Pathways to exporting | Eurozone | Sunday Times interview
On May 29, the Sunday Times interviewed Simon McKeever on exporting to the Eurozone.
- How important is the eurozone now in terms of Irish exports?
The value of Ireland’s membership of the European Union and the eurozone, in particular, is hard to quantify in terms of its importance to Irish exporters. In light of the continued uncertainties around Brexit and increased economic protectionism around the globe, the EU’s Single Market gives Irish exporting businesses easy, tariff and customs-free access to a market of more than 500 million consumers right at our doorstep.
Besides, the EU’s single rulebook on many standards and requirements in key topics around manufacturing, transportation, state aid and health and safety, ensure that Irish businesses manufacturing goods for export to other EU and EEA countries enjoy the vast benefits and cost-reductions from legal certainty, a level playing field and a wide variety of specialized Supply Chain partners.
Moreover, Ireland’s eurozone membership ensures that Irish businesses are now trading with 19 other European countries with zero risk of fluctuating currencies exchange rate risks and conversion costs. In addition, our eurozone membership provides Irish businesses with enhanced access to investment opportunities.
Despite its challenges throughout the past decade, the euro remains one of the world’s foremost trading currencies with a significant number of international business deals being denominated in it. Proposed moves by the European Union to seek a stronger international role for it and to establish the euro as the world’s second reserve currency will only further increase the attractiveness of the euro in years to come.
- What developments have you observed in terms of opportunity for Irish exporters following the Brexit vote?
The UK’s 2016 vote to leave the EU has had a number of immediate and long-term challenges for Irish exporters. From currency hedging, Supply Chain and transport management, to new market discovery and warehousing, Irish manufacturers have had to confront a number of significant tests since the UK’s Brexit vote.
However, Ireland’s membership of the eurozone meant that some Irish businesses were able to diversify their supply chains away from UK partners to new partners on the continent. Moreover, with the potential threat to exports to the UK following a dis-orderly Brexit, Irish businesses are looking to diversify their markets to the remaining EU-26. According to IEA research, Germany, France, and Italy are the most sought-after export markets after the US. The BeNeLux and Scandinavian countries equally offer opportunities for Irish exporters. The results of this market diversification should start to become more apparent in the next year.
- Why is the eurozone an attractive export market to consider, what are the benefits of being within the Single Market and the currency union?
See first question
- Can you comment on the importance of direct transport links, such as the ports in Ireland, and how these have developed?
As an open trading economy and island nation, Ireland’s exporting success is fundamentally dependent on it’s transportation links, especially its seaports when it comes to physical trade. With an estimated 150,000 vehicles and three million tonnes of goods transported between Ireland the continental EU via the UK landbridge annually according to the IMDO, the smooth functioning of Ireland’s ports is vital.
Even though we do not expect Brexit to cause the UK landbridge to immediately fall away, it is undisputed that there will be more friction to trade specifically through this route, should the UK leave the EU’s Customs Union. This will undoubtedly cause increased uncertainty for Supply Chains. There will be an increased demand for warehousing, higher associated costs from increased customs procedures as well as expected delays and increased freight transport management.
Direct transport links are therefore crucial to ensuring Irish exporting businesses continue to be able to compete in the face of potential frictions on the UK landbridge. There is an increasing demand for direct shipping routes, especially from Rosslare Europort, and shipping lines are responding. Today, there is enough capacity available to meet current demand on existing direct services from Dublin Port, Rosslare Europort and Cork to the Netherlands, Belgium and Spain. Should the need arise in the future, shipping lines are able to relatively quickly increase on this capacity.
- What challenges do Irish exporters face when first entering the eurozone and are they getting better at overcoming them?
Thanks to our full membership of the EU, exporting into any country in the EU’s Single Market is almost as easy as selling domestically. Because we are an EU member, Irish manufacturers already have full tariff and customs free access to and must comply with all the Single Market’s regulatory rules and standards.
There are the obvious logistical challenges with getting products further afield. Apart from having the resources required to expand abroad – people, finances and time to mention a few, companies need to figure out where there is a potential market for their products. The UK and Ireland share very similar customer requirements and preferences – one of the reasons it is a natural export market for us. When moving further afield into the EU other factors such as language and cultural barriers, labelling requirements and finding in-market partners need to also be considered.
Ultimately Ireland needs to diversify its export market portfolio. We have an over-dependence on the UK and the risks associated with Brexit have only underscored this. The EU is the best and most logical place to spread our export wings to, there is abundant opportunity there and the time to start the journey is now.