By John Whelan
Digital platforms are now the main drivers of international trade. Most of the global players are established in Ireland. They have been attracting the lion’s share of foreign direct investment into Ireland in recent years.
Hence, when last month the World Trade Organisation (WTO) released its annual report on global trade, the ranking of Ireland as the seventh largest exporter of commercial services, came as no surprise.
Of particular interest is the fact that in the year since the last ranking, Ireland has jumped over Japan, the third largest global economy, and India, the fifth largest — as well as Singapore, the poster child of small economy growth achievers.
The rapid climb in Ireland’s rankings can mainly be explained by the surge in data and information across digital platforms. These digital platforms are now the key enablers of international trade in goods and services.
Think of logistics and the tracking of every parcel bought on-line, communications and the penchant for continuous mobile online contacts including media feeds or financial services such as e-payment, visa, master card or PayPal facilitating on line buying across the globe.
Linked to this trend are the countries that these digital platform companies have decided to locate in. It may come as a surprise that the top six of the largest companies in the world are now services companies.
A closer analysis shows that these companies are all ‘platform companies — Apple, Google (Alphabet), Microsoft, Amazon, Facebook and Alibaba.
All have a strong presence in Ireland bar one — Alibaba the Chinese-based corporation. These companies located in Ireland are not alone servicing business and consumer demand for goods and services in Ireland, they are also managing and controlling the delivery of these services in Europe, the Middle East and Africa.
A good example of the reach of services from Ireland is the control centre at Apple in Cork, which manages the sale delivery process of all Apple phones and laptops manufactured in Asia and bought in the EU 27 countries as well as into Russia.
The Cork centre controls all customs entry, Vat border payment requirements, as well as physical delivery track and tracing to individual homes or businesses.
This combination of global growth in everything digital and the selection of Ireland as a key location have enabled the 19.6% growth in last year’s sales of export services of €151bn.
There is no indication that the voracious demand for digital services will decline anytime soon. In fact there are many indicators that it is gaining more and more traction globally, despite the proposed US legislation to protect the privacy of users’ online data after Facebook’s Mark Zuckerberg Senate hearing or the introduction of the General Data Protection Regulation later this month across the EU.
Retail e-commerce sales worldwide amounted to €1.9tn last year and are projected to rise to €4.1trn in 2021. This is only one section of the digital marketplace.
The issue in Ireland is can we continue to support the existing digital platform companies located here?
There are 46 data centres in Ireland, with the largest cluster southwest of Dublin, where Amazon and Microsoft among others have set up. The committed capital spend for the current year in building and extending data centres in Ireland is €1.1bn. bringing the cumulative spend to just under €6bn.
Supporting more data centre builds would appear to be one of the keys to continued growth of digital for national and international businesses.
However, the plans for Amazon’s new data centres in Mulhuddart and Tallaght were objected to by Allan Daly, the Co Galway-based engineer who was a key opponent of the planned €1bn Apple data centre in Athenry. And whereas Bord Pleanála rejected opposition to the Amazon project, there are concerns in the industry that the intervention by Taoiseach Leo Varadkar to treat future data centre build projects as critical infrastructure may not be enough to keep meet the rising demand in a timely manner.
This could push Ireland off the spearhead of digital expansion.
John Whelan is an analyst in global trade.