Economic update: Brexit takes a bite out of Irish trade
Brexit is already having a significant impact
Jim Power
UPDATE ON IRISH MERCHANDISE TRADE Q1 2021
· COVID-19 and Brexit are having a significant impact on Ireland’s external trade performance. In the first 3 months of the year, the total value of merchandise exports was 8.5 per cent lower than the same period in 2020. All categories of exports were weaker.
· Exports to Great Britain declined by just 2.7 per cent in the first 3 months of the year. This represented a significant improvement on the first 2 months of the year. In March, exports to Great Britain were up by 12.9 per cent.
· Data for the month of March suggest that the distortion to the overall export relationship with Great Britain may be starting to normalise. However, this cannot be said across the board. For the agri-food sector the challenge posed by Brexit is still intense. In the first 3 months of the year, exports of Food & Live Animals to Great Britain declined by 25.6 per cent.
· Imports from Great Britain, were down by 47.6 per cent. Imports of Food & Live Animals were 60.6 per cent lower. This explains issues such as the scarcity of certain food products in the Irish grocery market. Chocolate Flakes have been highlighted in this regard in recent weeks, but there are many other examples. Herein lies the opportunity for Irish food producers to push an import-substitution strategy.
· Eurostat data show that in the first 3 months of the year, EU imports from the UK were down by 35.4 per cent, and EU exports to the UK were down by 14.3 per cent. Brexit is having a very significant impact on the EU trading relationship with the UK.
The CSO has just published the Irish merchandise trade figures for March, and we now have a somewhat clearer picture of the impact of Brexit in the first quarter of the year. I stress the word somewhat, as it is still way too early to jump to any definitive conclusions on the impact of the UK leaving the EU. Trade late last year was distorted ahead of the ending of the transition period, and obviously it has been distorted so far this year by customs delays, bureaucracy, regulatory issues and so on. Of course, the impact of COVID-19 is also causing significant problems and distortions.
The Export Story
In the first 3 months of the year, the total value of merchandise exports was 8.5 per cent lower than the same period in 2020. All categories of exports were weaker. The previously very strong Chemical and Related Products category is down by 4.5 per cent, but it still accounted for 66.7 per cent of total exports.
Within this category, Organic Chemicals valued at €7.4 billion account for 27.3 per cent of the total in this category, and were down by 24.8 per cent. Medical and Pharmaceutical Products valued at €16.3 billion, accounting for 60.5 per cent of the total for this category, were up by 9.2 per cent. The Pharmaceutical sector is incredibly important to Ireland’s overall export performance, and indeed the overall economy.
Food and Live Animals, which is a very important indigenous part of the economy, saw a decline of 8.9 per cent.
Exports to Great Britain declined by just 2.7 per cent in the first 3 months of the year. This represented a significant improvement on the first 2 months of the year. In March, exports to Great Britain were up by 12.9 per cent.
Trade with Great Britain has become considerably more difficult since 1st January, with increased delays, bureaucracy, regulatory and customs requirements. However, it is possible to surmise, based on the March data that the situation for some sectors may be starting to normalise as stockpiles built up last year may be starting to run down, and impediments to trade may be improving. However, it is still too early to reach any definitive conclusions.
For the agri-food sector the challenge posed by Brexit is still intense. In the first 3 months of the year, exports of Food & Live Animals to Great Britain declined by 25.6 per cent. This category accounted for 21.4% of total exports to Great Britain in the first quarter.
Exports of Chemicals & Related Products, which accounted for 36.7 per cent of total exports to Great Britain, increased by 34.9 per cent.
A point to note is that the sharp decline in exports to the EU-27 is largely due to a decline of 33.8 per cent in exports to Belgium, which accounts for 21 per cent of Ireland’s exports to the EU-27. This high level of Belgian exports is due to the fact that a high percentage of exports from the Pharmaceutical sector are booked in Belgium. In real terms, Belgium is not as significant a trade partner for Ireland as the official data suggest. This is just another example of the distortionary impact of the multi-national sector on Ireland’s economic data.
The Import Story
On the merchandise import side, overall imports in the first quarter of 2021 were down by 1.2 per cent on the same period in 2020. Imports from Great Britain, which accounted for 10.3 per cent of total imports, were down by 47.6 per cent. Imports of Food & Live Animals from Great Britain were 60.6 per cent lower than the first quarter of 2020. This explains issues such as the scarcity of certain food products in the Irish grocery market. Chocolate Flakes have been highlighted in this regard in recent weeks, but there are many other examples. Herein lies the opportunity for Irish food producers to step into the gap and seek to push an import substitution strategy.
EU Trade with UK
Eurostat data show that in the first 3 months of the year, EU imports from the UK were down by 35.4 per cent, and EU exports to the UK were down by 14.3 per cent. Brexit is having a very significant impact on the EU trading relationship with the UK.