Ireland

 Over the last fifteen years, U.S. production of pharmaceuticals has fallen while imports have soared. It is worth asking why.   

The euro area GDP data—thanks to Ireland—is increasingly telling us more about the tax strategies of large U.S. firms and less about the actual composition of activity in the euro area. Large investments in acquisition of their own intellectual property by U.S. firms transforming themselves into tax residents of Ireland ahead of the end of the double Irish are impacting the economic data of the entire currency union.

American pharmaceutical companies are skilled at using transfer pricing to shift the profit on their U.S. sales out of the United States. That is why the United States' trade deficit in pharmaceuticals is now bigger than the United States' trade surplus in aircraft.

Ireland's tax authorities have made the job of Ireland's statistical authorities almost impossible.   The distortions in the Irish data are now so big that the impact the data for the entire euro area.   

Tax is often the biggest factor in the balance of payments. U.S. firms operating in Bermuda paid $229 billion in dividends back to their U.S. parents in 2018. That’s more than the United States earned from exporting to China before the trade war, and more than Boeing and GE generated by exporting aircraft and their engines even before the new 737 was grounded.

Turns out a small and very green island dominates financial flows from "other euro area countries."  Ireland's impact, of course, is a case study in the role that "trade-in-tax" plays in driving global trade and financial flows in today's global economy.

The pharmaceutical industry's tax strategies appear to have a large impact on the trade data. There isn't any other obvious explanation for why the (goods) deficit in pharmaceuticals exceeds the surplus in civil aircraft..

I wanted to follow up on a few points that I didn’t have space to explore in my New York Times op-ed on the international provisions of Trump’s corporate tax reform. The first is that, well, there…