65th Economic Policy Panel

For more than 30 years, Economic Policy has been publishing papers on pressing European policy issues. Preliminary versions of the papers are first discussed at Panel meetings. The 65th Panel meeting, which starts today in Valletta, features papers on the causes of Brexit, on the consequences of Brexit, on the impact of the 2015 reforms on the Italian labour market, on innovation, on entrepreneurship, on retirement, on monetary policy, and on mobile communications. The papers are available here.

The New Yorker on how Apple created Ireland’s real, and less real, economies

For readers who want a good summary of what’s going on with Apple, the EU Commission, etc., Adam Davidson of the New Yorker has a nice piece putting the decision in its historical and political context. From the piece:

Is the Ireland of the real Apple—the physical place with people doing things that produce profit—going to dominate, or will it be the Ireland of tax-free fictions and arbitraging loopholes in a complicated global economy?

Ireland’s economic transformation in the course of the past thirty-five years was remarkable in many ways. Up until the early nineteen-eighties, Ireland’s income per person was one of the lowest in Europe, right alongside Greece’s. Unemployment was well above sixteen per cent for much of the nineteen-eighties. The country’s income began to hurtle upward after 1995. Dell, Intel, and Microsoft joined Apple in Ireland. Large pharmaceutical firms also came, and now more than half of Irish exports are pharmaceuticals. At first, these big firms were excited to find people with advanced degrees willing to work at a fraction of what American, French, or German workers are paid. By the early two-thousands, Ireland’s per-capita gross domestic product was higher than that of the U.S. or the U.K., and fully a hundred and thirty per cent of the European average. For the first time in Ireland’s history, the country experienced net immigration. Alongside the new economy of high-tech and pharmaceutical companies, Ireland continued to develop its agricultural businesses, especially food manufacturing. Ireland is now a major exporter of snack foods and dairy products. For the first few decades, this growth seemed to have been based on something beautiful and right: the Irish had always been highly educated, clever, and hardworking, and they were now earning what they deserved.

Turnover and Exports in Irish Pharma – guest post from Chris Van Egeraat

Last week The Irish Times published their annual TOP 1000 Companies list. The list includes figures on, amongst others, turnover. A quick inspection of the list and CSO export data would suggest that exports of Irish pharmaceutical companies account for 248% of turnover!

The turnover figure I took from the TOP 100 list. I added Pfizer, which was missing from the hard copy but included in the on-line version. I excluded companies in Northern Ireland. I also excluded pharmacy groups and national distribution/sales companies on the basis that most of these will export little. I also excluded a small number of companies that were erroneously listed as pharmaceuticals. The turnover of the resulting list of firms adds up to €20.9bn.

CSO export figures suggest that in 2011, Ireland’s pharmaceutical exports stood at €51.8bn [pharmaceutical sector is here defined as to include organic chemicals (= mainly active ingredients), pharmaceutical preparations and essential oils].

I can’t figure out the problem. The issue cannot be explained by adding the turnover of the sub-1000 companies. The smallest Top 1000 company has a turnover of €6m. You would need a lot of small pharmaceutical companies to cover the difference.

I thought the difference could be explained by the fact that some pharmaceutical companies (e.g. Pfizer) operate separate export companies. But, the (separate) table with top financial enterprises includes no pharmaceutical companies. Still, could it be that exports of these export units are included in the Irish pharmaceutical export figures but not in the turnover of the Irish operations?

I appreciate that the Irish Times TOP 1000 list may not be perfect (Dell Ireland is reported to employ 796 Irish employees while the Dublin unit alone employs 1000 plus!) Still, the difference between the two figures seems too big to be explained away by recording errors. Any suggestions welcome

Below I include a selection of the methodological notes included on page 27:
• Where companies filed consolidated accounts, the group turnover was taken.
• The Irish subsidiaries of multinational or overseas companies are included if they are significant employers. If no financial information is available for the Irish operations, then turnover is estimated by The Irish Times on the basis of revenue per employee as per publicly available figures
• If a multinational has several subsidiaries in Ireland we have where possible treated them as one entity grouped under the main Irish company. In some circumstances this was not possible and they appear separately

External Trade Statistics

The (merchandise) trade statistics released by the CSO today showed that exports fell in December (here).  “From a November high of €8,252m, seasonally adjusted exports decreased by 9% to €7,503m in December… A substantial part of the decline in the value of exports was due to a high value product in the Chemicals and related products sector coming off patent in December”. 

This is the beginning of the “bad news (for Ireland) from big pharma” that I posted on back in December.   

Bad News from Big Pharma

We have reached the long-awaited “patent cliff”. Lipitor, which Pfizer produces in Ireland, has just gone off patent and others are set to follow shortly. Big Pharma’s new product pipelines are sparse. Bloomberg reported on this a few weeks ago here.

I don’t think Chris Van Egeraat is quite as pessimistic as he appears to be in the article, and he tells me that the figures quoted come from Bloomberg’s database rather than from him.

Furthermore, Big Pharma is fighting back. And we know that mergers and acquisitions in the sector have increased in recent years, against trend, as the pharma companies diversify into biotech, from which the new innovations are likely to emerge. (See the section on pharmaceuticals, pps. 16-17, here).

But worrying all the same!

The Effect of the Euro on Irish Exports

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.