Trade Policy in Ireland Essay

Trade Policy
Catastrophic consequences of the economic nationalism in the 1930s which observed high trade barriers, and a policy of import substitution paved the way for the transformation of the economy making a 180-degree change.
The Republic of Ireland has an ultra-open economy attracting foreign investors from across the globe. Ireland opens its doors to business activities and the government is supporting export growth and encouraging inward investment, and promoting the country as a place to do business, to study and to visit through a number of state institutions.
Ireland is considered as the most profitable country for US companies in Europe. High FDI (Foreign Direct Investment) rate, a low corporate tax rate (12.5% on trading income, and 25% on non-trading income), prudent economic management and a new "societal partnership" approach to industrial relations together transformed the Irish economy. A significant portion of the total export products of the country owes likewise to the foreign direct investments that have been made.
Monetary and Fiscal Policy
Since Ireland is a member state of the Eurozone (the European single currency regime), the freedom to practice independent economic policies is not at discretion of the country. As other members of the Eurozone and monetary policy for the entire Eurozone is set and carried out by the European Central Bank (ECB). The main purpose of the ECB is to maintain the quality and integrity of the single currency within the Eurozone, as depreciation weakens the value of the currency. Thus, ECB has been privileged to define the general level of interest rates.
However, fiscal policy still remains under control of the government of member-states. As an instrument of the fiscal policy, taxation yields up to 30% of GDP. In Ireland taxation includes and encompasses an income tax, a value added tax, a corporation tax and different other taxes. The country has a reputation for its low corporate tax regime which appeals many international investors.
2008 Financial Crisis
Being the first country in the EU to officially enter the crisis in 2008, Ireland struggled to cope with the recession. Ireland today has the second-highest level of national debt in the world (190% of the national income).
The boom of credit and a property bubble fade out in 2007. Irish banks already vulnerable to the Irish property market, came under heavy pressure in September 2008 due to the global financial crisis of 2007-08.
The foreign borrowings of Irish banks increased from 15 billion to 110 billion between 2004 and 2008. Much of this was borrowed on a three-month rollover basis to embark building projects that would not be sold for several years. When the properties could not be sold due to oversupply, the result was tragic. The government issued a 2-year unlimited guarantee of all debt in favour of 6 banks. It was approved at the time by the European Commission. Ultimately the government nationalised Anglo-Irish Bank which was exposed to the Irish property bubble and received a number of bailout packets from the EU.