The clearest indicator yet of what Brexit could mean to the Irish export sector was seen in the CSO’s recent trade figures.
Exports to the UK plummeted by 23% in September, pulling down the cumulative to-date merchandise exports by 5%.
Trade with the North was most heavily impacted with exports down by 40% in the month. As this is happening without a border restriction, trepidation over the introduction of any border, hard or soft, as a consequence of Brexit is justified.
Of course, the fall in the value of sterling is the immediate challenge for Irish exporters, but the ultimate long-term implications of Brexit will only be evident once the differing trade relationships between the UK, Europe and the rest of the world have been established.
This is likely to take a number of years, creating major challenges for our export sector long term. Exports to the rest of Europe continued to show no growth in the period to September, creating worries that the European Central Bank’s efforts to stimulate the eurozone was not working, despite ECB president Mario Draghi emptying his tool box.
The rise of isolationist anti-free trade, anti-establishment political parties in the run-up to the French, German, Dutch and Austrian elections will not help business or consumer confidence over the coming months and into 2017.
In addition, a downgrading of growth forecasts in the euro area has been released by the ECB due to the Brexit vote. As about one third of all Ireland’s exports go to the eurozone, the implications are very worrying for all those businesses trying to re-position themselves away from the UK into the wider EU market.
The US market has been the main reason Ireland’s exports have remained in positive territory up to September. However, the outlook for export growth has weakened significantly in the weeks since the US presidential election. The World Trade Organisation downgraded its forecasts for trade growth in 2016 from 2.8% to 1.7%.
If realised, this would mark a 40% reduction in world trade growth and could create a crisis situation for our exports.
At the same time, foreign direct investment flows have not returned to pre-crisis levels according to the World Trade Organisation director general Roberto Azevêdo and are unlikely to do so under a Donald Trump-led US government. Trade and investment have been the key ingredients of Irish economic growth and prosperity for many decades.
The disruption of both for the foreseeable future will be of particular concern to Ireland’s policymakers as well as exporters. In addition, all of this is taking place amid a rise in anti-globalisation discourse in many countries and communities. And trade is often singled out as a major cause of instability in labour markets. I would firmly dispute this point.
However, the biggest concern is not that such arguments are being made, but that they encourage isolationist policies prevalent in past centuries, which have been proven over time to be detrimental to long-term job growth and prosperity. Many countries are looking afresh at their trade policies and so must Ireland.
© Irish Examiner Ltd. All rights reserved