The great trade collapse

Richard Baldwin has just put together a new VoxEU Ebook on the great world trade collapse of 2008. It contains 23 short, user-friendly essays that give a great overview of what we have learned so far about the causes of this dramatic event.

7 replies on “The great trade collapse”

Once again, it gives me great pleasure to report that Ireland has largely escaped this ‘great trade collapse’. In the first three quarters of 2009, merchandise exports from Ireland were down just 3% y-o-y in volume, while, in the first two quarters of 2009 , services exports from Ireland were down just 2% y-o-y in volume. Overall, it looks like exports from Ireland in 2009 will achieve their highest ever share of total EU15 exports, comfortably beating the previous peak year of 2002. I’ve calculated the following figures from the Eurostat database.

Ireland’s share of EU15 exports (goods + services)

1995 2.052%
2002 3.737% (previous peak)
2008 3.280%
2009 Q1 3.961%
2009 Q2 4.031%

So, in the first two quarters of 2009, Ireland’s share of EU15 exports was almost twice what it was in 1995. As, Sir Michael Caine might say: “not a lot of people know that”. All the ground lost between 2002 and 2008 was recovered in 2009. Incidentally (and there isn’t time to go into it fully here), most of the decline between 2002 and 2008 was due to the fall in the value of the dollar v the Euro, rather than to any volume fall. As a disproportionate share of Ireland’s exports are priced in dollars, when the dollar falls v the Euro, the value (but not the volume) of Ireland’s exports is reduced in Euro terms. Other EU countries suffer much less from this effect. It is somewhat encouraging, therefore, that Ireland’s share of EU15 exports has hit a new high in 2009, despite the dollar being so low.

When I’ve posted similar figures in the past, some people have said that the 2009 figures shouldn’t count because they reflect the fact that other countries’ exports have collapsed in 2009, while Ireland’s have only fallen slightly. The argument they put is that, once global trade recovers, other countries’ exports will recover in line, while Ireland’s will grow much less fast because they didn’t fall nearly so much during the global downturn.

I’m not dismissing this argument completely. All I’ll say is that we’ll just have to wait and see. According to the VoxEU Ebook Kevin O’Rourke has posted, we won’t have to wait too long to see if this argument holds water. The Ebook article states that global trade has now begun its recovery and that this recovery is likely to bring global trade back to its pre-recession level pretty quickly. So, if this argument stands up, Ireland’s exports should now start to fall as a proportion of the EU15 total (even if their volume actually rises). There is little evidence from leading indicators like PMI surveys that such a fall is likely to happen, but I wouldn’t rule it out completely.

Of course this is only half the story for Ireland, how services exports fare is also critical. The available Q3 service export figures for other EU countries show a strong bounce back: UK (7%), France (4%), Germany 5%, Finland (0.1%). The pattern of services exports in these countries has followed ours pretty closely in the past, so the services export numbers when they are released should see an improvement.

Note that in nominal terms, Irish exports in the last 9 months are unchanged. For exports, it is the nominal amount that matters, which should then be deflated by a domestic consumption price index.

the little blue pill effect continues. But, overuse of same can have very nasty side effects, the literature says.


I don’t think Ireland has an unbalanced trade profile as hinted in your post. While Chem/pharma is big for Ireland, there are numerous other sector which are also big, and uncorrelated. Roughly:

Pharma/Chem: 30%
Financial Services: 10%
Computer Services: 15%
Business Services: 15%
Food/beverages: 5%
Electronics: 5%

This portfolio approach to building an export base may have been on purpose or accidental, but has served us well, and means that we are not overly reliant on any one sector. Notably, we have weathered well the shift of computer manufacturers Eastward in the early naughties, because we had built competencies in other areas. While financial services exports from Ireland seem to have weathered the crisis well, though we don’t have a huge concentration (around 10%) here either.

Data published today shows that in September, world trade expanded by 5.3% but was still 14% below the peak level reached in April 2008.

Employment in Irish industry fell by 21,300 from 232,600 to 211,300 employees between Q2 2008 and Q2 2009, despite the rise on pharmaceutical production in the US-owned sector.

Loans to the Irish manufacturing fell 18% in 12-month period to Sept 2009.


Fair point. Given productivity gains, no increase in exports will generally translate into a fall in employment, which is what will happen this year. I think John’s point remains though, that flat is the new up – our performance in 2009 does look very strong given the conditions, albeit not sufficiently strong to hold employment level.

Note the fall in industrial employment is likely to an extent be related to the construction industry.

[…] A couple of weeks ago, I looked at global economic growth and how the IMF’s estimates of growth in 2009 have changed over the course of the last 18 months. The main finding was that the world economy has different regions. South and East Asia, whose economic powerhouse is China, has seen a large upward revision in growth forecasts since earlier this year. The Americas, whose economic hegemon is the USA, has seen no such effect, while Europe has been somewhere in between. Government stimulus seems to have only a limited effect relative to the effect of international trade and trade networks. […]

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