the core of Ireland's successful economic strategy has been its relatively low corporate tax rate -- at 13 percent the lowest in the European Union and less than half the EU average. Ireland has also used its veto in EU sessions to stubbornly resist any harmonization of EU tax policies that might erode that advantage.
New EU Members Look to Emulate Irish
Experts Warn Path to Success Could Be Harder for Other Countries to Follow
By Keith B. Richburg
Washington Post Foreign Service
Sunday, May 2, 2004; Page A24
DUBLIN, May 1 -- When Lenka Bila first traveled from the Czech Republic to Ireland more than two years ago, taking a bus across Europe, then a ferry from the French coast, she remembers being interrogated twice. "They checked your passport, your money, how much you have, if your accommodation is arranged," she said.
Bila, now 25, has learned fluent English and works as a sales clerk at the Dublin outlet for Patagonia, a high-end American outdoor clothing company. Her visa expired on Saturday, but she doesn't have to worry about getting a renewal. As of midnight Friday, the Czech Republic and nine other countries became part of the European Union, giving Bila and citizens of those countries new rights to travel freely and to work. "I'm happy -- I'm going to celebrate tonight," Bila said.
There was much celebration on Saturday in Dublin, the venue for a summit meeting to welcome the new members to the EU. The Irish have been keen to showcase their country as a European success story. The festivities included a morning religious service and an official dinner for the leaders of all 25 nations in the expanded community.
Many analysts said that Ireland is the perfect example for the new members of the Union. People refer to the Irish miracle, a path the mostly poorer newcomers to the EU are hoping to follow.
"If there's one country that most of the new countries think of emulating, it's Ireland," said Charles Grant of the Center for European Reform, a research organization based in London. "Ireland is a poor country dominated by a big neighbor, and all of the new countries except Poland are small countries dominated by big neighbors. [Ireland] was very poor when it joined. It had high unemployment."
The country used to be a net exporter of labor, with many Irish workers fanning out across Europe and to the United States to escape the island's high unemployment and desperate poverty. But in 1973, Ireland joined the EU after a heated national debate over whether joining the union would threaten the country's identity, culture and cherished neutrality.
Ireland now boasts the continent's most dramatic turnaround. It used generous EU development aid to build its infrastructure. It became a gateway for U.S. companies launching onto the European mainland. It embraced the common currency, the euro, and can now claim a vibrant economy, with major inflows of foreign investment and a need to import workers from Southern and Eastern Europe for lower-end jobs in stores, hotels and pubs.
Besides the Czech Republic, the other new members of the EU are Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.
The new members could find it difficult to follow the Irish path to success, experts said. They received far less generous terms than existed when Ireland joined three decades ago, and Ireland had some unique characteristics not easily replicated elsewhere, analysts said. As English speakers, the Irish were able to quickly establish a financial base, particularly for American companies.
Ireland "is what it is because of European Union membership, but also a lot of other things," said Andy Storey, a political scientist at University College here.
Ireland has also benefited from a stable political system that has produced like-minded leaders with shared goals about what the country wanted from the rest of Europe. Many of the East European countries have suffered from constantly changing governments.
Also, according to analysts, the core of Ireland's successful economic strategy has been its relatively low corporate tax rate -- at 13 percent the lowest in the European Union and less than half the EU average. Ireland has also used its veto in EU sessions to stubbornly resist any harmonization of EU tax policies that might erode that advantage.
Several countries in the East -- notably Poland, Hungary, Latvia and Lithuania -- are trying to follow the Irish model by lowering their corporate tax rates. But in an interview with the Wall Street Journal and the German newspaper Handelsblatt, German Chancellor Gerhard Schroeder warned the EU newcomers against undermining German companies by offering large tax breaks and trying to follow Ireland's example.
However, Ireland's economic boom is relatively recent. The country experienced an initial economic downturn in the 1970s and 1980s after joining the EU, as some traditional manufacturing companies lost ground to increased foreign competition.
If any single element of the Irish model seems most transportable, experts agreed, it is that EU membership helped Ireland develop what Grant of the Center for European Reform called "a kind of national self-confidence. They no longer have to be the poor country in the British Isles."
"The new accession states can see clearly how Ireland placed itself on the map, culturally and economically, how we stopped ourselves from disappearing out into the Atlantic as we once thought we might," wrote novelist Hugo Hamilton in Saturday's Irish Times. "Ireland is in many ways a model for other small countries. The integration into a larger mix of cultures allowed our Irishness to flourish."
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