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Diversifying External Linkages: The Exercise of Irish Economic Sovereignty in Long-Term Perspective

Frank Barry
Trinity College Dublin

IIIS Discussion Paper No. 448

Political independence is usually associated with an attempt to reduce economic dependency on the dominant or former colonial power. For most of the early period since Irish independence the attempt to reduce exposure to the UK was implemented through tariff protection and restrictions on foreign ownership, though Ireland and the UK maintained (and continue to maintain) a common travel area agreement. Inward orientation eventually ran out of steam, culminating in sustained emigration and deep recession in the 1950s. The genesis in the mid-1950s of Ireland's low corporation tax regime facilitated later trade liberalisation and diversified the economy away from the UK. Full convergence on UK and broader Western European living standards was eventually achieved in the 1990s. From 1979 the UK would diverge from most of the rest of Western Europe on exchange-rate policy and Ireland
was forced to choose between irreconcilable options. The resulting difficulties can be ascribed to design flaws in the European monetary project and Ireland's failure to recognise the constraints that the new regime imposed.

Keywords: Ireland, Economic History, Economic Development, European Integration,
Foreign Direct Investment, Protectionism, Single Currency
JEL Codes: F5, O52, N94

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Last updated 28 August 2014 by IIIS (Email).