UPDATE- April 12, 2007: China overtakes US in global export rankings in 2006; Ireland slips from 26th to 29th place among leading exporters : The annual rise in US dollar terms in 2006 for Ireland of 3%, was the lowest increase of the world's top 30 exporters and compared with a rise of 15% for the global number 1 - Germany.

Nobel laureate Dr. Michael Spence

Dr. Michael Spence, a winner of the 2001 Nobel Prize in Economics and Chairman of the Commission on Growth and Development, says that sustained high growth in developing economies is a recent, post-World War II phenomenon. Using GDP figures, "high" is above 7% and "sustained" is over 25 years or more. He says that these cutoffs are arbitrary, but a similar picture emerges with variants. Growth at these rates produces very substantial changes in incomes and wealth: Income doubles every decade at 7%.

There are 11 such cases of sustained high growth, and eight are in Asia. These are Botswana, China, Hong Kong, Indonesia, Korea, Malaysia, Malta, Oman, Singapore, Taiwan and Thailand.

Each and every one of these miracles had an export sector as a driver of growth and an increasing share of trade in GDP. There are no exceptions. Every growth miracle involves leveraging the demand and resources of the global economy.

US multinationals were an overwhelmingly dominant factor in the export led take-off of the Irish economy from the mid-1990's. The Celtic Tiger period launched few Irish businesses on the global stage while investment in Irish tradable goods and service companies has been a fraction of the flows into overseas commercial property.

Slide from 2005 PowerPoint Presentation Ahead of the Curve, by Irish industrialist Eoin O'Driscoll

Irish industrialist Eoin O'Driscoll, who is chairman of the Irish Government science and policy advisory agency Forfás, told a conference in 2005, that most of the products we manufacture, are designed elsewhere and the bulk  of our exports, are marketed/sold by organisations outside Ireland.  

In the Irish Times on Friday, April 6th, economist Paul Tansey wrote that Ireland's Celtic Tiger economy, where growth was led by exports, expired in 2001. The demise of the tiger went unmourned and for a simple reason. After hitting a flat patch in 2001-2002, the economy rebounded. Nobody much cared that domestic demand had elbowed out export demand as the engine of economic expansion. What was important was that growth was back. Never mind the quality, feel the width.

China

Dr. John Lipsky, IMF

Also on Friday, Dr. John Lipsky, First Deputy Managing Director, of the International Monetary Fund (IMF) said at a conference on Global Implications of China's Trade, Investment and Growth, in Washington, D.C., that China's rise over the past three decades has been spectacular. It has consistently been among the world's fastest growing countries, with recent GDP growth exceeding 10 percent for four straight years. What's heartening is that the growth has rescued several hundred millions from abject poverty. By some estimates, China alone accounted for over 75 percent of poverty reduction in the developing world over the last 20 years. 

How did China pull this off? Lipsky said that China's merchandise exports grew 12-fold over the last 15 years, compared with a tripling in world trade—which itself is not a trifle. This is similar to what other countries who have had sustained high growth have done.

Productivity in China has been enhanced by moving resources from the less productive agricultural sector to more productive uses in manufacturing. About 100 million people have moved from rural to urban areas over the last two decades. And more recently, foreign investment has played a major role in steering resources into their most productive uses. Productivity in foreign-owned firms is higher than productivity in domestic firms, as some of the work you'll discuss this afternoon demonstrates.

Source: World Trade Organization

Lipsky asks what does China do next? How does it sustain this spectacular performance? He says that while the external sector will continue to be vital, China will also have to begin looking inward to sustain growth in the long run. And, happily, this is exactly the direction in which Chinese policymakers intend to go.

• They clearly see the importance of improving financial intermediation to help to boost internal demand. With better intermediation, China could grow just as fast with significantly less investment, allowing consumption to play a larger role in supporting demand.
• The aging of the population will also place large and immediate demands on the financial system. The proportion of people age 60 and over is growing faster in China than in any other major country, with the number of retirees predicted to double between 2005 and 2015. Developing the financial sector is vital to provide satisfactory living standards to these growing number of retirees and to the children who will have the responsibility of supporting them.
• Growth also needs to be more inclusive. As the Chinese authorities have noted, it needs to be better balanced between rural and urban areas, and also between eastern and western regions. In China, rural incomes are less than one-third of urban incomes; the corresponding figure in the United States, for example, is 80 percent.
• And, finally, as Premier Wen Jiabao has noted on many occasions, the environmental consequences of rapid growth must be addressed. Seven of the world's 10 most polluted cities are in China. One-third of the water courses are severely polluted. Enhanced enforcement of environmental regulations is needed, and economic decisions on energy and land use have to reflect environmental concerns.

As China's turns its focus inward, there will of course be implications for the rest of the global economy.

• Lipsky says that as China looks inward, it will provide a vast and dynamic market for the rest of the world. China's need for natural resources and raw materials will continue to boost prospects of resource-exporting countries. But, in addition, as China's income grows, the opportunities for other foreign producers will also expand, including no doubt in the provision of services.
• There are also implications for global imbalances. Lower savings relative to investment in China will lead to a decline in China's current account surplus. And the big change to watch for is a turning point in the US savings rate. The low US savings rates reflect the rather remarkable growth in household net worth, an unexpected surge in productivity in the mid-1990s, and an unexpected disinflation that lowered real long-term interest rates and thus raised the value of long-lived assets. Savings in the United States should return to more normal levels as these forces abate. This rebalancing of domestic demand across countries is one the factors that should help bring about a gradual unwinding of global imbalances.

Export Performance and Competitiveness of the Irish Economy Central Bank of Ireland Quarterly Bulletin 3 2005 - - - It is foreign-owned firms that are driving Irish exports and most of them don't have or need a marketing function in Ireland. The Irish firms are flatlining.

Ireland

Ireland's export performance has faltered coincident with the best sustained five-year performance of the global economy since the late 1960's.

China, India and the Asian tiger economies are hugely important potential markets for Irish exports but it's mainly a terrain for foreign-owned companies in Ireland. 

Global export volume grew by 8% in 2006 according to the World Trade Organization but Irish exports to markets such as Germany, France and The Netherlands showed little or no growth and exports to the UK were flat. Exporters to Japan saw a 14% fall in the value of goods and exports to China fell 10%.

As an estimated 92% of Irish exports in 2006 were made by foreign-owned firms, there is a serious problem with the analysis of our export performance.

The Irish employers' body IBEC issued a report in February to coincide with the Chinese New Year on opportunities for Irish exporters and there was no distinction made between exports by indigenuous firms and the foreign-owned sector. Last month, the Minister for Commerce lauded the 72% rise in Irish exports to Malaysia but it may have related to a decision for example, made outside Ireland by Intel, on transferring kit to Asian markets.

In February 2007, the National Competitiveness Council said that inflation and a strengthening euro mean that Ireland’s cost competitiveness has weakened significantly in recent years. Coordinated actions to restore Ireland’s cost competitiveness are critical across a range of policy areas, including fiscal policy and infrastructure development. In particular, a strong focus on land planning and competition policy issues is vital to regaining cost competitiveness, given the relatively high costs of property and locally traded services in Ireland.

Most new jobs created in Ireland in 2006, were in Construction, the Public Sector, Retail and Distribution. Some 7% of the total were in the internationally traded goods and services sector - -  2,913 permanent full-time jobs in foreign-owned companies, and  3,014 in Irish-owned companies.  

The Central Statistics reported last month that industrial employment was 241,500 in December 2006, an increase of 2,900 from December 2005. The total workforce in all production industries was 292,000. There are 281,000 employed in the Irish Construction Sector, compared with 126,100 in April 2008. Since Dec 1997, the number on the public service payroll has increased by 77,000 according to the Central Statistics Office and there has been no public service reform.