Address by Mr. Tom Kitt, T.D., Minister for Labour, Trade and Consumer Affairs at the ATGWU Seminar

Manufacturing matters in Ireland - North and South

on Wednesday 12^th December 2001 at 9.35am.

Economic development in the Irish Republic

Good morning ladies and gentlemen. As Minister with responsibility for Labour, Trade and Consumer Affairs in the Irish Government, it gives me great pleasure to address this first ever trade union seminar on the manufacturing industry, North and South. I commend your union for taking the initiative in arranging this seminar at the time when manufacturing industry, in common with other sectors of the economy has been confronted with unprecedented challenges in recent times. I will return to the challenges posed by the current economic difficulties. However, it is important at this forum to briefly reflect on the major achievements of the last decade.

Economic Developments in the 1990s

The Irish economy enjoyed a period of substantial and sustained employment growth during the 1990's. Indeed, since 1990, employment has increased by over 600,000. This increase represents more than half of the total of 1.16 million employed at the beginning of the decade.

Most of this record increase in employment occurred in the latter half of the decade as companies exhausted the spare capacity they had acquired during the recession of the late 1980's. In parallel to this increase in employment we successfully tackled the scourge of unemployment to reduce it to its lowest level since modern statistics commenced.

Ireland has attracted much attention, as one of the most vibrant and impressive economies in the world, with a performance that is unmatched among industrialised countries. During the 1990's, Ireland outperformed all other European economies, with a growth rate of three times the EU average. Between 1994 and 1999, the Irish economy grew at an annual average rate of 8.5% as compared with a EU average of 2.3%

This substantial growth would not have taken place without the appropriate economic factors being in place. The Government worked hard to improve Ireland's economic situation. The pillars supporting this impressive economic performance have been a partnership approach to managing the economy that takes account of the views of Government, industry, employers and trade unions, which has manifested itself in five successive national agreements since 1987, the current agreement being the Programme for Prosperity and Fairness; a tax regime which supports enterprise and employment; the promotion of a stable macroeconomic environment; a practical approach to the promotion of Ireland as a suitable business environment and business partner; and the availability of a highly educated workforce. There is no doubt that these policies have secured dividends for both our economic and social well-being.

Current Economic Conditions

It is clear that even prior to the tragic events of September 11, the major economies of the world, that is the US, EU and Japan, had already experienced a sharp downturn in activity.

The downturn in global economic conditions is taking its toll on our economic performance. There is a dramatically increased uncertainty in the business environment. This has come at the very time when we are attempting to grapple with the problems of our recent success - a tight labour market, rising costs and infrastructure under pressure.

As we have an open economy heavily reliant on trade and foreign investment, particularly from the US, exports and foreign direct investment are the areas of the economy most likely to be affected by the events of September 11. The US is a very important destination for Irish exports, accounting for almost 18% of the total. Foreign direct investment from the US has been one of the main driving forces behind the record growth rates of recent years. Job losses had already been increasing prior to September 11 and Ireland was already facing a reduction in foreign direct investment and an adverse impact on the Information Communications Technology (ICT) sector due to the slowdown in the US earlier in the year.

The events of September 11 had a major and direct impact in three specific sectors: Manufacturing and Trade; Tourism; and the Airline Industry. Figures published in the current Quarterly National Household Survey indicate that the economic slowdown in Ireland is already affecting the labour market, with unemployment currently standing at 79,500. This is an increase of 1,800 on this time last year and represents the first year-on-year increase since April 1996. The figures also represent an increase of 14,100 over the previous quarter. Unemployment is still remarkably low at 4.3% and the ESRI forecasts that the annual average will rise only to 4.2% next year compared with 3.8% for 2001.

The number of redundancies notified in the period January - October 2001 was some 14,000 compared to around 10,000 for the same period in the previous year. Most of the notified redundancies were accounted for by the foreign owned sector. While job creation in the foreign owned sector is expected to increase by some 12,000, the expectation is that this will be offset by an equivalent number of job losses.

The ICT sector has clearly endured a difficult period with over 6,500 job losses announced this year alone. This has been an important sector for Ireland, generating one third of Irish exports and accounting for almost 5% of employment. Some 40% of US green-field inward investment in European electronics has come to Ireland since the 1980's. While the short-term prospects for the sector in Ireland will depend on the duration and the severity of the downturn, nonetheless the key world class ICT companies with significant activities in Ireland continue to express confidence in the country, its positive business environment and the flexibility with which they can operate here.

In relation to indigenous enterprise few companies to date, aside from those in the technology and giftware sectors, have been directly impacted by the sharp slowdown in the US import demand over the first nine months of the year. This reflects the fact that the UK market is of greater concern to most indigenous firms and the prospects for that market remain good.

While the trade surplus for January - August 2001 totalled nearly £18.4 billion; we continue to be conscious that rates of export growth have been moderating as the year progresses reflecting the slowdown in many of our overseas markets, especially the United States, Japan and Germany. Our largest market, the Eurozone, and our second largest, the UK, are expected to continue to grow for the remainder of this year according to recent OECD forecasts. With well over half of our exports destined for these markets, this should help export growth. In addition, the rapid growth of exports to non-EU markets shows how flexible our exporting sector is in seeking and finding new opportunities abroad.

Clearly the prospects for 2002 remain highly uncertain given prevailing economic conditions. Most commentators are predicting a relatively short duration downturn and are foreseeing a pick-up by around the middle of next year. The fundamentals of our economy remain sound, unemployment still remains low, Government finances are sound and we have a good enterprise base. We also have much better structures in place to ensure that those who are affected by unemployment are quickly supported back into employment or into training supports, which will enhance their employability when the up-turn comes.

Our development agencies, the IDA and Enterprise Ireland in particular, are working closely with their client companies to help them through this difficult period. On the inward investment front, IDA's pipeline of projects is somewhat healthier than the circumstances might otherwise suggest. Employment growth continues in some companies and sectors and IDA believes that it will end 2001 with as many people employed in IDA supported companies as at the end of 2000. This means that the exceptional gains of over 16,000 jobs in overseas companies last year will be have been retained.

Enterprise Ireland is intensifying its contact with client companies to help resolve problems and avoid closures and in particular is concentrating its efforts on overseas marketing to help client companies increase exports and diversify markets. In light of the current economic conditions, Enterprise Ireland has however reduced its net job creation forecasts from 3,000 to 1,000.

The competitiveness agenda must become the central focus of agreed national policy, in the context of the changed economic environment. The drivers of competitiveness that have brought us success in the past are not necessarily those that will bring similar success in the future. Low business costs, in terms of wages and taxation, have been an important part of the complex of factors that attracted and maintained investment in Ireland in the past. Our wage and unit costs are now rising rapidly, as are the prices of other business inputs. Other countries in Europe and elsewhere may well be able to offer a better combination of costs, with lower wages and zero taxation in some cases. With reduced scope for competition in terms of costs, though this area remains important, the overall strategy for the Irish economy must now be to continue to move to higher value-added, knowledge-based activities. But for this to happen, skills and research capabilities, and the ability to adapt and use technology in enterprise, must be developed. Growing competitive advantage in manufacturing will continue to be dependent on having people with the necessary skills.

What is required now is a practical response. Efforts must be made to control and moderate costs, to improve productivity, to invest in education, skills, and research and development, to improve public infrastructure, to modernise utilities, and to enhance the functioning of markets. Initiatives in the research area and the broadband developments driven by Government will be of special value.

Similarly, the range of skills initiatives has been highly effective in persuading potential investors that Ireland can cater better for prospective needs than most other countries. The implementation of infrastructural investments under the NDP over the next few years will also be critical. The continued reduction of the standard rate of corporation tax and its assured long-term nature will be a very significant contributor to the attractiveness of Ireland to many new investors in the period ahead.

In the summary therefore the focus must be on internal policy responses so that when the international economy does recover, our economy is positioned to benefit fully. We therefore need to avoid any weakening of competitiveness on the cost front, to sustain business and investor confidence through continued prudent management of the public finances and also to prioritise spending towards programmes which improve the long-term capacity of the economy. All in all, there is every reason to remain confident that Ireland can see through this difficult period and, more particularly, be well placed competitively to tap into the up-turn as it takes root. The budget delivered by the Minister for Finance, Mr. Charlie McCreevy T.D., is designed to secure the basis for our continued prosperity in the years ahead.

North-South Co-operation on Trade and Business Development

Given the proximity of this particular venue to the border and the very welcome all-island character to participation in this Seminar, I thought it appropriate to make a few remarks about the all-island dimension to the way in which we direct and develop the two economies on the island. Taken together our two economies face common difficulties and challenges against the background of the current negative developments in the global economy to which I have already referred. At the same time, however, new, exciting and unprecedented opportunities for expanded trade and economic co-operation within our island economy as a whole are ever opening up before us as we avail of the favourable conditions for business deriving form the Good Friday Agreement and as we overcome the chill factor which, for so long, had dominated our island history.

Just a few short miles up the road from where you are now sitting, InterTradeIreland is headquartered in its new state-of-the-art premises at the Old Gasworks site in Newry. InterTradeIreland is the Trade and Business Development Implementation Body established under the Good Friday Agreement in order to promote and develop cross-border trade and economic co-operation. In its short life to date - having come into being in December 1999 - InterTradeIreland has indeed made its presence felt and has had a significant impact in terms of the range of activities and services it is now delivering. Much of its initial operations focussed on identifying the many barriers which have hindered North/South trade and on establishing relationships of trust between business operators and representative organisations across the two jurisdictions on the island -in order to create the conditions in which the vast potential for expanded all-island economic co-operation and enhanced prosperity could be transformed into reality.

InterTradeIreland has progressed to a situation where it is now poised to deliver, in 2002 and beyond, a range of ambitious services, programmes and road shows tailored to the needs and opportunities of our island economy. All sections of the business community North and South - whether it is manufacturing industry, service providers or the craft sector - stand to benefit from these activities. In pursuing its all-island trade development agenda let me assure you that InterTradeIreland is first and foremost a listening and people-orientated agency, which recognises the role that workers play through their skill, tenacity and creativity in the workplace. It would indeed make good sense for trade unions, through the appropriate representative channels, to open and maintain an active dialogue with InterTradeIreland in order to ensure that the best interests of workers, North and South, are duly taken into account in the design and implementation of that organisation's programme of operational activities.

In tapping into the potential that exists for increased trade and business development between North and South, we will secure increased prosperity and employment on both sides of the border.

Partnership in the Workplace

The workplace is the focal point for the change that is being experienced as a result of unprecedented economic growth, a changing labour market, a changing workforce and changing expectations and preferences on the part of workers. The increasing participation of women in the workforce, the labour market situation, family responsibilities and quality of life issues are all factors that are driving change in the workplace and need to be taken into account in maintaining optimum operational efficiency, protecting and expanding market share and creating jobs.

In responding to these changing times in the workplace, I believe there is a dual imperative: firstly, we must sustain social partnership at national level; and secondly, employers and employees, including employee representatives, need to seriously take ownership of partnership in their workplaces and, agree and put in place a mechanism to guide and manage the process of change that is affecting the workplace.

Social partnership at national level has been a key element in the transformation of our economic and social fortunes since 1987 and is also the key to further economic progress in the future. We also need to expand the present structure of co-operation and partnership at national level to develop partnership at enterprise level. I am convinced that partnership in the workplace can produce real gains for workers and management alike and needs to be exploited to its maximum potential. This is not easy to achieve but I have no doubt it is realistic and deserves our collective effort to ensure that the benefits are secured

For example in enterprises where working times may not be as family-friendly as we all would like, there is a need for workers and employers to explore available possibilities with a view to identifying mutually agreeable and realistic solutions to that situation. Equally there is a need to explore available options for staff flexibility that maintain operational efficiency, enable a swift response to any adverse changes in market conditions and contribute to the overall competitive advantage of the enterprise. A partnership approach in the workplace will facilitate the examination of these needs and help to identify relevant solutions.

The National Centre for Partnership and Performance, which has been established under the Programme for Prosperity and Fairness, and launched by An Taoiseach Bertie Ahern T.D., will be proactive in showing that partnership really can make a difference and it is an important resource to assist trade unions and employers.

An important goal in organisational change must be the development of family-friendly policies. The National Framework Committee for the Development of Family Friendly Policies at the Level of the Enterprise, which is chaired by my Department is mandated to develop family-friendly working arrangements that facilitate workers to reconcile work and family life and which also contribute to the effective and efficient operation of the workplace.

In implementing its mandate the National Framework Committee recently advertised for applications for funding from organisations and trade unions that wish to develop new and more family-friendly flexible working arrangements.

Conclusion

Today's seminar is an ideal opportunity for you to stock take on the issues that currently affect manufacturing industry and those who work in the industry, North and South. Your union and its members play a pivotal role in how the industry can address the challenges it is experiencing. I am confident that your union, as evidenced by today's seminar, will continue to be committed to ensuring its future successful development, while at the same time protecting the interest of your members.

I would like to thank your union for the opportunity to be here at this important cross-border seminar and I am sure that the experiences of speakers and delegates from North and South of the island will stimulate a lively and informative debate and exchange of views.

Thank you.