Thursday, 23 December 2010

How good is our export performance?

Rory O'Farrell: The government's policy (its probably overly generous to call it a policy, more the rationale give for their various mistakes) is to increase employment through exports. The government is going all out to promote the idea that exports are booming, (for example, look here).

Unfortunately, the truth is different.

The latest data from the CSO (available here) shows an improvement in our trade surplus. This is necessary to repay all the debt the country has borrowed (public and private). I previously explained the importance of the current account here. However the latest figures show the improvement is purely due to a drop in imports. This isn't necessarily a bad thing. For example substituting Belgian Leonidas chocolates with much tastier Gallweys' chocolates from Waterford will reduce imports and increase employment. What is a bad thing however is that (seasonally adjusted) exports have dropped 2% in October. Exports peaked in July, and have not recovered.

Exports in other countries decreased by more than ours during the recession, so the 'resilience' of our exports is an achievement. Also, there was a bounce as exports recovered from their decrease following the financial crisis. However, if we are really gaining competitiveness one would expect exports to grow along with the economies of our trading partners. Also (seasonally adjusted) exports were actually higher in March 2007, despite prices being far higher then.

The folly of cutting infrastructure spending is shown by the stagnation of our exports. Even if wages are cut, firms will not be attracted to one of the wettest countries in Europe where they turn off the water supply at 7pm. Why pay someone €7.65 to mop the floors when they can't get a bucket of water?

UPDATE: I've come across some new data from Eurostat (available here). It compares the growth in exports between the periods Jan-Sept 2009 and Jan-Sept 2010. Worryingly, with the exception of Luxembourg, Ireland is the worst performer.

1 comment:

Paul Hunt said...


Your point about infrastructure spend is valid but I'm not sure it's going to be enough to save the 'MNC export platform/low corporate tax rate' strategy that was beginning to falter before the bubble.

In any event, Season's Greetings to all here. Keep up the good work. And remember, if you want to target an 'enemy' of the well-being and prosperity of citizens, focus on unbridled capitalism; and don't let it pervert competition, markets and democracy to suit its own narrow,sectional ends.