Category: Archive

Irish businesses must vie for the competitive edge

February 16, 2011

By Staff Reporter

All the country’s main business and industry lobby groups had campaigned strongly in favor of the Nice Treaty and have welcomed its endorsement.
Whelan said that with the vote out of the way “the real business issues of EU enlargement must be faced.”
“In our top four European markets, exports are down by one third for the first half of the year,” Whelan said. “In these markets our currency advantage and labor cost advantage are gone and we are struggling to hold on.”
In contrast, in the traditional British market, exports had increased by 19 percent in the first six months.
Whelan said that four of the EU accession countries — the Czech Republic, Estonia, Hungary and Slovenia — are considered by the World Economic Forum Global Competitiveness Program to be ahead of Ireland in terms of “innovative driven production.”
He said Ireland’s current international trade policy was devised and issued in the mid-1990s.
“The old trade policy guidelines for government and state agencies is no longer relevant to today’s export markets and its players in the first instance and we need to reaccess Ireland’s trade-related competitive strengths and weaknesses,” Whelan said. “We need to look at ways to address the new drawbacks to competitiveness in Ireland. Ingrained competitive disadvantages undoubtedly exist in certain industry sectors and markets. And a resourcing and sequencing of priorities will need to be tackled.”
Key issues will be to identify priority sectors for building competitive advantage, priority markets where international demand and competition profiles give Irish exporters the best opportunities, and innovative design training and promotion across all sectors.
A study by University College Dublin economics professor Frank Barry found less than 1.5 percent of Irish trade is currently with the 10 applicant countries.
“The country’s main trading partners in the region are Hungary, Poland and the Czech Republic,” Barry said. “Exports to these three countries amounted to almost euro 1 billion in the year 2000, while imports came to a little over half that sum.
“Trade with each of the other states, and with Malta and Cyprus, is very small by comparison.
“Ireland generally runs a trade surplus with each country other than Hungary, with which it has a deficit that is driven largely by imports of office and data processing parts and equipment.”
One of the worries expressed by the No side during the campaign was that multinationals in Ireland might be tempted to relocate in the lower cost applicant countries, but Barry said the indications were that there would be greater out-sourcing.
The country has relied heavily during the Celtic Tiger boom on U.S. manufacturing capital to set up industries and create jobs and Barry said foreign firms in the country are importing parts from associated subsidiaries in accession countries rather than closing their Irish operations.
“A continuation of this trend upon enlargement would raise the profitability of these firms’ Irish operations.”
He said there is a possibility that there could be competition for Ireland for foreign inward investment. A number of applicant countries have followed Ireland’s lead in offering low rates of corporation tax like Ireland’s 12.5 percent and the more advanced accession countries do not differ substantially in terms of the skill levels of the population — but offered them at a much lower price.
Barry predicts gains for food processing, the country’s most important manufacturing sector. He said the vast bulk of Irish agricultural output is beef and dairy products, with cereals comprising only a small proportion, while the vast bulk of the accession countries’ farm output is cereals and pork.
Barry said there have already been Irish mergers and acquisitions activity in the accession states in sectors, such as in financial services, construction and property, natural resources and high-tech industries.
Irish companies are developing competitive advantages in certain niche sectors, and the development of the accession state economies “will present them with a larger playing field within which to expand,” Barry said..
The 7,500-member Irish Business and Employers’ Confederation was one of the most high-profile campaigners on the Nice referendum campaign, having spent about euro 500,000 to promote a Yes vote.
“We would be hugely positive about the Yes vote and the next stage of development. It’s not without its challenges, but the challenge is for Ireland to be competitive,” said IBEC’s director of European affairs, Maria Cronin. “There are new markets but no one is going to hand them to us on a plate. We are going to have to go and compete for them.”

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