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News : Irish Economy Last Updated: Feb 21, 2012 - 6:43 AM

Ireland signs trade agreements with China; There is no El Dorado on the horizon
By Finfacts Team
Feb 20, 2012 - 12:29 AM

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Trade agreements being signed in Dublin Castle between Ireland and China by Minister Bruton and Chinese Minister for Commerce Gao Hucheng, Feb 19, 2012. Taoiseach Enda Kenny (r) and China's Vice-President Xi Jinping, are in the background

The Government on Sunday evening signed two agreements aimed at improving Ireland’s trade and business links with China. However, there is no El Dorado on the horizon.

Both agreements were signed by the Minister for Jobs, Enterprise and Innovation, Richard Bruton TD, and by China’s International Trade Representative and Vice-Minister of Commerce, Gao Hucheng, at Dublin Castle following bilateral talks between the Taoiseach and the visiting Vice-President Xi Jinping who arrived from the United States on Sunday morning.

Irish exports to BRIC countries (Brazil, Russia. India and China from the original classification plus South Africa) are very low and are mainly made by the foreign-owned sector. Exports to these five countries only accounted for 2.3% of total exports in 2010 with China accounting for the lion's share. Exports to India were at a decimal point.

Exporting to China

In relation to China, for indigenous firms opportunities would be in niche areas and limited.

For a company to have export potential, it has to generally first establish a domestic base/record and unless it has a compelling product/service (in such a case it’s likely to be acquired by a bigger overseas firm), it needs resources, perseverance and patience.

Putting Mandarin on the school curriculum is a typical proposal from armchair ‘experts’ who have no experience of the challenges of selling in China - - 1.3bn consumers and all we need is a  very tiny slice of the pie!

In November 2009, Irish companies were warned by several senior executives who run some of the country’s most successful indigenous companies, to be cautious about expanding into emerging markets and focus instead on developed markets.

“More fortunes have been lost than made by getting in too early,” former CRH CEO Liam O’Mahony told a conference on making businesses international at UCD’s Michael Smurfit Business School.

O’Mahony, who ran the world’s second biggest building materials company from 2000 to 2008 and now chairs IDA Ireland, said Irish companies should consider expanding into the US, UK and other mature markets before looking at countries such as China. “Some of these markets are very large and there is still scope to grow as long as you have value propositions,” he said.

O'Mahony’s advice was repeated by Glanbia chief executive John Moloney and Glen Dimplex boss Seán O’Driscoll. “China is a long-haul, a slow-burn,” O’Driscoll said.

Trade Agreements

The first Memorandum of Understanding, on the Promotion of Ireland - China International Trade in Services, envisages a programme of events designed to encourage cooperation between the business sector in both countries.

Bruton said Enterprise Ireland  will be the key Irish body in helping strengthen a new trade relationship with China. EI already has three offices in China and operate an extensive range of supports to help Irish companies expand into the Chinese market.

The other agreement is a Memorandum of Understanding setting up a specially mandated working group to promote investment between Ireland and China. This will facilitate future investment and help identify any obstacles or administrative hurdles which might impede the growth or promotion of bilateral investment opportunities.

Activity under these new arrangements will be advanced under the wider framework of Ireland's 'Joint Economic Commission' with China. This is a bilateral forum involving both Governments. It meets formally every two years and is a regular way to enhance our trade and economic links between Ireland and China.

Speaking Sunday afternoon, Bruton said:
“A crucial part of the Government’s Action Plan for Jobs is to increase trade and investment activity with key markets such as China. We have already put in place a series of measures to build on the work done in recent years, but we must do more. The Vice President’s visit to Ireland is very welcome, and we are determined to take advantage of this excellent opportunity to further improve our links with China.

“These Agreements provide first of all for a comprehensive engagement between our two Governments to deepen and expand our enterprise links in order to provide substantial growth in the level of services trade. This will be of assistance to Irish businesses seeking to break into the Chinese for the first time and expand their activities there.

“Secondly, I see strong potential for increased inward investment as China seeks to deepen its engagement with the EU. Ireland is very well placed to be the target of such investment as the only English-speaking member of the Eurozone, and IDA Ireland has already had some success in this area. The signature of this agreement today formalises a mechanism for deeper ongoing engagement between our enterprise support agencies, particularly the IDA and its counterparts in the Chinese administration.

“These agreements are very welcome as we seek to grow our trade and investment links with China and ultimately create jobs”.

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