An important argument for the adoption of the euro was the expectation that it would boost trade. This paper analysed the effects of the euro on Irish exports over the period 1993-2004. The results indicate that the impact of the euro on Irish exports to euro area countries relative to the rest of the Irish trading partners was significant and positive from 2000 onwards. This effect has increased over time. Furthermore, it apperas that the impact of the single currency on Irish exports has varied across industries.
9 replies on “The Effect of the Euro on Irish Exports”
Nice to see some hard data on the very positive effect joining the euro had for Ireland’s economy. And for those who think bringing back the punt will solve all of Ireland’s problems, Iceland is debating replacing the krona with the Canadian dollar.
See: http://www.marketwatch.com/story/iceland-adopting-the-canadian-dollar-2011-12-13?link=MW_home_latest_news
It will be interesting to see how may comments will be on this one thread!
Hard to drum up the interest when it is a good news story about the euro!
I would assume that the euro was welcomed by the FDI sector but generally, individual currency is less important when delivering into global supply systems.
The period of focus of the paper coincided with significant ramping up of profit shifting by US MNCs.
Between 1999 to 2002, US multinational corporations increased profits in countries with no taxes or low rates by 68% while sharply reducing profits recorded in countries where they engage in substantial business activity, a study published in the journal Tax Notes shows.
In 2002, US companies reported $149 billion of profits in 18 tax-haven countries, up 68% from $88 billion in 1999, according to Tax Notes, which analyzed the most recently available Commerce Department data. This compares with a 23% increase in total offshore profits earned by US multinationals during the same period-total profits of US multinationals’ foreign subsidiaries around the world stood at $255 billion in 2002.
According to the New York Times, Commerce Department data not referred to in the study suggest that US companies took 17 cents of each dollar of worldwide profits in tax havens in 2002, up from 10 cents in 1999.
Tax Notes shows that for each dollar of profit taken in Luxembourg in 1999, US corporations took $4.56 of profit in 2002. The result for Bermuda was $2.96; for Ireland $2.01; and for Singapore $1.72. These countries are viewed as tax havens or partial tax havens. For UK, each dollar of profit taken in 1999 was equal to 67 cents in 2002; for Germany, it was 46 cents.
There is pretty much no good news for the country in there.
By one measure, the euro had no effect on trade.
By the other, it benefited exports from sectors where the link between trade and employment is very weak (resulting in almost no impact on employment), and provided very little other benefit to the Irish economy. By this measure, it significantly damaged exports from sectors where employment responds well to exports and which are actually embedded in the local economy.
Sorry I take it all back. Michael sure knows how to put a damper on good news!!
Interesting study. It would be nice to compare export growth with employment growth in each sector.
@ shaun byrne
Shaun,
I’m an optimist – – otherwise I would have waited to die of boredom in a multinational.
I’m also a sceptic because bullshit invariably trumps facts in the public arena.
@ BeeCeeTee
Your analysis is not credible.
While output in pharma and medical devices has risen since 2004 without any impact on direct jobs, do you think 42,000 well-paying jobs and shock horror, the provision of occupational pensions, could be easily replaced?
As for damaging potential exports from other sectors, just wonder why Sweden was producing as much cheese as Ireland in 2004?
There is also another interesting fact that you will not hear from enterprise policy spinmeisters; among small economies, Ireland has the lowest ratio of SMEs who export.
A few years ago, an Irish trade minister didn’t know why a small economy like Belgium was the third biggest destination for Irish exports.
Unfortunately, most of the commentary on exports is from deskbound folk who’ve never sold a bean!
Don’t wonder if that is anti-intellectaul. It’s not but it’s a fact and it shows.
Hi Michael,
I’m afraid I don’t have time right now to pull the numbers together, but I’ll tag a response to your points onto the end of this thread in a few days. It’s interesting how you have not actually contradicted anything I said beyond saying that my argument is not credible.
These estimated effects are much much smaller that the hyped-up claims of people like Andrew Rose and others on the effect of a common currency.
see http://faculty.haas.berkeley.edu/arose/RecRes.htm#CUTrade