Export industry needs a Brexit plan

Ireland, even without resorting to the leprechaun economics jibes, relies very heavily on exports to contribute to economic growth, writes Brian Lucey.

Export industry needs a Brexit plan

Since the 1990s, net exports have typically accounted for 10-20% of GDP. With Brexit, all of this now needs to be evaluated.

A large part of our goods exports are concentrated in a few sectors while services exports have become more broadly based and have indeed shown greater growth over the last two decades.

We run a merchandise trade export surplus and a services deficit typically.

Exports of services in 2015 were €121bn, exports of goods €112bn. Services require the transfer of bits and bodies over international borders, while trade requires the transfer of physical things.

Almost as important as whether we can trade easily with the UK when they crash chaotically out of the customs union (no is the answer), is how will we trade with the rest of the planet.

Being an island, we have to get “stuff” off the island to customers. Total services exports in 2015 to the EU/UK were €66/€23bn and imports €53/€12bn. Total merchandise exports in 2015 to the EU/UK were €58/€13bn and imports €40/16bn.

Thus we are heavily dependent on the UK as an export destination but more so to the EU. What is important is how we export. A large part of our goods exports to the EU and the rest of the world go via the UK.

Where will they be when we find the UK outside the customs union? What of Northern Ireland exporters using ports here? What indeed of Northern Ireland companies which find it faster to use Dublin than to use Larne, to get goods and services to their customers in the UK?

A hard Brexit will result customs checks. A chaotic Brexit will result in massive dislocation. Leaving aside the formal tariff barriers, non-tariff barriers to exports, and to cross shipping which crosses the EU border with the UK, these could be equally as important deterrents to trade.

It is not at all alarmist to imagine Dover, Felixstow and other UK ports horribly backed up with lorries and goods trains attempting to cross to the continent.

So where do we stand in terms of Irish exports using the landbridge, as it is know?

Speaking to the Irish Exporters Association, they suggested a number of potential problems. First, goods that ship on trailers “landbridging” Britain to the continent tend to be of higher than average value — think mainly pharmaceuticals, medical devices, high end food and drink.

Second, global supply and trade chains are indeed global. Landbridging cargo includes not just material whose end user is on the continent but also material that is being shipped to other airports, often Frankfurt, where connections are greater and more frequent than Dublin and where access is easier than Heathrow.

Third, much of the exports to both the UK and the continent may be for onward shipping. The large export to Belgium is in large part made up of exports to distribution centres there for onward shipping later.

We need to encourage and develop additional services to global hubs in regional airports and to further develop Dublin as a regional cargo hub. We also need to look at enhancing port and freight facilities.

It was always a trope that roll on roll off and freight services ex Ireland to the continent could only be on short lines, to the likes of Cherbourg. The arrival in 2009 at the height of the recession of CLdN blew that myth.

Further investment in Rosslare and Cork to develop more of these direct continent links would be a useful Brexit hedge.

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