Ireland needs to address a decline in business with our European partners, according to the Irish Exporters' Association (IEA).

In its half-yearly review released yesterday, the association welcomed the 7 per cent increase in exports in the first half of the year to €74.4 billion.

However, it noted that the main growth came from outside the euro zone, where merchandise exports grew by 23 per cent and services exports increased 10 per cent.

Responding to the findings, chairman John Whelan said he was particularly concerned that Irish exporters were continuing to lose market share in Germany, France and Italy, and called on the Government to adopt a more proactive approach to boosting trade in the region.

He said the low-cost base and the close proximity to these countries enjoyed by the new eastern European members of the EU was proving a significant threat.

"It is probably the most significant rebalance of trade within the EU that we have encountered since joining in 1973," he said. "It has to be taken as a very strong threat."

Conversely, Mr Whelan welcomed the 9 per cent increase in trade between the Republic and the North and the 7 per cent gain in exports to the UK as a whole, describing it as the bright spot on the horizon. Trade in this area had been stagnant for seven years.

He said the increase in trade with the UK was particularly important as a counterbalance to the extensive exposure of exporters to the US, where the rapid depreciation of the dollar and the problems in the housing and financial sectors are putting pressure on Irish exporters.

Exports to China and Hong Kong also increased significantly, a move Mr Whelan attributed to positive promotion of Asia as a trading destination by the Government.