John Whelan: Irish exports to China can continue to grow in Biden era

Donald Trump's aggressive stance towards China created opportunities for Irish exporters to expand sales to the Chinese market and there has been no change in policy since Joe Biden was elected US president

Joe Biden's relationship with China will be keenly watched by Irish exporters trading with the Far East. 

Despite the pandemic continuing under the latest variant and causing many countries to once again implement stricter restrictions, including lockdowns, and bringing with it economic uncertainty as we head into the new year, Ireland’s international trade finished the year with a flourish.

This was assisted, in no small measure, by rapid trade growth with China, which has hit an all-time high and looks set to continue across 2022.

The growth in exports and imports with China has been all the more remarkable in a climate when international travel has been drastically restricted, shipping congested and associated freight costs have soared. That’s not to mention the EU, UK and US sanctions on China over human rights abuses of the Uyghur Muslim minority.

In a strange twist in the geopolitical trade war between the US and China, the aggressive stance taken by Donald Trump in his period in office from January 2017 to January 2021 created opportunities for Irish exporters to expand sales to the Chinese market. During his four years in the White House, Ireland’s exports to China more than doubled from €4.3bn to €10.5bn.

With no change in policy since Joe Biden was elected US president, exports from Ireland to China grew again in 2021, forecast to reach €11.5bn for the full year, making China our fifth largest market internationally, just behind Britain.

To counter the loss in trade with the US, China has made considerable efforts to deepen its engagement with other countries. This has included the ratification of the Regional Comprehensive Economic Partnership (RCEP) across Asia, creating the largest trading bloc in the world, which will come into action this month.

China also applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), while continuing its efforts to negotiate a comprehensive agreement on investment with the EU.

These agreements may impact Ireland’s exports to the market, which are focused on computer components including Intel microchips, pharmaceuticals from the likes of Pfizer, medical devices manufactured by Boston Scientific in Cork, Galway and Clonmel, as well as baby food infant formula from Nestlé, Abbott, Danone and Kerry Group.

The vast majority of these companies trading with China are US multinationals, who are likely to be using their Irish-based facilities to circumvent the worst of the tariff and customs controls being applied to goods coming direct from the US.

However, China is a big market and specialist suppliers are not easily replaced and there is a clear policy shift to supporting domestic demand. China’s commerce minister Wang Wentao — speaking to international media in recent days — stated that imports reached €4.9tn worth of goods in the first 11 months of 2021, a rise of 31% year-on-year, and said he expected the double-digit growth in trade to continue next year.

Focus on meeting consumer demand

The focus in policy towards meeting consumer demand, which spells good news for continued growth in exports to the market from Ireland, was reiterated by Kang Yong, chief economist at KPMG China.

Despite all the tension and turmoil embedded in the US-China relationship, the rhetoric between President Biden and President Xi Jinping has been less toxic than under the Trump era and, in any event, both will have more important domestic issues to tussle with in 2022.

In February, Xi Jinping will be anxious to showcase China at the Winter Olympics in Beijing, hoping to demonstrate its mastery of a global spectacle and control of Covid-19. Even more important, Xi will want a quiet run-up to the 20th Communist Party Congress later in the year, where he expects to gain another five-year term as leader, elevating him to the historic level of Mao Zedong.

Conversely, Joe Biden enters his second year in office down in the polls, with a pandemic dragging on and nearly a third of Americans still hesitant to get vaccinated, a recovering economy strained by inflation and his trillion-dollar infrastructure bill blocked by one of his own Democratic senators.

However, in the longer term the tussle between the US and China, while likely to be put aside for the year ahead, may well return with force once domestic issues are sorted.

• John Whelan is a leading consultant on global trade