Speech by Mr Michael Ahern, T.D., Minister for Trade and Commerce at the Launch of the Export Ireland Survey and International Trade Finance Review 2006

7^th December, 2006, 12:15pm

Thank you Liam for your introduction.

Ladies and Gentlemen

I want to thank the Institute of International Trade of Ireland for inviting me here today to officially launch the Export Ireland Survey and International Trade Finance Review, 2006. As a small open market economy, exporting over 90% of Gross Domestic Product, our growth and well-being are heavily dependent on our trade performance. This report, now in its fourth year, is a very useful reference guide for Irish exporters.

It provides an up-to-date overview of export trends, with particular emphasis on the kind of issues Irish exporters are facing in the current global environment.

According to the latest figures available, the world economy is now growing at a rate of approximately 4% per annum, but is expected to slow to a more sustainable level of 3.1% over the full year. The US economy is growing at 3%, but there is increasing speculation that the US is entering a recession, and Japan’s economy, while still growing at 2%, is also uncertain. Elsewhere, in the Euro-zone, GDP is growing at just under 3% but growth is uneven. The larger European economies of Germany, France and Italy have growth rates ranging between zero to two percent, approximately, although there is some evidence that consumer demand is beginning to pick up in Germany.

Against that background, the latest figures from the Central Statistics Office suggest that Irish exports of merchandise goods are running at approximately three to four percent above 2005 levels and exports in services are continuing to grow dramatically. While the CSO is not yet in a position to provide data on exports of services for 2006, I note from the report that services exports are now about €44 billion euro, or 34% of total exports. In 2005, exports of merchandise goods increased by almost 5%, relative to 2004. These figures represent a continuous, incremental improvement in our export performance in recent years and are particularly impressive, given the continuing low growth of the major European economies.

The report bears this out. Despite oil increases, fiscal pressures and interest rate hikes exporters are now generally more positive in outlook, with increased export growth predicted in the short term. Exporters of services are even more optimistic.

However, labour and energy costs continue to be the main concerns and the report also shows that trade barriers still exist in EU countries.

Exporters have always been faced with the task of overcoming problems in order to be successful in international markets, and the problems faced by Irish exporters in today’s increasingly competitive international environment are still considerable. However, the report shows that there has been some easing of pressure for exporters in the area of trade finance and banking - especially in regard to foreign exchange management.

The report shows that there has been a very welcome move away from over-reliance on the pound Sterling and the US Dollar. The fact that the Euro has now become the predominant currency for Irish exporters, accounting for 77% of all export invoicing - including outside the Eurozone - is testament to the strength of the Euro and its acceptance as a stable currency on the world markets. It is also testament to the Government’s belief in, and commitment to, the Euro and our decision the Ireland should be a founding member of the Eurozone from its inception.

As well as being of interest to Irish exporters, the review being launched here today will also be of interest to the banking and insurance sector, whose services support companies trading internationally. Because these surveys have been going on for the past four years, they have developed into a particularly good system for monitoring the take up of trade finance products by the export sector. The general view among Irish exporters is that banking services have improved over the last year, with eighty-eight percent of respondents expressing satisfaction with their bank. However, it appears that the experience of exporters of services has not been so positive.

These are interesting and, in most cases, very welcome findings. I would exhort the banking and finance sector to study the findings closely, and to give consideration to making improvements to their services, where improvements appear to be necessary. Perhaps one such area, which the banking sector might consider, is the quality of facilities offered to exporters of services, currently the fastest growing sector in the economy, and growing at a faster rate even than that of merchandise goods.

I was pleased also to see from the report that an earlier prevalence of bad debt has led to changes in practices, whereby export trade on credit terms has been reduced to 64% compared to 75%, only a year ago. The virtual elimination of letters of credit in Europe has caused certain problems, however Irish exporters have responded by succeeding in reducing the credit period.

The success of exporters and the entire exporting effort is essential for the Irish economy to grow and prosper. We know that, as a Small Open Economy, our growth and well-being are heavily dependent on our trade performance. To date, we have shown that we are well able to “punch above our weight,” and we are one of the world’s leading exporters per capita. At the moment, we are the envy of many countries both in the developed and developing world.

As good as this may sound, there is no guarantee that we can maintain our current high status in international trade. With increasing globalisation, the world is becoming smaller, the competition is becoming stiffer and we must run harder and faster just to stand still. But, having said that, Irish exporters have shown in the past that they have the ability to succeed in international markets. I have no doubt that they will quickly adapt to the new conditions and continue to grow and prosper.

The surveys contained in the report provide a useful aid to Government in monitoring the level of acceptance of, and response to, state agency activity in support of the exporting sector. I was somewhat surprised to see from the report that the percentage of companies seeking market entry advice from Enterprise Ireland appears to be only 14%. Two thirds of exporters use their own marketing systems and sales force in targeting markets, and of course the Internet is also a valuable tool in compiling market intelligence.

However, Enterprise Ireland is available to advise Irish-owned companies wishing to enter new markets, and the agency has a range of supports and a network of contacts, worldwide, in which to assist these companies. The agency also runs a number of trade missions to, and participates in, trade fairs in various locations which, I know from personal experience, are of great value to companies intent on creating new market opportunities.

This report should be studied by the financial community, and all those engaged in the business of exporting goods and services from Ireland. It should also be read by policy makers, academics and media commentators alike, as a valuable commentary on the Irish exporting community and the current exporting climate.

I commend the Export Ireland Survey and International Trade Finance Review 2006. I would like to acknowledge the contribution of Irish Exporters Association C.E.O., John Whelan, who is the author of the report, the Institute of International Trade in Ireland and of course the report’s sponsors - Bank of Ireland and Intrium Justita. I believe that this important study will lead to improved trade practices and financial support services in the future.

So, without further ado – I hereby declare the Export Ireland Survey and International Trade Finance Review, 2006 - officially launched.

ENDS

TC 261