The Irish Exporters’ Association said this week that the Republic’s exports hit an all-time high last year, with a cool €161 billion in goods and services sent abroad for sale from our shores.
Hurrah! So does this mean we're back in the economic game, ready to grow and kick out the IMF?Not exactly. The booming exports reflect what economists like to call our "two-tier" or "twin-track" economy. This means that companies selling their goods and services abroad are, to a large extent, doing well, while the rest of the economy is still in terrible shape.
How can exports be doing so well while the rest of the country languishes in economic gloom?The main reason is that a lot of places around the world are doing reasonably well on the economic front at the moment, particularly the US, which is the biggest foreign market for Irish companies. This is why a lot of experts talk about any economic recovery we eventually have here being "export-led". The hope is that the growth in exports will eventually spread to other bits of the economy, but this is as tricky as it sounds.
But who is doing all this exporting when all we hear about is companies closing down?Some see it as a negative, but it is clearly multinational companies operating in the Republic, such as Pfizer and Intel, that are doing the best job on the export front. Financial companies based at the International Financial Services Centre are also making a reasonable contribution through exports of "services" such as fund management – an export doesn't have to be a computer chip or a medicine. The IDA said this week that its "clients" (foreign companies) account for more than three-quarters of total Irish exports.
If it's mostly multinationals that export, does that mean the economic benefit is exported too?This depends on whether the company involved pays its company taxes here, but it seems most of them do, at least to some extent. Again, the IDA, an authority in the area, reckons its clients paid more than 60 per cent of Irish corporation tax last year. This would amount to about €2.3 billion, which is chunky no matter how you look at it. Staff working in multinationals also pay taxes, although there is little evidence to show that export growth translates into jobs growth. In fact, it seems to make little difference, which is why export growth doesn't generate the excitement you might expect.
What about the Irish companies that export?Don't they deserve some credit? Of course they do; anybody managing to do well at a time like this is a champion. Food companies are the stars of the Irish-owned exporting sector, and this is expected to continue this year. It seems those cheesy Kerrygold advertisements have more of an impact than we might realise.
So how is it looking for 2011 anyway?The Irish Exporters' Association is feeling pretty positive, predicting growth of about 5 per cent in goods exports (such as of Viagra, made by Pfizer in Cork) and 10 per cent in services (such as by a Citigroup fund service completed in Dublin), bringing the total to €172.6 billion.
But surely there are risks to this?There are always risks to growth, as the economy as a whole learned the hard way last year. Any threat to the Republic's low 12.5 per cent business-tax rate would be seen as the main one, as it influences a lot of multinationals in their decision to locate here. Currency movements would also be particularly important to Irish-owned manufacturers, with a strong euro no help if you're exporting to the US or the UK, as it will make your products more expensive.
