I am very pleased, as Minister for Trade and Marketing, to have this opportunity to speak in this House on the Government's 1991 budget. I intend to frame my remarks in the context of my specific area of responsibility, namely, Ireland's export performance and prospects and how this budget and Government policy in general are assisting this vital economic activity.
How well have Irish exports performed in 1990? Better, I submit, than the statistics at first glance would indicate. The export figures to November 1990 show that the value of overseas sales in the first 11 months of the year was running at £13.2 billion. This is some £200 million below the level for the same period in 1989. The likelihood is that the 12 month figures will show a similar outcome. This apparent disimprovement in revenue from sales abroad, however, masks what was still a very good performance by Irish exporters. The volume, as distinct from the value, of our exports is estimated to have risen by 6 per cent last year with the drop in value being attributed to price deflation on a similar level. Manufacturing exports, with a volume growth of about 9 per cent in 1990 have grown at a faster rate than total exports. When one considers that this volume increase was achieved against a disimproving world trading climate, especially in the second half of 1990, there is more comfort than sorrow for us in the 1990 outturn.
Preliminary CTT surveys indicate that their 1,200 indigenous companies will show a small increase of 3 per cent in the value of their exports in 1990. The sectors which performed best were clothing, footwear, electronics and added value food products.
Before leaving the question of our export performance in 1990, it is worth making the point that there is a tendency in some circles to become complacent about export achievements and to expect consistent growth year after year. The harsh fact of economic life is that many export orders won in 1989 had to be fought for and won again in 1990 and the battle will continue this year. Buyers abroad will only continue to buy Irish goods if the service, quality and price are maintained at a high level.
We do not have an automatic God given right to have our products bought by customers abroad. Breaking into new markets is, of course, very difficult, but staying in and competing in those markets is also a major challenge — a challenge to which Irish business is responding very well.
Looking ahead to the prospects for 1991, there are many factors, some positive and some negative, which will impact strongly on our export performance this year. I will briefly touch on these in my remarks. Overall, however, a growth rate in the volume of industrial exports of around 4.5 per cent is anticipated for 1991.
With all our knowledge, all our sophistication and all our history, the realisation that a war such as the Gulf war can still happen is horrific and chilling. The human tragedy of war and the damage done to thousands of lives is, of course, our greatest concern and the over-powering reason we want to see the conflict ended as soon as possible. We must all share in the deep sorrow at the loss of so many lives and the tragedies which are occurring daily. The war will have economic impacts on us and it is only prudent that we consider them. Bearing in mind the sensitivity and the sadness of this conflict we must consider what is happening in my area of responsibility.
In terms of trade, the Gulf war could have serious consequences for Ireland particularly if it is of long duration. However, while we could lose our immediate export markets in that region, it is important to put this in context. Our total exports to countries in the Gulf region in 1989 amounted to £244 million; this was less than 2 per cent of our total exports.
There is no doubt that some Irish companies would be affected by the loss of these markets. However, of much more concern from an economic viewpoint would be a conflict which might affect world trade generally.
Because we have an open economy which is dependent on exports, a general deterioration in the world's trading environment would have to be viewed from our point of view with deep concern. Apart from any effect on our own economy, a downturn in the economies of our major trading partners would have to be of concern. Just as I continually express fears for Ireland in the event of a breakdown of the GATT negotiations, my fears in terms of our trading capability focus on the effects which this crisis will have on the world economy rather than on any immediate loss of markets in that region.
Most experts are agreed that this war should not cause the same havoc as was experienced in the aftermath of the 1973 and 1979 oil price rises. What can happen is that war will exacerbate trends already showing in the world economy. Developing nations and those relying heavily on oil imports would suffer the most. African, Asian and South American oil producing States could gain, depending on prices and the desire of western countries to seek alternative supplies. This could open up new markets for Ireland. However, in the context of our overall trade, we rely heavily on the strong western economies. Over 90 per cent of our exports go to Europe and North America. These are the countries most capable of withstanding economic shocks and recovering quickest.
Another significant negative factor is the increasingly difficult market conditions in the UK which is experiencing high inflation, high interest rates and low business confidence. The UK's entry to the exchange rate mechanism together with our lower rate of inflation will help to remove some of the price volatility in our trade there and provides a competitive boost for Irish exporters. Similarly, the US economy has been slowing considerably and together these markets constitute some 40 per cent of our exports. All economic forecasts for the UK and US markets predict that they will perform worse in 1991 than in 1990 and that the level of growth in imports, if indeed there is growth, will be at a lower level than in 1990.
On the positive side is the continuing improvement in our export penetration of major mainland European markets. In the 11 months to November 1990, our exports to Germany and France showed increases in value of 3.5 and 4.5 per cent, respectively.
Last year, 1990, has also seen very good export performances to smaller markets on the rim of the Community, with exports to Portugal up 26 per cent, Greece up 20 per cent and Denmark up 15 per cent. While the value of these markets is small compared to our main trading partners, the evidence that Irish exports are diversifying is encouraging. The expectations are that all main European markets will continue to show strong, if reduced, growth in demand in 1991.
One factor which is clearly providing a positive practical and psychological impulse to increased trade with our mainland EC partners is the steady pace at which the Single European Market is developing. Over 68 per cent of the Internal Market programme of measures has now been agreed. Progress has been most notable in areas such as the opening up of public procurement, insurance, merger control and air transport.
Harmonisation has been slower in the area of indirect taxation but I expect that significant progress will be made on this and other areas still requiring agreement during 1991. In this budget, we have taken another step towards achieving common rates with other members states.
I am heartened to see that companies all over the country, both large and small, are now looking forward to the completion of the Single Market — any earlier apprehension on the part of some has given way to an air of enthusiasm. Indeed, to a large extent the Single Market is already a reality and I would like to commend Irish companies for the way they have taken up the challenge.
I am aware that many have reviewed and adapted their marketing strategy and many others are in the process of doing so. There is an awareness now that the opportunities presented far outweigh the potential threats which may exist.
As a result of the Single Market, Europe as a whole will be the major economic growth centre of the nineties with GNP rates consistently outstripping those of the United States. A recent independent analysis of the countries within Europe which will gain most in the Europe of the nineties lists Ireland at number five. Only Germany, Austria, Switzerland and the Netherlands are rated ahead of us.
Another product of the Community's drive towards greater integration is the increased interest from EFTA countries in consolidating and broadening its relations with the Community. Since June 1990, the EC and EFTA have been engaged in negotiations to create between them a European economic area throughout which goods, services, capital and labour would move freely.
I would like to refer briefly, a Cheann Comhairle, to the General Agreement on Tariffs and Trade. The Uruguay Round of trade negotiations was due to conclude at a ministerial meeting at which I participated, together with the Minister for Industry and Commerce and the Minister for Agriculture and Food, in December last. As Deputies will know, the negotiations had to be suspended because some participants were seeking concessions from the Community on agriculture which were completely unrealistic.
A successful conclusion to these negotiations is very important for Ireland. It will result in greater access for Irish exporters to markets in third countries. It will also strengthen the authority of the GATT. This will mean that trade can carry on in a secure environment without the danger of unilateral measures, such as those which the US might have taken before Christmas against a number of EC exports, including cream liquers and mineral waters. In a more general way, a good result is even more desirable because of all the uncertainties which now threaten the world economy. It would go some way to reassuring businessmen and investors.
Talks have begun again at official level. It is my hope that it will be possible to find a solution in agriculture which will be within the terms agreed by the Community's Ministers for Trade and Agriculture last November. It should also be possible to find solutions in other sectors of the negotiations. This will allow the negotiations to be brought to a successful conclusion, to the benefit of investors and exporters.
These then are the external factors which can give us confidence in a strong export performance this year. However, probably the most important factor favouring Irish exporters at present is the maintenance of the secure and increasingly competitive climate for business at home.
That is why this budget, following on the negotiation of the Programme for Economic and Social Progress, has set out to sustain the economic and social recovery which the country has enjoyed since 1987. This budget will keep the public finances under tight control; this budget will help to maintain our inflation rate at the second lowest level in the EC; and as the Minister for Finance said in his speech, this budget will form a bridge linking the progress we made under the Programme for National Recovery and the progress we are aiming for under the new programme.
The commitment in this budget to maintaining a firm exchange rate within the narrow band of the EMS is one which all exporters will welcome.
A major factor influencing the cost competitiveness of Irish exporters will be the modest pay increases contained in the proposed programme. Increases, which are likely to average little more than 4 per cent over the next three years, will help Irish exporters to gain a distinct competitive advantage over competitors in, say the UK where some firms are paying out that level of increase in one year.
I would like to turn now to the question of the resources which this Government are putting into providing marketing supports for Irish exporters and how those resources are being targeted.
There has been general agreement in this country that, historically, too high a proportion of State expenditure on industrial development has gone towards investment in equipment and fixed assets. It is acknowledged that the balance needed to be shifted towards "softer" assets and particularly towards areas of perceived weakness like marketing, management development and technology.
This policy was adopted in the White Paper on Industrial Policy in 1984. The two reviews of that policy which have been published, the last one in December 1990, bear out that a significant shift within the industry budget from support for fixed assets to non-fixed assets has taken place.
The completion of the Single European Market, and the resulting increased competition in both domestic and overseas markets, further increases the pressure on Irish industry to bring its marketing capabilities up to the level of its competitors in the Community.
We have many programmes before us for 1991. The amalgamation of Coras Tráchtála and the Irish Goods Council is an exciting development which will help to increase our exports and maintain the markets which we have built up during the past few years.