Ireland’s €70 billion goods trade surplus with the United States in 2024 raises eyebrows — and rightly so. At the heart of this imbalance lies one powerful industry: pharmaceuticals, with €50 billion in pharma exports flowing to the US alone. But dig a little deeper, and you’ll find that this surplus is not just about pills crossing borders. Much of it comes down to accounting, not production.
Real vs accounting-based exports
On paper, Ireland looks like a pharmaceutical powerhouse. In 2024, €99.9 billion in medical and pharma products were exported globally, nearly half of all Irish goods exports. But here’s the catch: not all of those exports are real in the sense of goods physically produced in and shipped from Ireland.
Instead, many are what economists call accounting-based exports. These occur when a US pharma company secures an exclusive licence agreement with its Irish subsidiary, allowing that subsidiary to book the profits from global sales — even if the pills were manufactured in Belgium, Switzerland or Puerto Rico.
In today’s global supply chains, ownership matters more than geography. International trade statistics record exports when legal ownership changes hands, not when goods physically cross borders. So when a US branch of a pharma giant buys a drug from its Irish affiliate, that counts as an Irish export — even if the drug never set foot in Ireland.
Legal ownership vs place of production
This distinction is everything. While the US parent company typically retains legal ownership of the intellectual property, it grants an exclusive licence to its Irish subsidiary. That licence gives the Irish entity the economic rights to exploit and sublicense the IP, which means the Irish subsidiary books the revenue from global sales and reaps the taxable profits.
Let’s say Pfizer does exactly this, then contracts a factory in Singapore to manufacture the drug, which is shipped directly to a US wholesaler. The Irish entity never touches the product, but because it holds the licence, it records the sale. Legally and economically, the drug is Irish-owned, so Ireland books the revenue — even though the drug was made in Asia and consumed in the US.
Similarly, the US registers it as an import from Ireland, even though the supply chain tells a very different story.
This is why Ireland’s trade data appears so inflated. Much of what is recorded as an “export” is actually the result of profit shifting — where global companies route revenue through low-tax jurisdictions like Ireland to minimise their tax bills.
Why it matters
Ireland’s official GDP in 2024 stood at over €500 billion, but its GNI* — a more accurate measure of the domestic economy — was just over €300 billion. That €200 billion gap is the footprint of profit shifting. Pharma giants and tech firms shift billions in global profits into Ireland each year, booking revenue and inflating trade data, but ultimately repatriating the profits to their real owners abroad.
The result is a bloated trade surplus and a distorted picture of Ireland’s economic weight. Without these IP-based paper exports, Ireland’s surplus with the US — and the EU’s overall trade balance — would look very different.
So it is no surprise that Donald Trump wants to put an end to all of this. When US companies shift profits to low-tax Ireland and inflate the trade deficit on paper, it feeds the narrative he has long railed against: America losing out while others cash in.
Leave a Reply