The release of the briefing notes prepared for US Treasury Secretary Tim Geithner‘s meetings with the Taoiseach and Finance Minister make for very interesting reading — even if they are very heavily redacted.
What we need to see now are the notes drafted after the meetings. The notes summing up what Geithner learned from those talks and how Kenny and Noonan responded to the points he raised.
It would be particularly interesting to see how they reacted to the third key point on Geithner’s list, the one relating to “macro/fiscal outlook”. The official who drafted the note so strongly wanted his boss to “Query Noonan on Ireland‘s plan to return to growth” that he highlighted the line in bold.
The note goes on to say, “To make such a transition [to growth] Ireland needs to rely heavily on its export sector … Its major export markets (UK, US) are undergoing fiscal consolidation … ”
Though the US Treasury has been no great friend of Ireland’s over the past couple of years, in one paragraph one of its officials neatly summed up the situation. The big black hole in this Government’s economic and job creation strategy. Actually, the hole is not in the policy, the hole is where the policy should be.
The same point was made, though more subtly, last week by the Irish Exporters Association. It has called for “a major rethink” of our export strategy.
The figures are startling. Our once impressive export figures have nosedived in a very short space of time. In 2009 our trade balance grew (year on year) by 32 per cent. In 2010 that figure was still a credible 19.7 per cent. The projected figure for 2011 was 15 per cent; the reality was a paltry 4.7 per cent.
The Exporters Association is right to be concerned and to urge a strategic shift. Our exporters have individually done well in a very tough and highly competitive environment. But they need greater strategic state supports to expand and develop new markets for Irish goods.
One of the strategic problems is how our exports are narrowly based on two areas.
One is products: hard goods and merchandise. Organic chemicals, medical and pharma goods account for about 86 per cent of our trade surplus.
The other is services, with IT and financial services accounting for the vast bulk of this sector.
While these are areas in which we have acknowledged expertise, others are encroaching on our ground and we need to develop new areas and not become overly reliant on certain sectors.
More crucial, however, is our need to develop new markets. Geographically we are — as Geithner remarked to Noonan — hugely reliant on the USA, UK and EU.
Our trade with the so-called Bric countries (Brazil, Russia, India and China) accounts for under 3.7 per cent of our total exports, while our trade balance with these countries is a measly €70m.
Perhaps the Taoiseach has a secret plan to redress this imbalance with the Bric countries, particularly the “R” and “C” ones. Maybe that is why he gave the vital trade portfolio to Eamon Gilmore in recognition of his past political familiarity with these two countries and regimes.
If so, it ain’t working.
As if to heighten the importance of aggressively supporting and developing our exports in the emerging markets, another US report points to strains we may face in future in securing US foreign direct investment here.
Preliminary results from a survey published late last year by the Bureau of Economic Analysis on US direct investment abroad indicate that the slow growth in investment is being accompanied by a change in its geographic distribution. In other words, American multinationals are shifting investment from traditional areas to the Bric countries. While the report shows Ireland continuing to outperform others in the EU in attracting such investment, it points to the general level of investment coming to the EU dropping over time, in favour of the emerging economies.
We need to have new strategies in place in advance of these developments. Just rerunning the plans and policies that saw our economy take off in the mid-to-late Nineties is not enough.
The task is not unachievable. We need only a small slice of this growing cake. To do this we need to foster links and associations with these countries now. One of the ways to do this is to establish a start-up visa waiver programme, an idea I outlined here some 18 months ago.
Another way to achieve this is to encourage third-level colleges to market courses and encourage qualified students from the Bric countries to come study here. When these future leaders in commerce and industry return home, they will go back with positive impressions and strong connections with Ireland. Developing our exports is one element of a twin-track approach to returning us to growth. The other is to get our domestic economy moving again. This Government has wasted the first year of its term failing to seriously address either. We cannot afford a second year of this high-spun inertia.