David Andrews
Question:2 Mr. Andrews asked the Minister for Tourism and Trade the steps, if any, he proposes to take to maintain the competitiveness of Irish exporters; and if he will make a statement on the matter. [8427/95]
Ceisteanna—Questions. Oral Answers. - Competitiveness of Irish Exporters.
David Andrews
Question:19 Mr. Andrews asked the Minister for Tourism and Trade the concerns, if any, he has that Ireland's trading position vis-á-vis her partners in the European Union will worsen in the course of 1995; and if he will make a statement on the matter. [8382/95]
I propose to take Questions Nos. 2 and 19 together.
I constantly strive to ensure that Government macroeconomic policy contributes to the competitiveness of Irish exporters. The clearest manifestation of this can be seen in the Governments successful and continuing control of inflation.
Successive pay agreements, negotiated with the social partners, are assisting wage competitiveness in this country. The continuation of this approach to wage bargaining will ensure that over the period of the Programme for Competitiveness and Work, 1994-96, wage increases will be kept to an average of 2.5 per cent per annum, broadly in line with expectations for inflation.
Taxation changes announced in this year's budget will further reinforce the competitiveness of Irish exporters — particularly those exporters dependent on the UK, most of whom are characterised by high labour intensity. Reductions in employees' taxes and PRSI combined with the increase in the income threshold for the lower rate of employer's PRSI will assist Irish firms in maintaining an edge in foreign and domestic markets.
Planned investment in improved infrastructure under the Community Support Framework, 1994-99, in areas such as ports, roads, rail, telecommunications etc. is focused on improving competitiveness and expanding the capacity of the internationally traded sectors of the Irish economy.
Irish competitiveness is and will continue to be the result of sound policy built with patience and consistency over time. As a result, we achieved the strong export growth and a record trade surplus last year when total exports reached £22.4 billion, an increase of 14 per cent.
Export growth in 1995 will be facilitated by a range of market supports to be provided by An Bord Tráchtála which aim to maintain and further increase our market share in Britain, accelerate our export growth in continental Europe and continue to exploit niche market opportunities in other world markets.
I am confident that both our trading position and our trading prospects in Europe in 1995 are good.
Economic conditions in Europe are better than they have been for many years with all economies, and Germany in particular, showing strong growth. Other positive factors which should facilitate an improved export performance in Europe in 1995 include: (1) an enlarged European Union giving Irish exporters greater access to affluent markets in Austria, Sweden and Finland; (2) increased outsourcing by European industry offering valuable new potential for Irish suppliers; and (3) benefits to trade from the impact of the GATT Agreement.
I have initiated with An Bord Tráchtála an intensification of the drive to seize the new business opportunities in continental Europe. "Opportunity Europe" in 1995 will involve a dual strategy of promoting the fullest support to the 800 plus Irish companies already selling in continental Europe and, at the same time, encouraging Irish exporters who have been successful in Britain to expand into other European markets. I have complaints about barriers to trade within the EU investigated, where evidence is available, through either EU or bilateral channels.
The Minister failed to address a contemporary problem which is now confronting exporters. In recent days, serious concerns have been expressed about the threat posed to the competitiveness of exporters by the current high level of the punt. The strength of the punt is a matter of extreme concern and exporters, particularly in the food and clothing sectors, are under pressure and may be forced to lay off workers if the crisis continues. In asking this question I am in no way attempting to undermine our currency. We must take a responsible all-party view. Despite the Minister's rosy response about what is and is not being done on the export front, there is a central crisis that the Minister has missed in his response and which is pertinent today. At the time of the last currency crisis the market development fund was introduced. I will be calling on the Minister, if the Ceann Comhairle is charitable enough to allow my private notice question to be responded to, to give details of the plans that are in place for the reintroduction of the fund for exposed sectors if this crisis continues.
Deputy Andrew's question referred to the competitiveness of Irish exports and the steps I, as Minister, am taking to maintain that. The answer is as I have given. The Deputy rightly raised the concern of exporters about the currency position. A private notice question has been tabled and I understand the Minister for Finance will be dealing with it, as the Government has decided that there should be a solid cohesive line on questions about the currency fluctuations. The position now is very different from that which obtained in 1992 when there was a rapid appreciation of the punt against sterling and a huge rise in interest rates.
With great respect, the Minister should be more fulsome in his response. I appreciate that it is a matter of national concern and that the answer to the question might be more appropriately given by the Minister for Finance, but surely the Minister for Trade and Tourism has a responsibility too; he is, after all, the director general of the whole area of exports and competitiveness. Is the Minister aware that if the punt rises beyond 104p to the pound sterling it will be the first time since the 18th century that this occurred: this is a matter of economic history. Would it not be a tragedy if we went beyond that? If it rises to 105p we would be in crisis, and I do not want to talk up a crisis but to talk it down.
If Deputy Andrews wishes me to respond more fully in respect of the market development fund, I will. It was introduced in 1992 and its aim was to assist Irish exporters to cope with the unique and exceptional currency rate position which then prevailed, where there was a rapid appreciation of the IR£ against sterling; over the space of three weeks the IR£ appreciated by up to 10 per cent. There was a resultant hike in short term money rates, including overnight rates, of up to 100 per cent. These impacted on interest rates generally, including mortgage rates.
Following the establishment of the market development fund the IR£ was devalued in January 1993 when there was a more gradual appreciation of the IR£ against sterling. It averaged 1 per cent for each quarter over the past 18 months. Stability in interest rates gave exporters room to adapt and plan to cope with fluctuating sterling values. The most recent appreciation against sterling has not been accompanied by associated interest rate movement. Interest rates are still at historically low levels. The one month inter bank lending rate is now 6.56 per cent as against 6.75 per cent at the end of March. In general, where rates in Ireland are higher than in the United Kingdom the difference is marginal.
Against the Deutsche Mark the IR£ depreciated by 10 per cent since mid-1993. Indigenous exports to Germany, including food, were worth £391 million in 1993. Germany is the biggest overseas market for the sector after the United Kingdom. Total exports for 1994 were worth £22.4 billion. The breakdown is as follows: the United Kingdom, 27 per cent; the rest of the European Union, 40 per cent; North America, 10 per cent and the rest of the world, 23 per cent.
Taking some of these and other factors into account An Bord Tráchtála ran seven regional seminars for exporters involving professional treasurers, case studies of exports illustrating the tangible benefits, and representatives from local banks and financial service companies in terms of treasury management. The Irish Exporters Association which I met recently subsequently appointed a firm, Finance and Treasury International, to act as an adviser to its members with a free initial consultation so that they could plan forward buying and so on. The objective was to encourage small firms in particular to make greater use of financial mechanisms in currency matters. This was singularly successful. I am aware that a number of companies are experiencing difficulties. The Government and my Department are keeping a close eye on this matter.
Will the Minister——
I am sorry, Deputy but, as the House can observe, almost all the time available for dealing with priority questions has been utilised in dealing with these two questions. I am now calling Question No. 3.