Address by Mr Tom Kitt T.D., Minister for Labour, Trade and Consumer Affairsto the Annual Dinner of the Irish Exporters Association on Friday Evening 18th May, 2001

Ladies and Gentlemen,

I am very pleased to be here this evening. It gives me the opportunity, as Trade Minister, to thank you for the contribution which you are making to the prosperity of Ireland.

It is clear that exports have been the key to our recent economic development. The speed at which we have grown into a trading nation is remarkable - in 2000, exports were more than double what they were only four years previously, in 1996. That remarkable pace of growth has seen us become the second most open economy in the OECD, in terms of trade, and when all the figures are calculated, we expect to have been one of the top twenty trading nations in the world in absolute terms in 2000, an extraordinary achievement for a small country.

In fact, last year’s figures are full of records - the highest ever level of exports, the highest ever trade surplus and, in fact, the highest ever level of imports. The importance of exporting in our economy is highlighted by the fact that exports of goods and services combined amount to about 90% of our GDP.

Without you, the exporters, we would not be in the healthy economic position which we are in today.

Of course, we have no room for complacency. Although we have made so much progress in the past decade, we must keep our focus to maintain and improve our position. This is particularly true when we are faced with market conditions which are less positive than they have been in the recent past.

I am thinking, of course, of the uncertainty in the US economy. The US has become our second largest trading partner, after the UK; exports last year amounted to over £11 billion ( € 13.96b ), higher than ever before. In fact, for a while last year it looked as if the US was going to become our number one export market - and this may yet happen over the next couple of years.

This fact has changed the nature of our economic relationship with the US. Whereas in the past, we worried about the possible effects a slow-down would have on US investment in Ireland, now we must also consider the effects on our exports. Many of the US multi-nationals based in Ireland now have substantial exports to the US and not only, as in the past, to the EMEA region. Irish companies are also much more active in the US than they have been in the past - one statistic which surprised many, including me, is that Irish investment in the US is now almost equal to US investment in Ireland.

For this reason, what’s going on in the US is of great interest to us. I said that there was uncertainty in the US economy, and for now at least that is the best word to use: uncertainty. Business confidence is low, but growth in the first quarter was higher than expected and consumer confidence is somewhere in the middle.

So far, I’m pleased to say, Irish exports seem not to have been badly affected. The message which we’re getting from the agencies which work with exporters is that order books remain relatively healthy and companies expect to maintain their business plans for this year. For now, all is more or less well, and we are quietly confident that we can weather this spell of uncertainty without serious consequences.

Another area at which we are looking closely is our trade with the EU and with our partners in the Eurozone in particular. Our trade levels with the Eurozone are proportionally lower than those of any of the other countries in the common currency. While this reflects, on the one hand, the vibrancy of our exports to other markets - Britain and the US in particular - it does raise some concerns about whether or not we are taking full advantage of the opportunities and advantages offered by trading in a market with which we share a single currency.

Let me recall some of those advantages - price transparency across the market, the absence of currency fluctuations and the difficulties they can cause and the absence of currency exchange costs. There is also a greater ease when it comes to developing partnerships and alliances with other companies in the common currency zone.

I believe that we can make significant advances in our trading relations with our Eurozone partners over the coming years. In fact, I believe that we must do so if we are to ensure our future prosperity. Our traditional markets have served us well, and I certainly do not think that they should be neglected. But the uncertainty in the US is perhaps a timely warning to us of the need to diversify our exports.

To this end, Enterprise Ireland last year launched a strategy which aims to assist Irish exporters to get into the markets of continental Europe. Called EurOpp 2003, it will see Enterprise Ireland open seven new incubator centres in key European cities. There will also be assistance to ensure an adequate supply of people with language and marketing training to help companies make the breakthrough into the European markets.

I hope to see many more of you over the coming years active in our European partners.

Of course, those of you who are also importers will realise that the benefits of monetary union apply also to sourcing materials from Eurozone countries.

The value of the access to European markets which we have had as members of the European Union cannot be doubted. And over the coming years, much will be added to that value as the Union expands to take on, eventually, over 100 million new potential customers.

In three weeks time, we will vote on the Nice Treaty, negotiated to pave the way for what will be the largest and most sustained expansion of the EU ever. It will symbolize what most of us, east and west, knew all along - that the countries of Europe are strongest and provide the best opportunities for their citizens when they work together.

I know that many of you will be looking at the trade possibilities in the new members, and I would encourage all of you to do so. Our exports to the ten applicants in central and eastern Europe have grown from under £135 million ( €171.42 million ) in 1994, to over £590 million ( € 749.15 million ) in 1999 and reached £935 million ( € 1.2 billion ) last year. There is potential for even more, as all of these countries maintain the reform and restructuring programmes which will lead, over time, to increases in incomes and stronger economies.

Perhaps the main issue of concern to us, however, is not so much in the spread or volume of our exports, but in the relatively low levels of export growth in indigenous Irish companies.

John Whelan, your Chief Executive, copied me with an interesting study on indigenous exports completed earlier this year, and John, I’m glad you did. The study suggests that indigenous exports grew by a low rate last year - a very low rate if currency fluctuations are taken into account.

In fact, this has been an ongoing concern for some time, even if the concern hasn’t been expressed as clearly as you’ve done with this paper.

For me, the issue was highlighted last year, when Forfás produced the first Irish report on Trade and Investment. This report noted that multi-national corporations were responsible for a substantial majority of export growth, and put export growth in indigenous companies at about 5% annually over the past five years or so, a figure which more or less coincides with what was in your paper.

It’s not easy to say why this is the case. Anecdotal evidence suggests that the booming domestic economy is a factor, as the prospect of working to capacity to fill domestic demand makes companies less enthusiastic about putting in the extra effort and resources to build an export market.

It has also been suggested that many Irish companies on the road to international success become the target of interest from larger multi-nationals, and are bought out.

Another reason which is sometimes cited is a shortage of people with the language and marketing skills needed to build export markets.

There may be other reasons - I look forward to receiving further reports from you which might help to explain this phenomenon, and of course we will be looking at some of these factors ourselves, not least through the next Trade and Investment Report which will be published this year. But in the meantime, I hope that we can persuade more Irish companies to engage in international markets.

I would say that engagement in international markets will become more and more the benchmark of a successful company. In the first place, because the Irish market is relatively small and in order to grow most companies will realise the need to export fairly early on in their development. And secondly because the world is a much more open place today that it was ten years ago, and that means that competition in all sectors is stronger than it has been. In order to grow and to maximise benefits, companies simply have to find and take advantage of the best market opportunities available to them.

In particular, those companies which are happy to take advantage of the booming Irish economy and neglect the international markets may face problems in the future, even those which are very successful now. It takes time and resources to build up an international clientele. The temptation to put off that expenditure of time and resources is great. But if you wait until the market in Ireland begins to flatten out, it will be too late. The time to put in the effort to build up your international network of contacts is when you have a strong base to build on.

The Government, through the promotional agencies, is keen to emphasise this point, and this work that you are doing will assist in this regard.

We are also active on the training front, to try to ensure a good supply of people with the necessary language and marketing skills to help companies to break into new markets.

Enterprise Ireland, as part of its development strategy, is putting in place a series of courses to do this. They will be running workshops on selling skills and will be assisting with access to language courses and cultural training.

The European Orientation Programme run by IBEC, recently expanded to cover Asia as well, is another example of how this lack of personnel with the requisite skills is being tackled.

And if I may return to a point I raised earlier, I hope that the advent of the Euro will also encourage more and more companies to look to international markets as some of the last barriers to trade - currency costs and the lack of pricing transparency - come down across the Eurozone.

But then, I suppose that I’ve been preaching to the converted here. As I said at the beginning, exports have been at the root of our economic success over the past decade, and that is due to the efforts which you, the companies, have put in.

Last year was a record year for trade, and I am sure that this year, uncertainties notwithstanding, will be an even better year.

Thank you.