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Irish Exports Continue to Rise in 2010 – Is it Sustainable?

3/31/2011

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Irish exports have increased by 6% during 2010.  This is higher than the rate of import growth which stands at just 1%.  Resulting from this, Ireland’s trade surplus has increased from around €39 billion in 2009 to approximately €43 billion in 2010.  The overall value of our exports now stands at a little over €84 billion.  This is undoubtedly good new for our economy and indeed it is the only factor which has prevented our economic decline from being worse than it already is due to a deterioration in domestic consumption, investment and government expenditure. 

However, we must ask the question where is this export growth coming from?  Is it sustainable?  And can it drive an economic recovery?  Worryingly, analysing the figures at the sectoral level would raise serious concerns.  The main exporting sectors in the Irish economy in 2010 were medical and pharmaceutical products (which accounted for 28% of our exports), organic chemicals (which accounted for 23% of our exports) and computer equipment (which accounted for 5% of our exports).  These three sectors account for 56% of Irish exports and are mainly comprised of multinational companies.

Looking in closer detail at these sectors the exports of computer equipment are actually down 60% from last year.  A substantial part of this dramatic decrease is likely the result of the withdrawal of equipment manufacturing from Ireland by Dell in Limerick.  This may have had a substantial impact on this sector, as exports have fallen from over €10 billion in 2009 to just over €5 billion in 2010.  This could act as a worrying omen of things to come.

As a small open economy, with a low corporate tax rate and access to the European single market, Ireland is ideally positioned to reap the benefits of acting as an export base for multinational companies accessing the European market.  However, as was observed in the Dell case, these multinational companies can transplant their operations should a more attractive location become available and the withdrawal of these multinational firms can have a substantial impact on Ireland’s exports.  Should some of the larger medical, pharmaceutical or organic chemical companies in Ireland move their operations elsewhere this could have a dramatic negative effect on Ireland’s export sector.  The reliance of Ireland on multinational exports and the ability of these companies to move their operations raises serious concerns as to the sustainability of Ireland’s export performance and whether it can in fact drive an economic recovery.
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2/2/2016 01:52:10 am

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    Justin Doran is a Lecturer in Economics, in the Department of Economics, University College Cork, Ireland.

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