Ireland warned over plain packaging and political instability

Ireland will continue to be a leading beneficiary of US foreign direct investment (FDI) but risks alienating investors by backing plain packaging for cigarettes and through possible political instability.

That is according to William Reinsch, president of the National Foreign Trade Council and a former undersecretary of commerce for export administration under President Bill Clinton.

After addressing a conference in Dublin discussing the strength of the Irish economy, Mr Reinsch said Government backing for plain packaging could be seen in a negative light by companies considering investing here.

"The Irish Government is capable of either weakening or strengthening its appeal to investors and arguably the plain-packaging issue is something that is an example of it doing the former," he said.

“From an American perspective, this is not about health policy but about intellectual property protection. IP is a company’s crown jewels and the feeling is that the plain-packaging issue is not just about cigarettes. Tobacco is seen as the first tranche but there are other tranches planned and so it is seen as something of a slippery slope because, if you’re going to say ‘we believe in IP protection but that there are some instances where we don’t believe in it quite so much’, then that really raises the question of where you draw the line.

“We’re trying to advise countries around the world to hold off fully implementing a ban on packaging until the WTO case against Australia is settled. New Zealand has done that and other countries are also considering it and it would be good if Ireland also waited,” he added.

Admitting that the body he represented included tobacco companies as members, Mr Reinsch said the issue of plain packaging went beyond those firms who had most to lose from the its introduction.

“We believe trade rules should trump health and other policies and generally this is the kind of thing that makes people raise an eyebrow and find worrisome.”

Mr Reinsch said Ireland remained an attractive destination for FDI but that this could be threatened by the decision by individual states in the US to introduce new reforms that penalise companies operating in so-called tax havens.

“There are many states introducing new legislation that include a list of countries deemed havens and then taxes companies operating in those jurisdictions.

“So far, Ireland has managed to stay off those lists but it has been proposed a number of times. I believe from discussions with the Minister for Finance that the Government recently persuaded the state of Maine to remove the country from a list on its draft legislation, but it has to continue to keep on top of this,” he said.

“Ireland has a good argument to say it is not a haven and my sense is the Government is on top of the issue, but there are 50 states [in the US] so it needs to make sure it keeps up to date on new legislation being proposed.”

Mr Reinsch said investors had been impressed by the consistency shown by successive governments in Ireland but warned that political instability could lead investors to reconsidering investing here.

“I’m not an expert on Irish politics and it seems to me that there are other countries in which it is more of a pressing issue, but nonetheless, political instability is something that’s off-putting to investors.

“One of the best things that Ireland has done over the year is to stay the course and be consistent. It has held firm on the issue of its corporate tax rate and has shown a remarkable degree of consistency regardless of election results.

“I think that even if the election brings about substantial change, investors won’t do anything dramatic because there’s such a good track record but, at the same time, there are lots of places to put capital and you’re only as good as what you said five minutes ago in this game,” he said.