Pharma sector's strength distorts data
ANALYSIS:IRISH EXPORTS don’t follow the patterns to be seen in most peer countries. In early 2009, when the world was experiencing a collapse in global trade of a kind last seen at the beginning of the Great Depression 80 years ago, Irish goods exports were barely affected (see chart above).
Then, as world trade recovered in the second half of that year, Irish exports plummeted. By the final quarter of 2009 they had hit a 10-year low.
A similar eccentric, if less extreme, pattern was in evidence towards the end of last year. Despite contractions in the economies of many export markets in the final quarter of the year, the value of Irish goods exports hit a decade-long high.
The most important reason explaining these unusual export patterns is the pharmaceutical sector. It accounts for an unusually large proportion (60 per cent in 2011) of all goods exports. It is famously recession-proof owing to the “inelastic” nature of demand for such products – regardless of their finances, people will prioritise the purchasing of medicines over almost everything else. This was seen in continued strong growth in the sector’s Irish exports throughout the worst of the global recession in 2008-2009.
If the “pharmachem” sector in Ireland has put in an astonishing growth performance over the past decade (exports more than doubled), concerns have been voiced recently that the expiration of patents on some blockbuster drugs will have a major impact on the exports. Although it is hard to see how a negative impact can be avoided, the figures for January will provide some comfort. Foreign sales of almost €5 billion during the month represent a surge on the depressed December figures and on January 2011.
Export growth by market last year was evenly spread, with growth in the three main regions – euro zone, US and UK – close to the overall average. This reflects trends over the past half decade, during which the share of these markets has been broadly stable.
Politicians everywhere love to talk about tapping exotic new markets. The Bric countries – Brazil, Russia, India and China – are particular favourites.
The Fine Gael-Labour coalition is as enthusiastic about strengthening trade ties with the emerging giants as any government. Its first year in office did not herald much of a change.
Exports to China, the biggest market for Ireland among the Brics, are not only still smaller than those to Switzerland, they did not grow at all last year – despite near double-digit growth in the Asian dragon economy.
If penetration of the vast Chinese market has been limited, it has been almost non-existent in India. Ireland-based businesses sold just €217 million in goods there last year. Even if the strong growth rate in 2011 was replicated over the coming decade, so low is the starting point it would still not make India a major partner.
There is a long way to go before Irish exporters go truly global.