2020 may be tougher for Irish exporters

As 2019 ends, there is relief that political interference did not overly damage trade, but whereas we have escaped the bullet this time, we may not be so lucky in the new year.

2020 may be tougher for Irish exporters

As 2019 ends, there is relief that political interference did not overly damage trade, but whereas we have escaped the bullet this time, we may not be so lucky in the new year.

2019’s gloom kicked off mid-January, with the defeat of then UK prime minister, Theresa May’s EU-Brexit deal in the House of Commons by the largest majority against a British government in history.

Her premiership ended in July, when she was replaced by Boris Johnson, who was elected on a mandate to get Brexit done by the end of this month.

US president, Donald Trump, escalated his trade war with China, creating global tension and trade deceleration, finally culminating in a mini truce last month.

There were recessions, or borderline ones, in Germany, Italy, the UK, South Korea, Singapore, Hong Kong, Turkey, Brazil, Mexico, Argentina, and South Africa.

The net effect has pushed global trade in goods and services down to its slowest pace in a decade. Global exporters were losing out on €400bn worth of trade as the year progressed.

Against this background, exports of goods and services from Ireland shot up by 11%. This was a year when German exports only managed 1% growth and the UK failed to show any export growth. China’s growth was just over 1%.

Was this a freak performance? Will the growth come to a halt in 2020? Explaining Ireland’s strong trade growth, while global trade continued its slowdown, is partly done by an analysis of ‘trade diversion’ effects created by the US’s tariff wars.

‘Trade diversion’ — whereby exporters channel their sales through non-tariff affected countries, before reaching their end customer — has benefited Ireland, but also Vietnam, France, the Netherlands, and Taiwan.

Then there is Ireland’s focus on specific fast-growth sectors, such as software for internet platforms. Platform businesses have disrupted many sectors. Airbnb is now one of the largest hospitality companies in the world.

Uber is now a global transport company. Amazon, eBay, and Alibaba have become global shopping malls.

The five largest companies in the world are Apple, Google, Amazon, Facebook, and Microsoft. All are powered by platforms and all have major operations in Ireland. The exports from these companies are captured in our services exports figures, which exceeded manufactured goods exports by €50bn in 2019.

But, other sectors of Irish trade may not be so lucky in the year ahead. The agrifood sector is the most exposed.

The UK remains an important destination for Irish exports, primarily for products relating to food and agriculture, and is Ireland’s third-largest goods exports destination.

In the event of a no-deal Brexit at the end of next year, double-digit tariffsare expected to be imposed, with severe damaging effects for many agri-food exporters.

One of the legacies of 2019 has been the rise of protectionism and, with it, the trend to question the validity of existing trade treaties.

These challenges to the existing agreements add uncertainty to Ireland’s position on the international trade map; especially since replacement agreements seem to benefit the most powerful countries.

So, how competent are Ireland’s traders with the new rules of the game, in the shift towards more sustainable trade?

The indications are not good.

Ireland has been a climate laggard and this could be the Achilles’ heel on which future international trade growth may flounder.

John Whelan is managing partner of international trade consultancy The Linkage-Partnership.

More in this section

Budget 2022 Logo

What impact will this  year's budget have on you and your business.

The Business Hub

News and analysis on business, money and jobs from Munster and beyond by our expert team of business writers.

Sign up
Puzzles logo

Puzzles hub

Visit our brain gym where you will find simple and cryptic crosswords, sudoku puzzles and much more. Updated at midnight every day. PS ... We would love to hear your feedback on the section right HERE.

News Wrap

A lunchtime summary of content highlights on the Irish Examiner website. Delivered at 1pm each day.

Sign up

Our Covid-free newsletter brings together some of the best bits from irishexaminer.com, as chosen by our editor, direct to your inbox every Monday.

Sign up