Brendan Smith
Question:8 Mr. B. Smith asked the Minister for Tourism and Trade the plans, if any, he has to develop a specific trade strategy to help exporters cope with changes under EMU [2501/97]
Other Questions. - EMU Effect on Exports.
Séamus Hughes
Question:44 Mr. Hughes asked the Minister for Tourism and Trade if he will outline the effect of EMU on Irish exports within the currency framework and with other trading partners. [2500/97]
I propose to answer Questions Nos. 8 and 44 together.
It is my belief that the overall effect of EMU on Irish exports will be on balance, be positive. That view is supported by the ESRI study on the economic implications of EMU for Ireland which is the most comprehensive study of its kind to date on the subject. The expected advantages of EMU from an exporter's perspective include the elimination of transaction costs and exchange rate risk for trade among participating member states; low and fairly uniform interest rates among participating member states; promotion of price stability, sound public finances and sustained low inflation in participating member states; increased attractiveness of participating member states to foreign investment; and a voice in decisions about the economic and the single monetary policy of the union.
At the national level the critical strategies and preparations for EMU are aimed at ensuring that the convergence criteria for entry to EMU continue to be met. These include a reduction in the debt/GDP ratio and keeping interest and inflation rates within the relevant criteria. The implications of EMU are being taken fully into account in the formulation of policy and in controlling public finances. This month's budget took full account of the need to keep the debt/GDP ratio on a progressive downward path and the Government has adopted a strategy that will keep our general Government deficit at no more than half of the three per cent Maastricht ceiling by 1999.
At the level of the exporter, I and my colleagues, the Minister for Finance and the Minister for Enterprise and Employment, recently launched the EMU business awareness campaign which is aimed at small and medium enterprises and is designed to ensure that Irish business is fully prepared to meet the practical challenges of EMU. This campaign is being co-ordinated by Forfás with full participation by An Bord Tráchtála (ABT), the national trade board. Forfás has commissioned a study to examine how companies can best plan for EMU.
ABT, who have responsibility for export promotion activities, plan to publish a EMU guide for exporters in the next four to five weeks, which will deal specifically with the marketing challenges and opportunities presented by EMU. ABT is also stepping up its export development programme in Europe in 1997 and will invest a record £10 million in support of Irish exporters in continental markets as part of a medium-term strategy to increase the proportion of indigenous exports going to these markets by 1999.
As the Minister is aware, the economy of my constituency is hugely dependent on the agriculture industry and in particular on revenue earned through food exports. We have to bear in mind that the food industry, by its nature, is competitive and operates on very small margins. Will the Minister assure me that adequate preparation and contingency measures will be in place to counter the difficulties that will arise if Britain remains outside the EMU and the Irish pound appreciates within EMU, bearing in mind our dependency on the British market particularly as regards the export of food products?
As the Deputy is probably aware, food exports are a matter for An Bord Bia and are not in the remit of the Minister for Tourism and Trade or ABT. That change took effect some time ago.
The overall conclusion of the ESRI study on the economic implications of EMU on Ireland is that, assuming prudent policies, EMU membership will be favourable for Ireland and that will hold whether or not the UK joins. If the UK remains outside, the ESRI say that the balance of quantified effects is favourable, though only to the extent of about 0.4 per cent of GNP and 10,000 jobs. This Ministry and the trade board deal with non-food indigenous exports. I am sure if the Deputy tables a question to the Minister for Agriculture, Food and Forestry, or obtains the information directly from An Bord Bia, he will get the projections for food exports.
Are the financial institutions, who obviously have a huge interest in EMU, involved in the strategy Forfás is preparing?
I am sure that consultation has taken place. The Forfás promotion is quite detailed and is aimed specifically at small and medium sized enterprises because these are the ones on which any economy is built. The promotion will go on the road in the next couple of weeks and I assume Forfás has taken the normal projections and consultations with financial institutions into account. It is geared specifically at small and medium enterprises, to ensure that Irish business is fully aware of and prepared to meet, these practical challenges.
I know that having established the National Trade Council, which comprises people from exporting companies and other professionals, there is a great lack of awareness of this impending challenge within Irish business, particularly in small businesses. It is important that this awareness campaign be seen to be a success and that everybody participates in it. I am sure the financial institution's projections have been taken into account.
The Minister's initial reply to my question relied heavily on the improved health of the economy since 1987 and the fact that progress made as regards public finances and debts has made it possible for us to aspire to membership of the EMU. The financial institutions play a major role in our society and economy and I would have thought they would have a bigger part to play than just being part of the consultative process when a national EMU policy is being prepared.
The Minister of Finance will give the Deputy a detailed account of the involvement of the financial institutions, the Central Bank and the Department of Finance in preparing this. He can presume that the prudent management of the country's economy is in safe hands. It is specifically for that reason that we are leaders in terms of the Maastricht criteria for entry into European Monetary Union.
The Minister may be aware of severe difficulties facing some firms who rely on the export market to France and Germany, because of the appreciation of the Irish pound. I appeal to the Minister to do everything possible to assist those individual exporters, two of whom are in my constituency.
I have received a number of letters from employers and exporters in the Deputy's constituency who have great difficulty in finding people to work in their plants even while they are paying above the rates. They have trawled counties north and south of the Border looking for employees and have been unable to find them. There are difficulties exporting to Britain and beyond. I am aware of difficulties in exporting to France and Germany because of currency fluctuations with the franc and deutschmark. We had this problem in Britain last year. On that occasion we were able to set up a task force to help companies through ABT. I have invited those with difficulties in the French and German markets to contact me and, in so far as we can, we will offer the same type of assistance through ABT.
I am sure the Minister is aware of a survey conducted by the chambers of commerce of Ireland which showed that most business people look forward with some confidence to EMU. It also discovered, however, that few of them had made any attempt to find out what would be the implications of EMU for their businesses. While I strongly welcome the Forfás initiative and the ABT campaign, perhaps it would be better if they were directed at particular types of company to ensure their future in the marketplace as well as their concerns are looked after. Deputy Smith's questioning has pointed up an enormous structural weakness between the Department of Finance, ABT under the Minister, Deputy Kenny, and An Bord Bia under the Minister for Agriculture, Food and Forestry. A much more concerted and co-ordinated approach is required for such a fundamental question.
I deal with ABT and other semi-state bodies under the aegis of the Department of Tourism and Trade. ABT deals with indigenous non-food exporters. It is in that context that I replied to Deputy Smith. This campaign is quite detailed and includes the distribution to businesses of information packs which can be regularly updated, as well as advice on how companies should best prepare for EMU, and information meetings. I strongly suggest that chambers of commerce and others involved in business, whether exporting or not, should consider attending the meetings arranged by Forfás on behalf of the Government. They should raise questions relating to their business and the concerns they have.
With the Trade Council we found there was a great lack of awareness among business people concerning the mechanics of how EMU will operate, and the practical challenges involved. It is in everybody's interest, and specifically in our own economic interest, that exporters should be fully aware of, and competent to deal with that challenge. I hope they take it up because it is for their benefit and ultimately for the country's.