Partners Wanted: looking at Germany

As it stands, arguably Ireland’s most important trading and investment partner is the United Kingdom. This has been the case since Independence although the balance has shifted greatly since Ireland entered the EEC in 1973 with the UK no longer wholly dominant despite our reliance on the UK in certain sectors such as beef, timber, pork and much more.

As Ireland’s reliance on the UK as a trading partner has diminished, it has been able to look to a wider market largely thanks to membership of the EU both in terms of exporting to EU member states as well as using EU trade deals to export to third parties.

With Brexit negotiations set to start on Monday and following the election of Donald Trump as President of the US with a far more protectionist outlook, Ireland must now use its EU membership to develop new markets and make the most of trade deals.

While it is of crucial importance for Ireland to tap into new markets outside the EU after the UK’s decision to leave the European Union, Ireland will also have to seek to develop its commercial ties with states remaining in the European single market. In the latest of my series of articles, I will shift to possibilities closer to home and look at Ireland’s economic relations with Germany, Europe’s economic powerhouse and the world’s fourth largest economy.

Relations between Ireland and Germany go back to the 7th century when the Irish missionary bishop St. Kilian brought Christianity to then-pagan Franconia. Germans have long had an affinity for Ireland, demonstrated by German Nobel Laureate for Literature Heinrich Böll’s ‘Irish diary’, and Ireland provided a new home to about 500 German refugee children in the aftermath of World War II during Operation Shamrock. Today more than 11,000 German citizens live and work in Ireland while the Irish community in Germany continues to grow and Irish societies, associations as well as numerous GAA clubs hold regular events across Germany.

Irish businesses already maintain extensive ties with Germany and Germany is becoming an increasingly attractive trading partner given its strong economic performance, with its economy expected to grow by 1.9% in 2017 and record-low levels of unemployment. Germany has Europe’s largest economy and is the world’s third largest exporting nation. Germany’s GDP makes up almost a third of the Eurozone’s economy and it is the world’s leading industrial nation in automotive, life sciences, agri-tech, software and engineering services as well as the leading European economy for dairy production and has assumed a pioneering role in Europe’s renewable energies industry.

Germany is already one of our main trading partners with annual bilateral trade estimated at about €25 billion. It ranks third among destinations for Irish exports with almost 10 per cent of Irish exports going to Germany in 2015 while, in terms of imports, Germany is ranked fourth among countries of origin. Irish exports to Germany are worth approximately €14 billion. Ireland’s main exports to Germany are chemical products, food, services, and electrical and electronic goods while motor vehicles, electronic goods and machinery and chemical products make up the majority of imports from Germany. Germany is the Ireland’s second largest market for services exports, is ranked fourth among the countries of destination for Irish merchandise exports and Ireland’s third largest export market for non-food items.

Germany is also of crucial importance in terms of foreign direct investment (FDI), tourism and Irish food and drink exports. Germany is only second to the US as a source of FDI into Ireland with about 300 German companies employing more than 20,000 people in Ireland. More than 60 Irish companies such as Glen Dimplex, Smurfit Kappa and CRH employ approximately 14,000 people in their operations in Germany. Both German and Irish businesses have been supported in developing their operations by the German-Irish Chamber of Industry and Commerce since 1980.

German visitors are pivotal to the Irish tourism industry as there is widespread interest in Irish literature and music among Germans who are fascinated by Irish landscapes and appreciate our hospitality. Germany is the world’s third-largest spender on travel and the third-largest source of visitors to Ireland. It is also the most important holiday market to Ireland in mainland Europe. A record number of 630,000 Germans visited Ireland in 2015 (up 13 per cent on the previous year) and figures for 2016 suggest that this market continues to grow.

Exports of Irish food and drink to Germany are worth about €600 million annually, making Germany Ireland’s sixth-largest export market for Irish food and drink. Our agri-food sector is the third-largest provider of beef in Germany.

Even before the United Kingdom’s decision to leave the EU, Irish companies were increasingly trading with Germany. However, in a post-Brexit world, even closer economic ties with Europe’s leading economy, which is on Ireland’s doorstep and a member of the same currency union, offer promising opportunities for Irish companies and constitute an important step in the Irish government’s aim to diversify Irish trade. Economic links with Germany are not only important because of the size of the German market. Given Germany’s strong export economy, opening operations in Germany and trading with German companies also potentially gives Irish businesses the opportunity to use Germany as a gateway to markets all around the world and to become part of German companies’ international supply chains. Irish state agencies such as Enterprise Ireland and IDA have been very active in helping Irish companies strengthen their ties with countries all across the world and have seen particular successes in Germany.

In April 2017, then Taoiseach, Enda Kenny, visited Germany to further develop and promote trade, political, economic and commercial ties between Ireland and Germany and launched the Enterprise Ireland Going Global – Exporting to Germany Guide in Frankfurt. He also underlined the importance of economic ties with Germany after Brexit and promised to support Irish businesses to expand abroad.

Neale and his colleague Senator Joe O’Reilly pictured Bundestag Member Detlef Seif of Fine Gael’s German sister Party, the CDU, and Hans-Hartwig Blomeier, Director of the Konrad Adenauer Stiftung.

Political relations between Ireland and Germany are very close and, despite being viewed as a hate figure amongst the anti-austerity movement, German Chancellor Angela Merkel has been a good friend to Ireland and she shared a genuinely close relationship with Enda Kenny going back to their early days leading their respective parties that were then rare as being opposition parties unlike many of their counterparts in the European People’s Party. Chancellor Merkel has visited Ireland on numerous occasions and was one of the first EU leaders to acknowledge that Ireland must be given special consideration in light of Brexit. She emphasized this year that she is “most encouraging and supportive” of Ireland’s Brexit concerns. She views the Irish as close allies and a valuable source of expertise in the upcoming Brexit negotiations with the United Kingdom given our long and close relationship with the UK. It is telling that Chancellor Merkel was one of the first Heads of State that new Taoiseach, Leo Varadkar, spoke to following his election.

We will never have a better trading partner than the UK nor will we ever replace its preeminent role in Irish commerce but it is vital that we look to develop new markets and the obvious first ports of call must be those closest to home with the easiest levels of access.

Senator Neale Richmond is the Government spokesman on EU Affairs in Seanad Éireann and the Chairman of the Seanad’s Brexit Committee.

 

 

 

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  • ted hagan

    Well Dublin, you are welcome to Germany.any time because
    here are up North we will soon have all the benefits of Brexit (well in about 10 years).
    It’s just that I can’t think of any at the moment;
    However I’m sure it will all be fine with Arlene Foster in charge and with her fine track record in enterprise and investment.

  • Eoin Fogarty

    I like the Germans, funny people.
    Hopefully the ida and enterprise ireland can crack europe like they did the states before the funny business with taxes started.

  • runnymede

    well this is pretty laughable stuff, isn’t it? Germany takes about 7% of Irish exports. half as much as the UK and a less than quarter as much as the US.

    The Germans meanwhile have little interest in Ireland beyond seeing it as an annoying tax haven.

  • Gavin Crowley

    The idea is to substitute some UK trade with German trade. I work with an importer of tools who has UK and German suppliers. He would prefer the German ones based on quality issues (incidentally, the UK ones are not made in the UK) but,
    1. the German prices result in a tighter margin
    2. the Germans will only pay for carriage up to their own border
    3. the UK suppliers are wiling to supply small additional orders, with the Germans you need in practice to stick to a monthly order.
    4. They keep trying to put you in contact with their UK agent

    With a bit of time and effort 2, 3, and 4 can be resolved. If the currency keeps posing issues the tighter margin might make sense. If Brexit goes badly then it certainly will.
    It would not take much to flip from 80% UK to 80% German trade. But it’s easier to deal with the UK – for now.

  • Old Mortality

    ‘The Germans meanwhile have little interest in Ireland beyond seeing it as an annoying tax haven.’
    Shh, that’s just like mentioning the war.

  • Old Mortality

    The common corporate tax base (CCTB) is back on the agenda. And now the UK won’t be there to resist it alongside Ireland.

  • Pang

    Being referred to the UK supplier is quite common, not just for German suppliers. Ireland is a small market. It is one of the reasons stuff costs more here as the UK agent takes a margin. Maybe after brexit we will buy through agents in Germany for some industries.

  • Pang

    Freedom from EU agricultural subsidies and market access.

  • ted hagan

    Freedom? Penury more like.

  • Conchúr

    It’s not going to happen. Taxation is not an EU competency