Donald Trump’s team reveals surprising lack of global business knowledge

Do not expect to see tax-driven rush of technology multinationals out of Ireland

The incoming Trump administration will find it hard to tempt even large-scale skilled tech manufacturing back to the US. Photograph: Getty Images

The incoming Trump administration will find it hard to tempt even large-scale skilled tech manufacturing back to the US. Photograph: Getty Images

 

To the concern of many here, one of the first policy announcements, vague though it was, that came from the US president-elect’s transition team last week centred on US corporate tax policy. 

 Ironically taking a page out of Ireland’s own playbook, Stephen Moore, senior economic adviser to Donald Trump, said the US would lower its corporate tax rate to lure companies and jobs (back) to the US.

 Following this move, people could expect to see “a flood of companies leaving Ireland and Canada and Germany and France and they are going to come back to the United States”, he said, bringing jobs with them. The US would aim for a corporate tax drop  from the current 35 per cent to 15-20 per cent (still potentially well above Ireland’s 12.5 per cent). 

The plan reveals a surprising lack of global business knowledge and understanding, especially for a supposedly business-focused administration and candidate. 

Several financial commentators in Ireland have already pointed out one of the big holes in the strategy. It seems to confuse high-employment multinationals with the taxation approach of a subsector of companies — namely, the brass-plate headquartering of some companies here, who base in Ireland in name and paperwork only, but have fewer employees than could be counted on one hand.

Lower tax-rate destinations

Perhaps some of those might be lured back, but surely they would instead opt for one of the many even lower tax-rate destinations around the world?

But look at the reality of why the vast majority of multinationals are in Ireland in the first place. Our biggest US-based employers almost all fall into the broad technology sector, and these companies, and those jobs, are not going to be lured back to the US on the basis of this proposed tax policy. Trust me.

First off, those companies – like most multinationals – don’t just set up large operations abroad because of taxes. They do so, like any global business, because they need to have facilities physically closer to their international markets than, say Silicon Valley or Austin, Texas. 

Just look at what many of our multinationals do, many of which have their European, Middle East and Africa (EMEA) base here: their employees, sometimes numbering in the thousands, look after everything from sales, marketing, support, research, and development of products tailored to the international markets they serve.

Much of this work is EMEA-market specific. As multinationals know, this requires employees with the language skills and cultural knowledge of those markets. And as they also know, customers and partners in those markets want a company that is responsive and available, not with everyone located halfway around the world, five or more time zones away.

Focus, then, on the companies that have major and leading-edge research centres operating out of Ireland. All of those companies – IBM, Bell Labs, Intel, to name just a few – have research centres all over the world, because they know it makes sense to capitalise on regional research expertise and market knowledge and skills. 

Yes, they could try to move all of that over to the US. And, let’s say the incoming administration puts pressure on the big tech multinationals to shift all those EMEA teams to the US. Unfortunately for them, that raises another awkward Trump campaign issue: immigration. 

To get the technically skilled and university educated employees needed to move global operations back, all those multinationals will need to bring thousands of workers to the US.

Any business acumen

As anybody in the US with any business acumen should know, the US already has a massive challenge in finding people qualified to work in many tech sector jobs, so much so that this one sector has, for years, been the greediest in snapping up the annual allotment of US H1B work visas.

One of the reasons expressed over and over by multinationals for going to Ireland or any other country to set up a global operation is the availability of qualified workers. And many of those workers do not want to move to the US; they want to be in or near their country of origin.

Given the hostile Trump campaign position on immigration and immigrants, how likely are graduates from some of the countries with strong, tech-focused degree programmes – places such as India or China – to go to the US? Or Europeans, used to working in open, collaborative, multilingual, multicultural environments?

The incoming administration will likely find it hard to tempt even large scale skilled tech manufacturing back to the US. For a start, much of the supply chain infrastructure and skills base, from worker to management, is long gone from the US.

In addition, US operational costs are far higher. US consumers would have to be prepared to pay much more than they are now for products if production of, say, that Android or Apple handset shifts back to the US.

Finally, the US might find that those multinationals just might choose to move their global headquarters out of the US entirely, to more internationally business savvy and friendly locations. Like, er, Ireland.

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