ireland. 30 June 2022. https://www.roc-taiwan.org/ie/post/6.html.

242 | O’Sullivan, Neil. 2021. ‘We Need Closer Links to Taiwan’. Letters. The Irish Times. 26 January 2021. https://www.irishtimes.com/opinion/letters/we-need-closer-links-to-taiwan-1.4467506.

243 | Felbermayr, Gabriel, Hendrik Mahlkow, and Alexander Sandkamp. 2023. ‘Cutting through the Value Chain: The Long-Run Effects of Decoupling the East from the West’. Empirica, January. https://doi.org/10.1007/s10663-022-09561-w.

You were reading the Ireland chapter from the ETNC Report 2023 "From a China strategy to no strategy at all - Exploring the diversity of European approaches". Go back to the main page.