JOINT COMMITTEE ON FOREIGN AFFAIRS díospóireacht -
Wednesday, 14 Oct 2009

Promoting Irish Trade Abroad: Discussion with Irish Exporters Association.

Chairman

I would like to welcome Mr. Liam Shanahan, president of the Irish Exporters Association, to discuss the promotion of Irish trade abroad. In these challenging economic times the promotion of Irish trade overseas has never been more important. We are all aware, for example, of the difficulties facing Irish companies exporting to the UK, given the current weakness of sterling. When the Minister for Foreign Affairs, Deputy Micheál Martin, came before the select committee in June, he acknowledged this and said there is currently no more important task for the Department of Foreign Affairs than the work of promoting Ireland's economic interests overseas. The question arises whether the Department of Foreign Affairs is responding adequately to that imperative.

Trade promotion is an issue which this committee should prioritise in our work programme for the remainder of 2009. To that extent, I have asked the Oireachtas research unit to undertake a study of the current trade promotion support framework, with a view to making recommendations on how to improve it. Mr. Liam Morris from the research unit is in the Visitors' Gallery today.

This committee has an oversight and accountability role in respect of the Department of Foreign Affairs. We are keen to hear from Mr. Shanahan, as president of the Irish Exporters Association and a person deeply involved with exports himself, how the Department of Foreign Affairs, working with other State agencies, can best support the work of the export sector. We are anxious to focus on the immediate needs and we are doing so fairly urgently at this time.

Before we commence, I would like to advise that whereas Members of the Houses enjoy absolute privilege in respect of utterances made in committee, witnesses do not enjoy absolute privilege. Accordingly, caution should be exercised, particularly with regard to references of a personal nature. I am sure it is not necessary but I mentioned it because it is the factual situation. I invite Mr. Shanahan to address the committee, following which we will take questions from members.

Mr. Liam Shanahan

I thank the Chairman. I will set the context for some questions the committee can pose later on. It is stated Government policy to reinvigorate the economy by exports. It is my belief, as president of the Irish Exporters Association, that the only way to achieve economic recovery is via exports and every resource we have nationally, in the public and private sector, has to be diverted to what is the economic war we have to undertake. There is no other way; every job in Ireland depends on exports, one way or the other.

To set the context in terms of statistics, there are €147 billion worth of exports every year, 80% of which is undertaken by multinationals and 12% by indigenous Irish companies. The implication of that number is that the IDA, heretofore, has been exceptionally successful in attracting foreign direct investment and the companies concerned then use Ireland as a cost base, as a base for talent and as a base within Europe to re-export. It has done a great job so far.

A smaller section of our exports is undertaken by indigenous Irish companies, most of which are SMEs, but the 12% figure belies the fact that 50% of people involved in exports out of Ireland come from that sector, a sector which currently needs particular attention. The large multinationals do not rely so much on the international support of the State agencies, but the indigenous Irish exporter should and could rely heavily on the Irish State apparatus, be it the Department of Foreign Affairs or the agencies which undertake those exports. Of the 300,000 jobs dependent on exports, 50% are dependent on the indigenous sector. It is that sector which relies heavily on the Department of Foreign Affairs, Enterprise Ireland, Bord Bia, Bord Iascaigh Mhara and so on for support.

Approximately two thirds of those jobs in the indigenous sector are food related. If the Government wants to focus efforts and prioritise support, it should concentrate on the food sector. That sector is undergoing extraordinary difficulty, with the effective devaluation of sterling and an inability to replace the sterling based market rapidly with a euro based market. That is one area where the Department of Foreign Affairs or any other State agency could immediately get involved.

To prompt a discussion I will begin with a conclusion. Several vehicles are available to those who wish to export from Ireland. These include the Department of Foreign Affairs, Enterprise Ireland, Bord Bia, BIM and Teagasc. My first conclusion is that the effort is unco-ordinated. If the effort is to work it must be co-ordinated. The argument for co-ordination is completely separate from the argument for rationalisation. Let us leave budgetary considerations aside. It must be co-ordinated simply to make it work. That needs political will.

For those who are not marketeers, I can analyse how to go about doing that. I use the sales chain, which any first year commerce student knows is the way to analyse a business. The first step is to establish what the marketplace wants. The nation must adapt the goods and services we export to what the marketplace wants. We need to improve our market research capability. Business undertakes its own market research at the multinational level. My feeling is that the SME sector is poor at market research. At that level we are also poor at understanding how to obtain market research inexpensively. Those elements in Ireland who understand market research do not communicate it to the SME sector. Even though people in Enterprise Ireland offices overseas or a talented Department of Foreign Affairs official might have a capability in market research, they are operating in a vacuum. On the Department side there is a vacuum between what is going on in the marketplace and how the people producing the goods and services are reacting to that marketplace. That connection needs to be made.

Market research is undertaken by business itself and by Enterprise Ireland, which is an excellent vehicle to energise exports and one which needs to be nurtured and supported throughout the process of rationalisation which we will go through soon. This is the second recession which the business I run has seen. During the first recession, in the 1980s, we had to go overseas in 1983. In the past 15 years, 99% of our business was export related. We did not have to depend on the domestic market and we do not do so today. We had to live the story the nation must go through all over again. What kick-started things for us was a talented man in the IDA who spoke to a talented man in Enterprise Ireland and gave us a lead. Both of those leads originated overseas. We must support and enhance the foreign presence of the Department of Foreign Affairs and Enterprise Ireland personnel in the marketplace. It is no use having that capability in Ireland. The action is overseas and not at home.

We must then develop the goods and services we need to export. We need to mould what we do and build to what the marketplace wants. We need to build a very sophisticated listening mechanism to understand what the marketplace wants. For those who cannot afford their own listening mechanism, the State needs to step in and support them. Once again, we must look at the vehicles which are available to us.

If the food sector were a private business market, research and product development would be tied under the same roof and not operating in separate silos where something can get dropped in translation. There may be an argument for the research and development aspect of Teagasc being linked with the Bord Bia capability. There is no point in Teagasc researching and developing products in a vacuum. They must develop products which Bord Bia, Enterprise Ireland or the Department of Foreign Affairs says the marketplace wants. There is an argument for immediate connection there.

Once we have developed those goods and services we have to sell them. I am not aware of a depth of capability in the Department of Foreign Affairs in communicating what it is we have to offer. That is not to say it does not exist, and I will come back to that comment. I am aware of an excellent capability in Enterprise Ireland. That is not to say Enterprise Ireland is excellent all around the world. Like any organisation, it has its highs and its mediums. I have never come across a low. That has been my experience over 25 years. Each time an exporter, whether my own business or one of those I represent, engages with Enterprise Ireland which then couples with the Department of Foreign Affairs it wins business. The results are direct and immediate. It is not long-term strategy, but we must get our people out into the marketplace doing that. At water-coolers in businesses throughout the country people are asking, "How do we get out into the marketplace?" I will pick that point up a little later.

Enterprise Ireland works. It creates jobs and revenue for the country. It couples very well with the Department of Foreign Affairs in certain aspects. The headlines on the slide I have shown are: find out what the market wants; develop the goods or service; and sell it. That chain is dispersed all around the various State organisations. The approach is not unified and co-ordinated. Were this a business — and we are talking about business — one would have single point responsibility for what it is we want to achieve, which is overseas sales which will create jobs and tax revenue and bail us out of our deficit problems. At present, the effort is somewhat unco-ordinated. Steps one, two and three need to be co-ordinated, managed and accountable as a single chain.

To reflect the experiences of the members of the Irish Exporters Association and my experience, I have listed what works well. I do not say what does not work. Enterprise Ireland's overseas offices work incredibly well and generate sales. Enterprise Ireland training also generates sales. I took part in a programme it promoted, Leadership for Growth, which attempted quickly to re-orient the construction industry, which is a large employer here, to the international markets. This was no mean feat. I am aware of immediate successes where much capability is being diverted. I can speak to my own company's success in that programme. Those programmes must be maintained. In a time of business slow-down one must spend money and resource on sales and marketing. Otherwise one will end up closing the shop in two years time. We need to emphasise that.

Other support programmes, financial or otherwise, are an important, but less important, part of what Enterprise Ireland does. Its presence and capability are more important and we have found its local market research to be effective. Its people on the ground have developed contacts and networks which Irish companies can immediately use and without them its work would be ineffective. They are an absolute necessity if we are serious about exporting, and we have no choice but to be serious about exporting.

In the context of what is going on politically it is important to recognise that ministerial trade missions are vital to develop sales internationally. Small companies — those with a turnover of less than €250 million per year or in some cases less than €50 million per year — need the imprimatur of the State and its officials. The Department of Foreign Affairs and Enterprise Ireland do an excellent job in ensuring the people with that imprimatur do not let the State down in the markets which will be most important for us in the future, such as Asia and eastern Europe. Despite our political difficulties, I urge that we do not lose sight of the importance of Ministers getting on airplanes and flying the flag.

I am a representative of business and when everyone steps out on St. Patrick's Day and flies the flag for business, it leads to enormous success. We do not go overseas with Government and officials to party but to do business and it has been an enormously successful part of what we do.

The State imprimatur is very relevant from the point of view of the Department of Foreign Affairs. The calibre of our diplomatic corps is excellent and strong traditions of service are evident in the Department. The status of our embassies needs to be maintained because they are our shop window. People do not come here to buy; we have to go to their country. We need, however, to reorientate the second layer within the Department of Foreign Affairs towards business. That could happen through training to give exposure at an earlier stage to business and its requirements. The process of selection of the people in question could also be looked at. I trained in France and Germany and they use systems in which people who are ambitious in business are put through the diplomatic corps and vice versa. They recognise that business exports and internationalism go hand in hand. Typically they have a system of internships that allows cross-fertilisation. Many of my colleagues in business school in France went overseas and worked in embassies without pay for between three and six months promoting sales as part of the business school programme. Those people who were chosen for the various political schools had to serve time in business to progress their careers. That system was driven by political leadership which insisted on cross-fertilisation between the diplomatic corps and business at training stage.

We have an issue with branding overseas. This is not just as a result of our financial difficulties. We need to rebrand our country away from drink, bars and pubs because that aspect of our brand is a constant source of difficulty for me as I try to sell a high-tech country with high-tech capability. The last thing anyone wants is to entrust their business to someone who has a hangover. Financial rebranding is under way and I will not comment on that today.

We should use the arts for our brand and the IEA encourages its people to use them. The arts are a serious but enjoyable part of our brand and one we should emphasise. We are already a green brand, despite some of our domestic performance. We need to rebrand and the embassies and their staff will be central to conveying the message, not just officially but unofficially. I believe the nation is ready for branding as an area of technical excellence, green capability, food technology and the biosciences. Our financial services sector is large enough to deal with its own branding.

On the last page of the slide I make a few points to prompt a discussion, one of which concerns training. The Department of Foreign Affairs should be used as a resource to support and emphasise business and this should be one of its central functions. Enterprise Ireland does an excellent job overseas and needs to be supported and nurtured. We need people to be on the ground because Ireland will not do business unless it has a presence. There is much talk about budget cuts but when an overseas office is cut, so are eventual sales to the country concerned. This cuts the tax revenue which would be generated by those sales so while it might be of benefit in the short term, in the longer term we will reap the consequences.

I am not familiar with the other State agencies such as Bord Iascaigh Mhara, Bord Bia and Teagasc but the research and development functions of Teagasc should be tied to the promotion side of the equation. How can one side promote something when it does not even understand if it meets the needs of the marketplace?

There is no better time for availing of cheap or free talent to generate export sales. We can recruit from the very best business schools in the world. We cannot be politic about it but need to be aggressive to turn this country around. I hope there will be an open discussion between the Department of Education and Science and the universities which will then be linked back into business and the Department of Foreign Affairs through programmes such as those used by the French and the Germans. The system works, the networks are very strong and, having been through both the French and German systems, I have benefitted enormously in running my business.

Chairman

I thank Mr. Shanahan for a very concise and stimulating presentation. It supports a view which members of the committee hold as to the importance of embassies in the trade sector to link and co-ordinate the different groups. I worked for 13 years and was a founder member of what was then An Foras Talúntais and is now Teagasc. I worked in research and development and I appreciate what Mr. Shanahan said about linking marketing and sales to research and development. I took steps to understand that issue in my own time there.

Deputy Billy Timmins

I thank Mr. Shanahan for a very pragmatic, clear, focused and frank contribution. One of the problems I find in respect of both sides in meetings of this joint committee is an excessive emphasis on preambles and padding, so it was great to hear a speaker getting to the point straight away. The presentation was very good and I agree with much of it. I will make one comment and then ask a few questions, without going down the road of the preamble. The concept of the Irish pub and Tourism Ireland was very interesting. The reality today is that the young Irish person is on the iPod or the computer as opposed to drinking pints of Guinness in the thatched pub. Clearly we could send out the other image and I do not know if it would attract tourists but there is that conflict. I was very interested in the points raised.

According to the briefing material supplied, only 25% of the targeted companies availed of the employment scheme. Perhaps the witness will say why that is the case. Mr. Shanahan mentioned the concept of an "Ireland House" approach as opposed to the various agencies who might have a common objective but approach it from different angles, such as Teagasc, BIM, Enterprise Ireland. He spoke about pooling resources under one roof, with one head, and using those resources under a common objective and a common approach. That is the way forward. I have raised this issue with the Minister in the past. Leaving aside the concept of rationalisation, it makes sense to approach it in that way. Bearing that in mind, I would like to hear the view of the president of the Irish Exporters Association. My understanding is that Bord Bia has only one person stationed in the US. I am not sure if that person is in Chicago or New York. Why is that the case? It strikes me as most unusual that Bord Bia would have only one person in the US.

Mr. Shanahan extolled the virtues of the diplomatic corps and I do not disagree with him. Does he have any view on going outside the diplomatic corps on occasion, as circumstances may require, in the appointment of an ambassador or head of an "Ireland House"? Does he think the Department of Foreign Affairs would fight very hard to ensure that ambassadorial positions would always come from within the diplomatic corps? I take the example of the Americans whose ambassadors come from outside the diplomatic corps, such as Jean Kennedy Smith. She was an ambassador for her time given the importance of the peace process. Could we look at doing something similar here on a limited basis so that, for example, Michael Smurfit, who lives in Manhattan, might make a good ambassador to the US? That is not to say that he would not have the diplomatic assistance. I just mention him as an example.

I would also like to hear Mr. Shanahan's view on the concept of trade and the moral objective when we criticise China on its human rights violations and whether that causes a difficulty for the Irish exporters? Where does one draw the balance? There is a major issue in this regard for the Joint Committee on European Affairs which is looking at the trade association agreement between Israel and Europe, the upgrading of which has been put on hold. Some people say the agreement should be abolished. Where does one draw the line? Is there an occasional failure on our part to recognise the strides being made by some countries to address their human rights issues whereby, perhaps, we exasperate the problem rather than address it by cutting off or limiting trade? How does this impact on the Irish Exporters Association? When Mr. Shanahan hears a Minister for Foreign Affairs make a statement or, as happened at the Green Party conference, when something is said that may not please the Chinese and the Chinese ambassador walks out, does he put his head on his hands and say, "There goes six months of hard work"?

Deputy Rory O’Hanlon

I compliment Mr. Shanahan on his own business and how he has spread it around the world. I appreciate his comments in regard to our agencies abroad. My experience from travelling around the world is that we get tremendous return from a very small staff in our embassies.

I wish to ask a number of questions. In regard to promoting trade at Government and embassy level, are there particular supports he would like from Government to assist overseas trade and what further developments would he like to see in our embassies? In regard to best practice, obviously there are some areas to which we export a good deal and other areas not so much. Does he see any particular opportunities for us to improve our export position?

With regard to Northern Ireland and the Northern Ireland Exporters Association, are closer links developing given that we now have InterTradeIreland? Is there a place for one national exporters organisation? Linked to that, particularly in the Border areas, is the whole question of the food sector and the problems arising from the strength of the euro against sterling. If that were to continue what support would be appropriate?

Mr. Shanahan referred to the type of training he would like to see and how market research might be disseminated more speedily to the Small Firms Association and to the members who are exporting. There is also the whole question of visas and language. Are there problems from the point of view of the State and other countries to which we are exporting? Is the response sufficiently speedy or are there delays in dealing with difficulties where an exporter, as a matter of urgency, wants to get something into Ireland or into some other country?

Deputy Michael D. Higgins

I join in the welcome to Mr. Shanahan. His presentation is valuable. It is also valuable as a reminder of the importance of exports and where the employment lies. Employment is attached primarily to indigenous exports. The first point is that such exports would obviously include services and because it includes services, it raises a number of issues. The whole value of exports in employment outturns is not only in the finished product but in regard to the process between the generation of an idea and the finished product being sent abroad. I will refer to an area with which I would have been familiar from the past. Of all films finished by companies in Ireland or any country in Europe, 15% go into successful commercial distribution. However, as regards the other 85%, the film industry is continually training people in camera and lens technology, editing and make-up. In fact, from the time one has spent €1 million, there are 51 skills involved.

This raises an issue in regard to the word "exports". It does not only include the services we know but also the services that are emerging. In the different institutes of technology there are a number of incubator firms producing new products, for example, imaging equipment in the area of medicine and so forth. I attended the discussion in Farmleigh on this issue. What many of these need is a platform, places such as Silicon Valley, to introduce a new product for its application abroad. I have met some very young people who have made contacts all around the world despite this difficulty. What it means is the absence of a platform, the absence of connectivity in regard to a number of very small innovative places and access to the network that would take one to that part of the niche market that is using a particular product. The other issue, which applies to other countries more than Ireland, is that large banks have about 45,000 patents under applied processes in the European network which are available for purchase and application. When people speak about hiring graduates, they talk about the product that is there. In spite of all this talk, there is a great number of unemployed, highly qualified graduates and hardly any of them are being hired. This is not just confined to the export sector. All the NGOs that I know have lists as long as my arm of people who want to work for nothing as interns, yet they simply cannot be placed. There is no point in saying that we have this and that and we are giving this and that. We only have had windy speeches so far.

Drinking causes serious reputational damage; the notion that everything is to be launched with froth. People drink cheap sparkling wine and think they are champagne drinkers, which is a kind of national delusion. There is even something wrong with the language used. People have spoken about the smart economy, and there is nothing as disastrous as that phrase. Translated into Irish, it means glic. There is no shabbier word in the Irish language than that word.

Senator David Norris

It is a term of abuse.

Deputy Michael D. Higgins

Yes. I want to be positive about what I am saying, as I know about the creative industries. When I worked in that role from 1993 to 1997, we created thousands of jobs in film and music. We should talk about the creative society. We should talk about forms of innovation and a new fit between people who are very highly qualified and new forms of technology. This is all possible, it is exciting and it is something to be done.

Mr. Shanahan made a very valuable point. The suggestion to close down the Irish Film Board and rely on Enterprise Ireland is a kind of inchoate, slash and burn economics. Enterprise Ireland can only be of assistance in introducing one to people who might be interested in the finished 15%. There is no country in Europe whose citizens are watching less than 90% of the US product. One cannot buy a single lead film, but rather a basket of films. When "Braveheart" was being made here in 1994, a new piece of editing equipment was introduced for the first time in the world, and this was invented at DIT. The period between the development of an idea and the finished product that goes for sale globally is rich with employment creation. I agree with Mr. Shanahan about linking agencies with responsibility for the promotion of the end product with agencies that are involved in research and development.

The Department of Foreign Affairs is well on the way to turning embassies abroad into Irish houses. That is already happening with great effect. I congratulate Mr. Shanahan on his fluent French and German, but Spanish is spoken by an enormous number of people on this planet, yet we have hardly any embassies dealing with the Spanish speaking world. If we follow the McCarthy report, we will be lucky if we get to represent Latin America from Canada. This kind of thinking is bad economics, combined with philistinism and ignorance. If we want to sell to the Spanish speaking world, which is a huge part of the planet, we should appoint the odd ambassador to the Spanish speaking world. People might not like the Bolivian transition taking place in South America, but the fact is that it is happening. I agree entirely with what Mr. Shanahan says about eastern Europe.

Mr. Shanahan has accurately spoken about reputational branding abroad. Whether we are in eastern Europe or South America, we will get much farther with the names of Heaney, Joyce, Casey, Synge and others, than with names like Séanie Fitzpatrick. Creative Irish people will be known abroad. What is brandable is imagination, intelligence, and creativity, but if we decide to go for the cheap option and talk about being smart, then we are smart rather than bright, creative and so forth. I like Mr. Shanahan's definition of exports and their potential, but I would like to see him do something to offer opportunities to young, highly skilled graduates who are coming out from institutes and third level colleges but who have no opportunities at all. We are offering them nothing, in spite of all this talk about 3,500 places. Such places are neither offered nor filled.

It is to the credit of the Department of Foreign Affairs that it has junior professional fellowships, which is innovative. Why is this not happening in every Department? In some Departments, a person has to be half dead to be promoted. It would have done the world of good to have brought a raft of new people in.

Deputy Alan Shatter

The same happens in politics.

Deputy Michael D. Higgins

Absolutely. Some people are old before they start. The Deputy should listen to some of his colleagues.

Mr. Liam Shanahan

I thank committee members for their comments. Deputy Timmins asked why the uptake of the stabilisation fund is so low. I am not the chief executive of the IEA, but an honorary president. I have a day job, and I am not fully familiar with all the workings of the IEA, but I asked the same question last week. I am told that access is complicated by the various hurdles that one has to leap over to get the money. I do not know whether those access hurdles are financial. One has to show a degree of difficulty and pain that has been incurred for a certain length of time. It is an issue that the IEA will examine, because it is a shame that these funds are available but are not being used. At the same time, there is no point in spending money if it will not be taken up. I know anecdotally of one significant food company that took up the fund, and it literally saved its bacon.

Deputy Timmins also asked why Bord Bia has only one man in the United States. He will have to put that to Bord Bia. One spends into wherever one makes sales. If I make sales in the US and I have devoted a certain amount of money and resources to it, then I double that and I should double my sales. Until that stops, I keep spending. That is how I run my business. I do not know whether the State runs its business the same way, so I will have to deflect that question.

The third question related to whether we should appoint a businessman to the position of ambassador. My experience in Germany and France suggests that it is wise to choose ambassadors from the diplomatic corps because they are sensitive to all other issues that are not related to business. Those who become ambassadors are frequently chosen because of their early training in business. They will have gone through a process of diplomatic sensitisation. People who come straight from business, from business training or from those aspects of the State that are oriented towards business should be sent to those places where we have a second level within our diplomatic corps. If we source officials from the Department of Foreign Affairs only, we will exclude those whose resources might be more appropriate to today's environment. While each ambassador, as a titular head, needs to be versed in business, he or she also needs to be versed in many other things. The ambassador's deputy, or second in command, should be a businessman or businesswoman. My experience suggests that in several continental systems, a business person is appointed as second in command to give advice. There may be moves on that front. If we decide that people with a business background should be chosen to serve as ambassadors, we might leave the process open to political interference, which would be unhelpful. As too many appointments here are made as functions of favour, rather than functions of capability, I would resist any move to change the method of appointing ambassadors.

Deputy Timmins asked about human rights issues in China. My experience is that it is rare for a statement on an issue of human rights, which may be particularly unpleasant for foreign countries, to interfere with business. Business operates like oil on water after there has been a diplomatic stand-off. Business discussions can take place in the context of such stand-offs. Everyone who is involved in business knows that business continues even when the diplomatic corps are going at it hammer and tongs on issues like human rights and the rights of workers. Over the course of the 25 years I have spent working overseas, I have not encountered any circumstances in which doors have been closed because of anything our diplomatic corps has done. As Irish men and women, we are made very welcome overseas because we do not carry any colonial baggage. I have worked throughout the Middle East and parts of Africa, where Ireland's reputation as a country that is not imperialistic in any way is of benefit to us. We were beginning to have problems with our European trading partners. Prior to the second referendum on the Lisbon treaty, I was aware of a sense of insult among our trading colleagues. The larger multinational companies with which Irish companies do business saw the treaty as a vehicle that would help their ability to trade across borders. The Irish Exporters Association was trying to transmit a message that any break in that process would have been detrimental to business. I am speaking somewhat against myself, however, as that question appears to have been resolved. It is worth reiterating that a "Yes" vote in the recent referendum on the Lisbon treaty was critical for business in Europe.

I assure Deputy O'Hanlon that there are things we can do to promote trade. We have to encourage our salesmen and saleswomen to go overseas. Those who can bear it should spend between 50% and 75% of their time wearing out their shoe leather, cold calling, winning orders and gaining business for the country. We are seeking the introduction of a tax break to incentivise such people to go overseas. The small amount of tax that would be foregone would affect hundreds of people, whereas the benefits would be far more significant. The Irish Exporters Association will produce a couple of proposals in advance of the next budget, with the aim of finding a way of incentivising our salesmen and saleswomen to go overseas. We also believe the current research and development regime should be widened to include market research and development. Moneys that are spent on market research and development should be treated in the same way as moneys spent on other forms of research and development. If one cannot make a sale, one does not need an operations department or a managing director and one does not pay taxes. While Deputy Higgins might think it sounds crass to say that everything stems from sales, I remind him that I am a salesman at heart. As sales are at the centre of what we have to do as a country, we should find a way of turbo-charging our sales over the next 24 months.

The Irish Exporters Association suggests that the appointment of an exports tsar — at the risk of using a cliché — should be considered to tie the various strands together. Such a person should be empowered, accountable and responsible for tying together the various strands, or pockets of excellence, that are available in this State in a manner that will turbo-charge our export sales. While he or she does not need a team of additional officials, as there are plenty of staff in place at the moment, he or she should be given the accountability and responsibility to get the job done. That proposal should be considered. The only way out of this crisis is to generate business and the only way to generate business is to enhance exports. We need to consider how that can be done. When large businesses encounter problems that are difficult to fix, sometimes the easiest thing to do is to take a piece out of that organisation. One needs to accept that while it may take time, it can be worked on. In the meantime, one can take a piece out of the organisation and make a certain official responsible and accountable for it. That is what we do in business and it works. We should consider making someone responsible for tying it all together. Such a person should not tolerate an attitude of "it'll do". In effect, he or she should put everything we have on an export war footing.

I was also asked about the Irish Exporters Association's links with Northern Ireland. I am in attendance at today's meeting because the chief executive of the association, Mr. John Whelan, has travelled to Northern Ireland to meet our counterparts there. Certain industries naturally fit together for the purposes of promotion. It is right to promote the island of Ireland as a whole in sectors like food and tourism. We have to recognise that we compete with Northern Ireland in other sectors. Certain businesses in Northern Ireland compete with certain businesses in the Republic of Ireland. I cannot give the committee an easy answer to that question. While the performance of sterling is creating significant difficulties in many sectors, that should recede over time. As much of what we buy is in sterling, our input costs will decrease. We have to find a way of maintaining our market position for those people who sell into the sterling area. That is where temporary supports are needed. We do not need to reinvent the wheel in the training sector — I would just copy what other people do.

On Deputy Higgins's point on the circumstances that would obtain if this were France or Germany, we should not pour people into the State apparatus but pour them into our embassies and Enterprise Ireland offices overseas. We should take the graduates out of our business and engineering schools, and our schools for the arts, and place them in three-month and six-month internships overseas. One does not have to give them the money to pay for this but perhaps the host company or entity should be given a tax break. Everything we do from now on should be cash-neutral or tax-neutral.

Reference was made to language. I speak German and French. It was an advantage at the start of my career but it is irrelevant now. The language of business is English and we are blessed to be naturally English speaking. If we can teach our young people to say a few polite remarks in a foreign language purely for the sake of business, it will be helpful. I refer to business development rather than human development. Language is not as big a barrier as people believe. I believed it was a huge barrier as a young man and that is why I learned other languages. The Germans, French and Spanish speak English but the Chinese do not. We must emphasise Chinese language speaking skills, develop them and own them. The Chinese do not speak English as well as we believe they do.

Deputy Michael D. Higgins

South America.

Mr. Liam Shanahan

Perhaps South America. I was born in Colombia and my first language was Spanish. However, in looking to the markets in respect of which we need to acquire language skills, I would look to the east rather than the west. In South America, Brazil is thriving and will do so for the next five years. If one wanted to emphasise a language, it would be Portuguese in that instance. There may be a way of establishing links to develop the required skills. We cannot afford long-term strategies. We must have a fix next month and cannot afford papers and studies. The resources are all available; what we need is decisive action.

The Department of Foreign Affairs could help exporters with regard to visas, particularly where we want to bring buyers into the country. Frequently I have to go to London to meet a buyer, which is embarrassing. This is not because of a lack of desire but because the first port of call at the embassy overseas constitutes a block. There have undoubtedly been abuses in the allocation of visas in Ireland — on student programmes, for example — but we must find a way to make our borders a little less exclusive to those who wish to come here to buy the services we provide, including training and education.

I reiterate Deputy Higgins's point that the arts constitute a readily available, immediate brand that can be used for business. We should use this brand. It is simply a case of diverting a budget from somewhere.

Businesses decide to locate where they find the people innovative and creative. Innovation and creation go together. Everything else is a given so we must decrease our cost base and have public sector reform. We must listen to those people who are marching with their feet. The reason we stay here as a business is because Ireland is essentially a creative and innovative place. All this will be tested over the next six months because we must innovate and create our way out of the mess we are in. I support the Deputy's sentiments.

Chairman

This committee has pressed very hard on the visa issue and appreciates exactly what Mr. Shanahan is talking about.

Senator David Norris

I welcome Mr. Shanahan and his very clear and cogent exploration of this subject. Arising from his comments, I want to address the issue of visas. We have considered and are to consider a series of Bills dealing with immigration. The entire area is a disgrace to this country and certainly impugns our reputation. Very strange decisions are made. If the legislation the Government proposes is passed, circumstances will only get worse. That is the bad news. Quite a few of us will oppose the legislation.

I was very pleased to hear Mr. Shanahan state directly and clearly from the front line of business that our diplomatic staff do a good job upholding human and civil rights and that this is a separate category, and that if there are ruffled feathers, the staff address the matter immediately. Mr. Shanahan feels business pours oil on the water after a diplomatic confrontation. I was glad to hear his comments because usually the financial aspect enters our contributions at this committee, bearing in mind the way in which sensitivity in this area inhibits human rights. This was certainly true for China in the past.

Human rights are not considered a major issue, particularly by the European Union. There are the grossest violations of human rights in the Middle East, yet it has not even been possible to achieve circumstances in which the Euro-Med agreement between the European Union and Israel is monitored, as opposed to judged. This makes a farce out of human rights. At European level, whatever about Irish level, there are farcical circumstances.

Reference was made to tax breaks for people going overseas. Has Mr. Shanahan a specific idea in this regard? To what kinds of tax breaks is he referring? Should one be given an additional tax allowance for living abroad? I want to hear a little more about that.

It is interesting that Mr. Shanahan concentrated so much on food. Afterwards he spoke about technology. We have a contribution to make technologically. A recent technological development has attracted the investment of approximately €20 million by Dermot Desmond, who is a very canny man. The development has something to do with computers or broadband, something I do not understand but which is frightfully clever. It has been developed by young Irish people. We are still very good on research and design.

A couple of years ago, an Irish firm in Waterford, which was a branch of an American multinational, had done very significant research and design. It was also profitable. However, the parent company was in trouble and it repatriated all the research and design elements to the United States and closed the Waterford factory. How can we avoid such circumstances? I refer to investment, both intellectual and financial, that is subsequently appropriated in questionable circumstances by the parent company.

I noted in Mr. Shanahan's submission that the first three steps are to determine one's market, develop goods and services and then sell them. This did not come as a bombshell and even I would intuit those points. However, is it not possible sometimes to create demand rather than simply follow the market? If one simply follows the market, the appetite will eventually become jaded. I assume that within that model, there is an opportunity for innovation in the food industry, through the creation of new mixtures, flavours or presentations, for example. Otherwise, it would get rather boring.

Mr. Shanahan answered one of the questions I was to ask. He referred to the necessity to co-ordinate unco-ordinated elements. It sounded a little like the relationship between the FBI and the CIA, which walked us into certain difficulties in the Middle East. I welcome Mr. Shanahan's innovative proposal for an export tsar to lead the type of turbo charged export drive to which he referred.

I very much welcome Mr. Shanahan's comments regarding trade missions. It is important that these points be made but many of my political colleagues are inhibited in the current political climate from making them. As I understand it, Mr. Shanahan has argued that trade missions offer good value for money and are very important. Can he offer any concrete evidence in this regard? I recognise that the benefits may be difficult to quantify but it is important that they be recognised. We are in great danger of a retrenchment in this area in response to the populist media. I say this as somebody, as the Chairman will testify, who has not benefited from the opportunities afforded to members in terms of foreign travel. As I recall, I have not participated in any delegation from this committee in the last five years. The extent of my travel has been to attend a meeting of the Interparliamentary Union.

I support the work of trade missions. For example, I acknowledge the amount of work done every year by the various Ministers in St. Patrick's week. Enormous sums have been mentioned in the press in recent days regarding ministerial use of the Government jet. From my reading of it — and I may be incorrect — the newspapers are lumping together the capital cost of the jet, depreciation, ground staff, air crew and all the rest into the cost of each trip. If that it is the case, it is complete and utter nonsense because those costs are incurred in any case. The only cost to the taxpayer for each usage of the jet over and above what exists independently is the cost of the fuel. I have no difficulty with the Government jet being used in cases where it is clearly necessary and where it serves to promote Ireland. Taxpayers would get much less bang for their buck if the jet were left idle on the tarmacadam. Will Mr. Shanahan comment on that?

We have not always behaved responsibly in regard to our food industry, with episodes such as the beef scandal some years ago sullying our reputation. We have the best raw materials but have not always been careful to protect their integrity. I have a house in a remote agricultural village on a mountain in Cyprus. While there, I can purchase Kerrygold butter in the local co-operative, an example of how far Irish agricultural produce travels. There is evidence of good branding.

I have just received material outlining the commitments set out by the Green Party as part of the programme for Government. One of them relates to the development of Ireland's status as a GM-free area. I have argued this point with one of my former colleagues, a professor of genetics and brilliant man who considers me a Luddite. I cannot fight with him on the science of it — although I can raise questions — but I can say with certainty that there is a market for food that is certified GM-free. That is part of our image as a green food nation and is helpful in growing exports of our food produce to Europe. Many European governments are not listening to consumers when they say they do not want genetically modified food. We are one of the few countries in a position to use that label as a marketing brand.

Mr. Shanahan spoke very much to my heart when he dealt with the cultural aspect. I completely agree with Deputy Higgins's comments on the Irish Film Board. It is an outrageous suggestion that it should be destroyed in order to save such a small amount of money. We as politicians have taken on this issue in the past and ensured the board's survival. I heard one of the Sheridans on the radio in recent days — I am not sure whether it was Peter or Jim — referring to the multiplier effect of the investment in the board. It would be a disgrace to dismantle it.

It is sometimes forgotten that Irish people have written a disproportionate amount of the greatest literature in English in the last two centuries. Writers such as Wilde, Joyce, O'Casey, Yeats, Beckett, Heaney and Friel come immediately to mind and I could list many more. I have been involved for many years in activities arising from my love of Joyce. His work is a resource that can and should be used, not in a vulgar way but in a manner that meets the international appetite for sophisticated cultural material. People in the United States and in the East have remarked to me that we have a wonderful boon in artists such as Joyce. When one mentions his name in Tokyo or New York, the response is always a reference to Dublin. Likewise, when one mentions Dublin there is invariably a reference to Joyce in return. The James Joyce Centre in Dublin has played a significant role in this. The Department of Foreign Affairs regularly contacts me or one of the other board members to say that a visiting Head of State has asked to see the centre and to be given a talk on Joyce. We often find that these visitors know a great deal about the writer. I am pleased Mr. Shanahan has placed such a central focus on the cultural aspect.

Thank God for Mr. Shanahan's comments on Irish people's drinking habits and on Irish pubs. We are often presented with an absolute embarrassment and a sentimental evasion of the realities of living in the 21st century. I was disgusted to hear it said on radio recently that Temple Bar is a great place to get rat arsed drunk. That is a damaging review and hardly a desirable advertisement for a sophisticated capital city. A plague on so-called Irish pubs, as far as I am concerned. The growth of such pubs throughout the world is an infection, with none of them representing the true traditional Irish pub. Dublin pubs were known as places where one could converse but these aircraft hangars are ghastly. However, I will say no more because I am aware that colleagues wish to speak.

Chairman

Before calling Senator Hannigan, I wish to clarify that visas are under the control of the Department of Justice, Equality and Law Reform.

Senator David Norris

That makes it even worse.

Chairman

I merely wished to clarify that point.

Senator Dominic Hannigan

I am afraid I must leave for another meeting presently and will not get to hear Mr. Shanahan's reply. However, I will read the transcript later. Most of my questions have been covered by other members. Mr. Shanahan said that when it comes to export sales, the action is not at home but abroad. He was very persuasive in his arguments for how important it is to retain our presence abroad in the form of Enterprise Ireland missions and so on but also through the medium of our embassies. However, as we are all aware, the McCarthy report has proposed a reduction in our diplomatic missions overseas. We would like to be able to put forward strong arguments for retaining existing embassies and perhaps even expanding to other countries such as Brazil. I understand we currently have only one mission in South America, in Argentina, which also covers Bolivia and Peru, all of which have growing economies. Has any research been done into the before and after situation, that is, the amount of trade Ireland had with various countries before and after we opened embassies in those locations? Can Mr. Shanahan offer more concrete evidence to support the retention of existing offices?

Deputy Alan Shatter

I join with my colleagues in thanking Mr. Shanahan for his presentation. I commiserate with him in that we seem to expect him to be an expert on every aspect of Irish life. I will confine myself to two or three issues. I was interested in his indirect reference to the issue of competitiveness and wages. The only way we will get out of the current economic difficulties, and I agree very substantially with Mr. Shanahan, is by export-led growth, the creation of jobs by extending our impact on markets outside this country and finding new markets for our goods. From the perspective of the Irish Exporters Association, could he comment on that suggestion?

There is political controversy generating significant heat between IBEC and the trade unions as to whether wages in the private sector are too high and the extent to which that is making Ireland uncompetitive. It goes beyond simply the particular difficulties that have arisen because of the fall of sterling and the dollar vis-à-vis the euro. We have difficulties in those two markets but also in exporting to countries where the currency is not denominated in sterling or the dollar. To what extent is the wage structure in the private sector the real problem? Does the IEA set out the extent of the difficulties from the perspective of those working at the coalface and play a significant role as an association in dealing with these issues or is it left simply to individual businesses to work out their own fate in direct discussions with their employees? Does Mr. Shanahan have comparative figures for Irish products to compare with the basic manufacturing and other costs of competitors abroad? To what extent can that information feed into actions which are necessary to take here?

China is possibly becoming the economic giant of this millennium and is one of the most important markets to penetrate. China is not confronting economic problems that the major countries such as the United States are confronting, however it may find that it faces difficulties in the area of political unrest.

Has the IEA any links with China? What should Ireland do in the business context to increase its business relationships with China, how easy is it to do business in China? Does Mr. Shanahan know if we have companies that are doing business successfully in China? Does the IEA have a view as to how the education system should address future trading relationship with the Far East and China, whether it means an upskilling in certain areas or linguistically?

Chairman

I am very interested in the fact that Mr. Shanahan emphasised the markets in Asia, Eastern Europe and the countries that are in the developmental phase since joining the European Union. The half year report of the IEA was particularly interesting and very relevant to our present position. It highlighted the really big export figures, for instance the United States at €9.475 billion and increasing by 17% in the first half of this year. In Great Britain the volume of exports has dropped by 7% to €6.7 billion, in France, to almost €2.6 billion. We have not got into some smaller markets which have significant potential. Exports range from €142 million in the Czech Republic, €12 million in Estonia, €129 million in Finland and €92 million in Hungary. Irish exports to Latvia are worth €16 million, to Lithuania are worth €6 million and to Romania are worth €113 million. We know that Romania is about to draw down €20 billion from the European Union for contracts and businesses. Ireland as a very friendly nation has the opportunity to be very much involved. We need to drive the search for business opportunities and I appreciate very much Mr. Shanahan's point on the need to seek out business opportunities in the next six months and not just over the long-term. We must seek the opportunities now. Much of what Mr. Shanahan has had to say is very relevant. We have to give an impetus to business for those reasons. I particularly welcome the fact that Mr. Shanahan emphasised the value of Ministers and delegations from the Oireachtas going abroad. St. Patrick's Day is a classic example.

Senator David Norris

Chairman, is this a concluding statement?

Chairman

No. I wanted to raise a number of points. I welcome Mr. Shanahan's acknowledgement of the valuable role played by Members who travel abroad because it concurs with the opportunities I have seen being created in practice.

Will Mr. Shanahan respond to the questions raised?

Deputy Alan Shatter

May I ask an additional question? Was the increase in trade with the United States at a time when the dollar was weak and the euro was strong due to the American multinationals based in Ireland? Will Mr. Shanahan comment on trade with the US and how we might increase it? We do surprisingly little trade with quite a number of our European partners. Has Mr. Shanahan a view on that?

Mr. Liam Shanahan

First, I will respond to Deputy Shatter's questions on the market in the US and China. I cannot comment on the US figures as they may result from profit repatriation numbers or tax management moves. With regard to trading with Europe, we must look to the educational system in the long-term. I would look again at the model that I understand, that is business training in France and Germany and it was essentially managed by business. One has a coalescence of business and universities and businesses pay the universities to train their young people for the future. I would look to that in the long-term.

In the immediate future we have to get our sales presence into Europe. This is not the time to cut Enterprise Ireland offices or the sales presence of the diplomatic corps overseas. I cannot comment about the other aspects of the diplomatic corps, but the functions that serve to generate export sales and support exporters need to be reinforced and supported. An analysis could be done as to whether they do, but it is not my function to comment on that.

Deputy Shatter asked about the importance to Ireland of trade with China. China is as it always has been, somewhat of an enigma. It should be much more important than it is for Irish companies and we, as an association, as a country and the business that I run have all attempted at various levels to establish a strong presence in China and with varying degrees of success. Everybody is focused on China. We certainly have to keep it very much within our capabilities but I would not put all our eggs in that basket. I can speak about our own business. We opened an office there for two years and shut it down again. It was a very expensive venture for us. We find it easier to focus on those areas to which everyone is not paying so much attention. Is it Brasil next? Perhaps India might be a better market? China is very important and we must keep it as part of our thinking but we cannot rely on it. There are people with far bigger armouries at their disposal who have decided to take on that market and we are a small player in that context. It will be a very competitive field in which to create a beach head. The way to do it will be in the medium to long term.

The key to opening up that market will be education. At a very early point, the State exchanged young engineers with German organisations and strong links were created by young German people coming here and our engineers going to Germany. Those business links remain strong. Chinese people do business with family. Until one becomes family one will not do business. I would copy what the French and Germans do. They send their young people abroad as our Celtic ancestors did. We need to do the same thing and encourage those exchanges at all levels, but certainly no later than third level education. At that stage we should take students into our homes and universities and exchange them back. Ten years later those students will do business. I have lived and worked in China and I know that Chinese people do business with family. That is the piece we lack. Our education system is the only way to achieve that. How can education help? We must learn the language. We must also educate their people here and our people there so that they share common experiences.

How important is competitiveness to our exports? It is the elephant in the room. NAMA is irrelevant to this issue. What drives our competitiveness is our cost of labour. Everything else, whether energy or professional services, is secondary. Cost of labour is at the core of our lack of competitiveness. We are making the situation worse. The Government is going in the wrong direction. We are taxing labour, thereby adding to the cost of labour and decreasing our ability to compete. Exporters recognise that we must pay our bills but business will leave the country if we continue to pursue a heavy tax strategy.

We are in deficit to the tune of €25 billion per year and debating whether NAMA will cost €5 billion or €7 billion per year. We are doing two NAMAs per year in public sector spend yet everyone is talking about NAMA. As a representative of business I say, "Just get on with it". The real issue is the €25 billion per year of debt which we must support with taxes. Business is looking at the message the nation is sending and asking, "Do we invest here and can we afford to hire people if the tax rate is going to increase?". Public sector reform, or the bill of €25 billion per year, is at the heart of our economic viability. NAMA pales in comparison. As a businessman, I say it may be politically expedient to discuss NAMA at present but the real crisis is the cost of that deficit. This is politically unpalatable to discuss it but the nettle must be grasped. That spend drives our tax requirement. Taxes are a labour cost and that adds to our lack of competitiveness.

The unattractive answer to Deputy Shatter's question is that we are uncompetitive. Tax goes to the heart of our uncompetitiveness. We are going the wrong way because we have to pay these extraordinary costs which we cannot afford.

Deputy Alan Shatter

Mr. Shanahan has given me the answer I anticipated. I wanted to give him the opportunity to express his view. This is a very important issue. Many of the other issues we have discussed are decorative. They are not the substance of where we need to be going.

Mr. Liam Shanahan

The economic viability of the country will be defined over the next six to 12 months by one Government or another. However, the answer remains the same. Whether or not Government grasps the nettle does not matter. It may be expedient for Government, regardless of who controls it, to point to a third party who will say, "You will do this, that and the other". That may be the Central Bank, the IMF or whoever is lending us money at that point. At some stage the money will dry up and we will get on with the necessary reform. We must either control it ourselves or someone else will control it for us. That is inevitable. I believe that is the biggest threat to our economic viability and it needs to be taken on. It is the political elephant in the room.

I cannot comment on Senator Norris's question as to whether or not being GM free is advantageous. I defer to experts in Bord Bia and in that market. With regard to culture, when I am overseas and I want to refer to who we are as a nation, the things people understand are Joyce, Wilde, Riverdance, Enya and U2.

Chairman

And Westlife?

Mr. Liam Shanahan

Indeed. They are important cultural lodestones which we need to tap. Ministerial trade missions are important to business. We need to make sure that those people in the public sector who support trade missions focus on the business of the day rather than on the Minister who travels. That is a little nuance which should be highlighted. Trade missions are important and, to date, effective. To curtail them would be a negative step.

Senator Norris referred to research and development. We are spending money on these areas. We must make sure that when the money runs out, as it will some day, the PhDs who are currently assisting us in research and development do not run with it. We must ensure that the knowledge we are paying for remains anchored in this country. Are we certain that the structures we have imposed on research and development facilities throughout our third level education system ensure that we retain ownership of the intellectual property they are developing? When Mary returns to Harvard and John returns to Yale, will the knowledge and intellectual property leave with them? That is important because some of those funds are being examined.

Chairman

I regard that as another important point, possibly because I was in the research area and was involved with patents and so on.

I thank you, Mr. Shanahan. You are the honorary president of the Irish Exporters Association but you are all parts rolled into one, because of the depth of your knowledge and understanding of the general situation. Your presentation has been very helpful to us. You struck quite a few chords which the committee has also been striking. We will build your observations into our report.

I thank you for your frank and informative presentation. We are agreed that exports will remain a key driver in the recovery of the Irish economy. It was useful to hear from your association, which represents industry and business, and to hear what you have to say. There are many things we could discuss and perhaps we can do so after the meeting. I thank Mr. Shanahan for his contribution, which will certainly help to inform our recommendations to Government on the role of the Department of Foreign Affairs in promoting trade abroad.

On the subject of visas for educational visits, there are many people who are very thorough and always know who is coming. It is disastrous that Mr. Shanahan has to go to London to meet people to arrange business and it cannot be allowed to happen. Some people who were being educated in Dublin have moved to England and are flying because they get the necessary visas there. We feel very strongly about this matter and have emphasised it a number of times. I assure Mr. Shanahan we will continue to do so.

I thank Mr. Shanahan again for his assistance and for his far-seeing and incisive comments which are relevant to the immediate situation in which we, as a country, find ourselves. I always emphasise that we came from a lowly position to a relatively high one and if we get a grip on ourselves we can start to move up again.

The joint committee went into private session at 4.20 p.m. and adjourned at 4.25 p.m. sine die.