asked the Minister for Industry and Commerce if he is aware of the considerable difficulties being experienced by exporters due to the present exchange rate of the Irish pound; the options available to him to deal with the problem; and if he will make a statement on the matter.
Ceisteanna — Questions. Oral Answers. - IR£ Exchange Rate.
20.
The Deputy is referring to the exchange rate of the Irish pound in the UK which, of course, is a function of the value of sterling.
Every exporter knows that when we joined the European Monetary System in 1979 we consciously broke the link with sterling. It was, therefore, foreseeable that sterling was free to fluctuate without limit in relation to all the currencies in the EMS. That situation demanded that exporters would constantly bear in mind the need to seek opportunities to diversify their markets. I am happy to record that many have done so and the growth in exports to EMS countries is testimony to this. In reply to an earlier question I have said that the figures are quite substantial and encouraging.
Exchange rate fluctuations are but one of a variety of elements of total costs such as those associated with wages, quality, marketing, delivery and after sales service. Proper business practice requires that the balance of these be constantly re-appraised by firms.
Not all fluctuations in the exchange rate of currencies outside the EMS are disadvantageous. In addition to considerable benefits reaped from the high value of the dollar the present exchange rate of sterling has enhanced the position of many Irish firms in that imports from the UK, such as basic raw materials and capital goods, which are significant, are now cheaper and help to reduce manufacturing costs.
Moreover, the Deputy will recognise that the competitive position of Irish exporters in the UK market vis-á-vis those in other EMS countries has not been eroded since the other EMS currencies have also strengthened against sterling.
It has long been my policy to impress upon Córas Tráchtála the need to ensure, as far as possible, that Irish exporters remain flexible in diversifying their markets so as to cope with such situations, advantageous or otherwise, as may present themselves.
Can the Minister say whether the Government have any specific exchange rate policy in so far as exporters are concerned? I thank him for the information he gave but I should like to know whether they have any specific export exchange policy.
The Government continually keep exchange rate policy under review. It would not be correct or proper for me to make any comment on the Government's intention in regard to exchange rate matters. They are always extremely confidential and that is the practice throughout the world. I have explained, in reply to the Deputy, that exchange fluctuations — particularly with the £ sterling in which I think the Deputy would be particularly interested — have both advantageous and disadvantageous effects, disadvantageous effects for exporters in so far as they will have immediate problems but they can buy forward. An increase in the value of sterling also has advantages, in that imports into this country for capital goods are also reduced. This would also have a knockon effect of rendering exports more economic and competitive in other markets. It is a complex area and there is no easy answer.
Is the Minister aware that 75 per cent of our exporters have indicated that their preferred exchange rate is approximately 85p or 86p? Would he agree that, if the exchange rate remains in advance of 90p for any considerable length of time, there is a grave danger that a considerable number of indigenous exporting firms will experience serious financial problems before the end of this summer?
I do not accept the thrust of the Deputy's question. In reply to an earlier question from Deputy Taylor I was quite explicit, in that I said I welcomed the diversification in relation to markets. For instance, it has been know for quite some time that the American dollar was going to weaken; to my knowledge that has been commented on for the last three years. There was never any guarantee that our exchange rate at, say, 80p vis-á-vis the £ sterling would be maintained. It is an extremely complex matter which, to a large measure, is outside the control of my Department. These exchange rate matters should more properly be addressed to the Department of Finance. It is an extremely complex area. There are advantages to the Irish economy overall and disadvantages overall in exchange rate movements. To simplify the matter, as the Deputy has done, does not do full justice to the question nor can I respond to him with a simple answer because one does not exist.
Is the Minister aware that there is talk of realignment within the EMS following the French elections next Sunday? Would he agree that if certain movements take place there, they will have a very big bearing on our exporters' continuing position to export successfully? Can the Minister state, on behalf of the Government, that they have a policy in regard to the exchange rate situation? Is the Minister aware that there are a large number of exporters here who will be placed in grave danger unless some action is taken, and some advice given by the Department?
I am fully aware of the international implications of exchange rate fluctuations. I am also aware of the rumours that there may be a realignment of the EMS currencies, as suggested, after the French elections. The Government will give full consideration to their position as and when the time arises. At this juncture it is a matter of speculation. I will not become involved in speculation in relation to currency or exchange rate policy. I am confident that the Government are fully aware of their responsibilities to Irish exporters and will continue to be so. I want to reiterate — the Deputy may not accept this — that exchange rate policy is extremely complex and that there is no simple answer, as the Deputy implies.