A recent article has suggested that Ireland’s economic relationship with the UK pales in comparison with its integration with the EU. The implications of this are twofold: that the country should continue to stick with the EU despite the increasing contributions required of it, and that the cost of a WTO scenario in the event of Brussels’ intransigence is made bearable by the greater importance of European trade.
What the report neglects, however, is that official figures for Irish exports bear little resemblance to the reality of the country’s balance sheet. Indeed, these figures claim that Ireland exports 20% more than it produces in total. This can be explained by a number of distorting practices.
Multinationals such as Apple take advantage of low Irish tax rates by registering much of their far eastern production as being imported into Ireland and then re-exported. Much of this may never physically touch Irish soil.
The phenomenon of ‘contract manufacturing’ also distorts the figures. Frequently in the Irish case, Irish firms commission foreign manufactures to produce items which are then sold overseas, never passing through Ireland itself. As the Irish entity ‘owns’ all the inputs used in manufacturing until the products are sold, the final sales are booked as Irish exports (and also as imports on the service side).
As a result, the figures underestimate the proportion of goods produced in Ireland for the UK market: particularly in agriculture, where half of all beef products (for instance) go to the UK market. Imports from the UK make up a correspondingly larger chunk of Irish trade, too, further underlining the naivety of an Irish economic strategy focused exclusively on EU markets.
