Michael Taft: Before we break our arms from patting ourselves on the back over our export growth, let’s take a fact break. Clearly, Irish exports grew by a greater amount than the Government expected. In December 2009, they predicted exports would grow by only 0.4 per cent. It looks like they will come in at a growth of around 6 per cent or so. Words like ‘strong’, ‘robust’, ‘resilient’, etc. have been thrown around with abandon.
Well, in comparison with previous projections it is all those things. But let’s leave our little island world and the associated little island commentary for a moment and look at the wider European landscape. Irish export growth is hardly anything to talk about – indeed, it looks rather anaemic (and credit to Rory O’Farrell for spotting this).
Eurostat has recently published the latest data on EU goods exports. It compares non-seasonally adjusted, export growth between the first three quarters of 2009 and 2010. What does it find?
• Ireland: 2 per cent
• EU-27 average: 18 per cent
• EU-15 average: 13 per cent
In the first three quarters of this year, average goods export growth in the EU greatly outstripped Irish growth.
Of course, this could be a result of bounce-back. For in 2009 most EU countries took a severe export hit as a result of the fall in global demand. Ireland didn’t. However, if we take a longer perspective – from the eve of recession to the present - Irish goods exports don’t look especially resilient. Comparing the three-year period from the first three quarters in 2007 to 2010 we find:
• Ireland: - 1.6 per cent
• EU-27 average: -1.2 per cent
• EU-15 average: - 4.6 per cent
While Ireland held up better than most other EU-15 countries, for the EU as a whole we came in about average. And if current trends continue, we may find ourselves falling behind our EU partners – only just hanging in there courtesy of a modern multinational sector which is only tangentially connected to the rest of the economy.
None of this is to gainsay the benefits of export growth. However, it is about ensuring that we put things into perspective – a pre-condition to the next step which is to more closely examine what is going in our export markets and determine how beneficial it will be to the Irish economy.
5 comments:
@Michael,
Excellent post. You'll probably be accused of doom-mongering, but we need to know where we are and where we've been. The 'export-platform' model ran out of steam a long time ago. I'm not sure how wise it to quote the much-villified IMF here, but in their country report:
http://www.imf.org/external/pubs/ft/scr/2010/cr10366.pdf
we have the following on p11:
"Exports will continue to lead the recovery helped by improved competitiveness and world trade
growth. However, spillovers from the largely enclave exports sector to the domestic economy will be limited because of their heavy reliance on imports, their tendency to employ capitalintensive
processes, and the sizeable repatriation of profits generated by multinational exporters.
But to the extent that the domestic sector participates in the export recovery—and signs of this are emerging as traditional sectors exports are picking up—the spillover to domestic demand could be greater."
I'm sure various options will be floated, but my view is that we need to leverage the ability we secured temporarily to exploit the intersection between the trans-Atlantic economic space defined by the US and UK and that in continental Europe so as to integrate more effectively with the global strategy Germany is pursuing for itself (and the economcially-aligned parts of the EU) in the conext of a multi-polar world dominated by non-Anglo-Saxon and non-EU members of G20.
Hi Michael,
I would also have concerns about our export performance but would not be getting worried (yet!) with comparisons to other EU countries.
As you point out other EU countries are going through a "bounce-back" after a steep decline in 2009. Why didn't you do a two-year comparison to the year before the decline?
The three-year comparison might show that we are about average, but a two-year comparison is much more positive. If we look at the equivalent Eurostat document giving the 2008 figures, we see that there are only two countries with 2010 goods exports higher than their 2008 goods exports.
Romania is one and dear old Ireland is the second. Even with higher growth so far in 2010 the other 25 countries are still behind their 2008 exports. We mightn't have had the fastest growth in 2010 but we are still doing relatively better than virtually every other EU country (when compared to their 2008 performance). The current growth rates may alter this but we cannot foretell the future.
Of course, what we really need to see is how this "export-led growth strategy" will lead to job creation. I'm not holding my breath on that one.
Seamus - thanks for that and the link. Yes, it would have been better had I graphed the goods exports for each year from the eve of recession. This would have shown that (a) a sharp decline and bounce back for EU exports, and (b) a relative flat-line for Irish exports. My narrow concern in this post was to put Irish goods exports in an EU perspective and, when looked at from begining to end of recession, almost everyone is taking up where they left off. There is a dearth of EU comparisons when it comes to employment, growth, investment, private consumption etc. which limits the debate.
But this is only a small piece of the puzzle. Your wwn post adds more - in particular the look at export performance minus chem/pharm. This gives a different perspetive. Indeed, the long-term reliance on this one sector has the potential to skewer our view export stats. In 2000, chem/pharms made up less than a third of goods exports; now it is close to 60 percent. Surely, this should feature in any commentary re: the performance of 'Irish' exports.
As to how our export performance, regardless of the sector, can be translated into economic growth - now there's a question. You might be interested in this post: http://bit.ly/dSpJrD
There are numerous stories yet to emerge from our export stats (does anyone remember that Forfas could not rely on official statistics to assess productivity in the modern manufacturing sector and instead used US productivity as a proxy?). The deeper one looks, the more curious it all seems - and it is this that might explain the impact (or lack) of export performance on the larger economy.
Michael,
If what you are saying is that a big part of our economy is detached from the main economy, and that our GDP and even GNP figures are not giving a true steer on our nation's wealth, does that mean that our true 'peer' countries are Italy and Spain rather than the 'core' European nations like the Netherlands and Belgium?
Anonymous - an important question. I have addressed one part of it over here: http://bit.ly/fWKEtI
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