In a trade war between the EU and the US, what happens to a city like Galway?

The one thing that successive Irish governments want to avoid is having to make a choice between Europe and the US. As long as the US is guardian of the Grand Bargain, Ireland can be European and American. With one foot in each camp, commercially we are American and technically we are European. This Grand Bargain, set up by the United States after the second World War, has brought peace and prosperity in Europe. The US took care of European security via Nato and, in return, the old imperial powers of Europe – Germany, Britain and France – accepted American hegemony, undertaking to drop their previous aggressions.

Under this protective American umbrella, various European projects were advanced. Without having to worry about security, the European Union could begin its slow development from a coal and steel treaty in 1957 to a single currency. American nuclear deterrence ensured Russia/Soviet Union remained in check. Meanwhile, France and the UK dissolved their empires as American supplicants not rivals, understanding that hard power had shifted from Europe to Washington.

In return for this munificence, the US got free trade and an intricate system of alliances, treaties and partnerships as well as leadership in a variety of American-created institutions such as the UN, the World Bank and the IMF. It also populated the world with American military bases, which brought the borders of the US right up to the doorstep of its two biggest foes, Russia and China. Pax Americana backstopped globalisation, a rules-based system policed not just by the hard power of the world’s biggest military but the soft power of treaties, as well as norms and understandings that we in the West were on the same side.

Ultimately, the countries it most suited were not the crestfallen imperial powers, whose nostalgia for past glories remains real. These were the “middle ranking” countries that Canadian prime minister Mark Carney spoke of at Davos in a much lauded speech.

But we Irish should remember that it was under the hegemony of today’s “middle ranking” countries that we suffered most. History should caution about embracing a new global system which elevates the Parises, Berlins and Londons of the world.

In contrast, the American world suited Ireland and other small countries. Think of Taiwan, Singapore and South Korea. These former colonies – victims of various regional bullies, pushed around and humiliated for years – have flourished under Pax Americana. Small countries that played ball with the United States were allowed, for the first time, to pursue their own interests, safe in the knowledge that the local tyrants were being policed by Washington. In many cases the Americans could be counted on to be a reasonably impartial influence. Think about the role of the US in our peace process. Do you think the UK, which had for years dismissed Northern Ireland as an internal affair, would have come to the table without the lean from Washington?

The Grand Bargain also allowed Ireland to craft an expedient economic policy, transforming the industrial base into an American bridgehead in Europe. To its supporters, Irish industrial policy is a blueprint for other small countries. To others, particularly in the European Commission, it is a Trojan horse that has allowed corporate America to plunder the European market while at the same time funnelling European taxes unfairly into Irish coffers. What else does the Apple tax decision by the European Court of Justice mean? The plaintiffs in that case were Ireland’s EU partners.

This brings us to the crux.

The conclusion emanating from Davos this week is that Europe is on its own. Donald Trump may have made a U-turn on Greenland, but the rupture between Europe and the US is permanent. There will be another crisis over Greenland because Denmark will not sell it to the US. How will the US get its hands on Nuuk then? Diplomacy this time seems to have come up with a Guantánamo-style arrangement, where the US can have a base in Greenland but this doesn’t give it Greenland’s rare earths and minerals. The US will come looking for more and if the language of Davos is any indication, contempt for the EU is a Maga article of faith. American tariffs will be reignited, and the EU’s counterreaction will be swift – as it must be if the EU is to stand for anything. The country most aligned to the US – Ireland – will suffer most in this scenario.

Ireland is by far the EU state most dependent on the US, with more than a quarter (26.6 per cent) of total exports headed across the pond. That is almost half (45.8 per cent) of our non-EU exports. The next most exposed countries are Finland, Italy and Germany, with 11.1 per cent, 10.7 per cent and 9.9 per cent of their total goods exports going to the US.

We all know how much tax and employment comes from US companies, but sometimes it is more stark if we examine what a permanent rift between Europe and the US might mean for a specific region and industry. Take medical devices and biopharmaceuticals around Galway and Limerick alone. Galway hosts medical device giants such as Medtronic and Boston Scientific, while Limerick hosts pharmaceutical leaders such as Regeneron and Eli Lilly. The top 10 biopharmaceutical companies in the world are now based in Ireland, fundamentally transforming the region’s economic landscape.

The biopharma sector accounts for more than 60 per cent of Ireland’s total exports. We are now the third largest exporter of pharmaceuticals globally, with more than €116 billion in exports annually. The medical technology sector alone employs more than 25,000 people, predominantly in these cities. Galway is Europe’s medical technology hub, employing 15,000 people in the city alone and more than half of medtech companies in Galway have dedicated R&D facilities. About 80 per cent of the world’s supply of stents are now produced here, largely from plants lying on the eastern outskirts of Galway city that can churn out about 10,000 stents per day or about two million annually. In a trade war between the EU and the US, this all dries up. What replaces it? What happens to a city like Galway, its bars, shops and restaurants, where does alternative high-wage, high-skilled employment come from?

Let’s hope we don’t have to make that choice between Europe and the US. To paraphrase Mark Carney in Davos this week, hope is not a strategy.