US FDI stock in Ireland doubled since 2007, 11,000 jobs added

US data show that the value of the outstanding stock of US FDI (foreign direct investment) more than doubled in the period 2007-2014 but Irish data show that only 11,000 jobs were added in American-owned firms in the period 2007-2015.

Last week the American Chamber of Commerce in Ireland, a unit of the US Chamber of Commerce, published its annual report on the US-Ireland relationship and as there is no acknowledgement that the data is significantly distorted by tax avoidance, the report is highly misleading.

Data from the US Bureau of Economic Analysis (BEA) show that in 2014, the US direct investment position in Ireland (outward) was $311bn, an increase of 25.4% from 2013 — it was valued at $150bn in 2007. In 2013, Ireland-based majority-owned affiliates of US MNEs (multinational enterprises) employed 108,000 people.

US-based majority-owned affiliates of Irish-owned firms employed 210,100 in 2013, an increase of 10.6% from the previous year — yes Irish firms employed 210,000 in the US compared with 108,000 working in majority-owned US affiliates in Ireland!!

Based on Irish government survey data, about 72% of employees in foreign-owned exporting firms work in US affiliates, which in 2015 amounted to 135,000 compared with 124,000 in 2007.

The American Chamber report says:

Ireland now accounts for nearly 20% of all new US investment flows to Europe, according to figures contained within the report. This compares favourably against France (3%) and Germany (2%) and Ireland’s share of the total US investment stock in Europe has soared to 11% over the past decade and increased from 6% ten years ago.

In 2014, US investment stakes in Ireland ($310bn) were greater than many regions of the world, including Latin America ($139bn), Central America ($118bn), Africa ($64bn), the Middle East ($52bn) and China ($66bn). US investment flows to China in the first nine months of in 2015 were just 16.8% of those to Ireland in the same period; comparable figures for India, Brazil, and Russia were 7%, 6.2% and less than 1% respectively, reflecting Ireland’s track record as a high-performance, attractive and stable investment location within Europe.

Joseph Quinlan, author of the American Chamber's report, does not explain why the doubling of US investment in Ireland in 8 years has produced so few jobs.

The fact is that the value of the US FDI stock of $311bn in Ireland is massively distorted by tax avoidance. Rises in diverted profits which become reinvested earnings, are treated as FDI inflows.

In 2014, BEA data show that the US direct investment position in Germany (outward) was $115bn while US firms employed 613,000 in that country. The US direct investment position in France (outward) was $77bn in 2014 and US firms employed 557,000 in France in 2013.

As for Irish firms employing 210,000 in the US, as CRH, the international building materials group, has about 40,000 employed in the Americas (North and South). Who are the rest working for?

Most are working for American companies that have moved their headquarters to Ireland for tax purposes — the true number of the so-called US tax inversion companies, is much higher.

The NASDAQ stock exchange has 26 "Irish" companies listed — only 5 such as CRH and Ryanair had their origins in Ireland. The others plus listings on the NYSE mess-up GNP (gross national product) and Balance of Payments data. See here.

To get an idea of the sale of some of these fake-Irish companies that are tax resident in Ireland but mainly controlled from the US, just 6 have a combined head-count of 770,000 — more than double employment in both Irish and foreign-owned exporting firms.

"Caveat emptor" (Let the buyer beware) should be the watchwords for this type of data and the related exaggerated claims, or the Russian, “Doveryai, no proveryai” (Trust but verify), which became President Ronald Reagan’s watchwords for the relationship with Mikhail Gorbachev, Soviet Union president, in the 1980s.

Note in the chart below, how another corporate tax haven, the Netherlands, heads the ranking for FDI flow in 2015.

Can Ireland reduce its reliance on FDI by boosting Irish firms?

Superlative 2015 Irish growth data massively distorted by tax moves

Pic on top: Enda Kenny, then taoiseach, meeting President Obama at the White House, March 2011.
　

The Irish Times reports distorted data as facts