Yes vote will bring competition from the east

Business campaigners are stressing the possible positive and negativeeconomic and business outcomes to back up their positions…

Business campaigners are stressing the possible positive and negativeeconomic and business outcomes to back up their positions for and againstthe Nice treaty, writes Conor Lally.

Every major business organisation in the State may have thrown its weight behind a Yes vote for the Nice Treaty but a small and vocal band of detractors still insist that we should vote No on October 18th.

Some in the No campaign claim that ratification of the treaty would be to the detriment of the Irish economy. Others believe the treaty will make no difference to the Irish economy either way and favour a No vote because they are fundamentally opposed to EU enlargement as laid down by the Nice Treaty.

Perhaps the least surprising element of the hitherto lacklustre campaign has been that the Yes lobby has been most vocal. But, backed by heavyweights such as IDA Ireland, IBEC, the Chambers of Commerce of Ireland and the Small Firms Association, it was never going to be any other way.

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The arguments in favour of a Yes vote are straightforward. An enlarged European Union will give the Republic much greater access to a larger marketplace. And if the treaty is not ratified, it will harm the State's image as a good place to do business and, ultimately, set our economy back.

At the other end of the spectrum, No campaigners believe lower costs of doing business - primarily lower wages and lower rates of corporate tax - in some accession states will result in multinationals relocating away from the Republic.

The National Platform of Ireland is one of a small number of groups which believe that if the Nice Treaty is carried - and the 10 additional member-states are admitted by 2004 - it will be to the detriment of the Irish economy.

Its secretary, Mr Anthony Coughlan, is a senior lecturer emeritus in social policy at Trinity College Dublin and an economist who has written widely on EU-related issues.

Mr Coughlan says a combination of lower tax rates, lower salaries and higher unemployment in some of the accession states as well as relatively high levels of education in many of those countries is a recipe for foreign investment to flow from countries like the Republic to lower cost-base economies.

"In Estonia, for example, there is no corporate tax whatsoever," he says.

"Countries like Estonia and Poland have wage levels roughly one-third of what we have in Ireland, if not lower. In Poland the rate of unemployment is 16 per cent but around 25 per cent of people aged between 18 and 25 are unemployed.

"And despite this, a lot of these countries have educated workforces. Hungary, for example, is stuffed with technicians and computer experts and the like. There are also much more lax environmental controls and the unions are weaker.

"For all of those reasons, it would make sense for many large companies to invest their capital in more eastern countries."

Another group campaigning for a No vote has been the Green Party. The party's finance spokesman, Mr Dan Boyle TD, says the flow of foreign investment into the Republic has already begun to dry up significantly and will continue in that vein, irrespective of how the State votes on the Nice Treaty.

Last week, the United Nations' latest World Investment Report revealed foreign direct investment in the Republic fell by 60 per cent in 2001 to $9.8 billion (€9.98 billion). There was also a net loss of 4,000 jobs in IDA Ireland-backed firms last year, the first such fall in 15 years.

"We would certainly feel that, because of those figures, arguments on trade being put forward by the Yes campaign have been disingenuous," Mr Boyle says.

Mr Neill McCann, chairman of a group of concerned citizens called Equal in Europe, also believes the country should vote No to Nice. He says the economic doomsday scenarios, being put forward by the Yes campaign should Ireland vote No, will never happen. He objects to the Nice Treaty on the basis that it will enable groups of countries within the EU greater co-operation, such that groups of countries will be able to engage in measures like common tax rates without having to win approval from, or include, other member-states in that inter-state co-operation.

"Foreign firms investing in Ireland do so on hard-nosed business principles, nothing else," he says.

"There may be short-term dissatisfaction towards Ireland if Nice is rejected but it will not last long. The same arguments were used when Britain and Sweden opted out of the euro, that it would be bad for their economies, but investment in those two countries has increased in the last 18 months and it has doubled in Sweden. It will be business as usual in Ireland after the referendum if we vote No."

However, big business does not agree. Mr John Dunne, chief executive of the Chambers of Commerce of Ireland, insists a Yes vote is a vote for continued prosperity. He believes the issue of firms in some accession states undercutting Irish operators is a red herring.

"Clearly there is no way we can be complacent but we are competing on the basis that we are the best, not the cheapest," he says.

Minister for Transport, Mr Brennan, agrees. Exports to Eastern and Central European countries seeking to join the EU grew sevenfold between 1994 and 2000, he told a conference organised by the Irish Exporters Association yesterday.

He said a golden opportunity lay ahead for Irish exporters with the enlargement of the EU. Irish exports to applicant countries amounted to €160 million in 1994 and €1.187 billion in 2000.

Our main trading partners among the applicant countries are Hungary, Poland and the Czech Republic, he said.

According to Mr Dunne, the fact that the Republic is an English-speaking country and has a business culture that "straddled both Europe and the US" will, in larger part, be enough to safeguard US investment here

He adds that the investment by both Intel and pharmaceutical group Wyeth of around $2 billion each in the Republic is typical of the nature of foreign investment in the State.

"These are sunken investments, and, unless something major goes wrong, these groups are here to stay. They have already made their decision," he says.

IDA Ireland chief executive Mr Seán Dorgan believes the upcoming referendum will be the most important vote for inward investment in the Republic since the original decision to join the EEC 30 years ago.

He believes the State's "future economic success, and its attractiveness for foreign direct investment, will be determined by how competitive we are, not by whether we can stifle competition from new member-states or otherwise". A No vote would be a disaster, he says. As a nation, he believes, we will be less attractive as a place to do business.

He also claims we will be more exposed to adverse EU and trade decisions because of our loss of influence, as well as being seen as damaging the prospects for recovery and growth in the European economy, which enlargement will present.

"Because it is so small and trade-dependent, Ireland simply cannot afford to take the substantial risks associated with rejection of the treaty," he says.

Conor Lally

Conor Lally

Conor Lally is Security and Crime Editor of The Irish Times