New focus on developing overseas markets
Trade promotions moved from Enterprise to Foreign Affairs
The Government is trying to change the focus of the economy. Minister for Jobs and Enterprise Richard Bruton is hoping a model based on endeavour, innovation and exports will replace the one of property, construction and debt that landed the State’s finances in their current predicament.
One step taken was to shift responsibility for trade promotion from the Department of Enterprise to the Department of Foreign Affairs. The decision was made with a view to better using the State’s broad, and often criticised as expensive, diplomatic network as a tool to drive overseas trade.
“The rationale behind that was to recognise that in each country we now have a trade strategy and we have our agencies operating in tandem under the leadership of the ambassador,” says Bruton, whose department retains responsibility for trade policy.
“It reflects the reorientation of diplomatic representation towards the core challenge of employment and recovery. . . It is a good way of getting a clear focus on the trade challenge as a team effort.”
Acknowledgement of the “trade challenge” is salient at this time, with the IMF’s most recent forecast pointing to a world economy moving at three paces.
Unfortunately for Ireland, it finds itself and many of its largest export markets in the EU languishing in the bottom tier, where members are, as a whole, expected to experience a contraction this year before growing modestly next. The EU accounted for well over half of Ireland’s total goods exports in 2012, which increased by 1 per cent to €92 billion.
The economy in the US – Ireland’s largest trading post – is in the middle tier and expected to grow by 1.9 and 3 per cent this year and next. Goods trade with the US fell by about 16 per cent to €18.1 billion last year due to a fall in the value of medical and pharmaceutical products shipped there. The trend has continued.
The Irish Exporters Association says a stark reality is that only 4 per cent of Irish exports go to these fast-growing economies, whereas the average EU state is sending 20 per cent.
The Government’s trade strategy identifies 27 “priority markets” seen as having the best prospects for increased exports. Familiar markets such as the US, Germany and France are among those selected, along with lesser-explored markets like Malaysia, the Bric countries and Singapore.
It is in these markets that the Government hopes a combination of trade missions, with 18 to be led by ministers this year, and the overseas diplomatic network can increase trade. The network cost some €52 million to maintain in 61 countries last year but the Department of Foreign Affairs said it could not quantify what proportion of spending went on trade-related activities.
What difference has this joined-up approach made to date? Irish diplomatic presences in East Timor and the Vatican ended last year, while in the 59 countries where the State is still represented, goods exports fell year on year in 22 cases and rose in 37. The outcome was an increase of 0.55 per cent in goods exports to these markets to €87.3 billion.
In the 27 priority markets, the results were a mixed bag, with goods exports up in 17 cases last year and down in 10, resulting in a 0.28 per cent increase to €82.6 billion.
Exports rose in eight of the 11 countries where expenditure on diplomatic representation was more than €1 million last year.Trade declined in Italy (-10.8 per cent), France (-10.8 per cent) and the US (-16.2 per cent), while Japan (+20.5 per cent), Switzerland (+37.5 per cent) and Britain (+7.5 per cent) were among those where it rose.
Four State agencies – the IDA, Enterprise Ireland, An Bord Bia and Tourism Ireland – have a presence among the 27 priority markets and are also part of the effort to drive trade in tandem with Ireland’s diplomatic representatives.
The agencies overlap in some markets but at face value, goods trade was up in 14 of the 24 countries with an Enterprise Ireland representation; it rose in eight of the 12 with an IDA presence; it increased in five of 13 countries with Bord Bia representation and in 10 of the 16 nations where Tourism Ireland is operating.
Trade agreements are also being explored with a view to creating opportunities to do more business in more places more easily. The Irish EU presidency has seen progress on a agreement with the US, which the Government says could add €800 million to Irish GDP and create up to 4,000 jobs.
“The prize is very significant,” Bruton says. “You’re talking about a real growth opportunity. From the Irish perspective we have established connections with the US market . . . so we are well placed to derive benefit.”
Negotiations on a new EU-Japan free trade agreement began last month, while talks with Canada on a similar deal are coming to a close.
The EU and Singapore announced an agreement in December and signs that an EU- South Korea trade deal may be making an impact can be seen in trade figures. They show Irish goods exports to South Korea increased by 18 per cent to €355 million last year.
State aid body Irish Aid is also broadening its focus on trade, with the publication of a strategy including plans to encourage economic growth in partner countries to support their move away from aid and bring increased trade opportunities for Ireland.