The Atlas of Economic Complexity and UK and Irish Exports over the past decade

Introduction

Previously the MIT based Observatory of Economic Complexity (OEC) has featured in PP posts, but another  resource (Harvard), the Atlas of Economic Complexity, (AEC) has not. It is a useful trade resource and well worth exploring as it seems to have more visualisation options than the OEC.

Much of the underlying data is the same, but the AOC has a major advantage in that services are included and there are some additional visualisations such as the time series plots (simply a plot of a particular measurement or statistic taken at regular time intervals) as shown in Fig 1 and 2. The latest year for which data is available is 2017.

This brief article will explore time series data for both the UK and IE exports, but as with all good data sources, I would encourage PP readers to explore the the Atlas of Economic Complexity for themselves. The headline finding is that IE exports more than 6 times more per capita than the UK.

UK Exports

Fig. 1 UK exports between 2007 and 2017

UK exports, over the past decade, are shown in Fig 1. Exports are dominated by services and have hovered around the $800bn region for the past decade, with a totally predictable dip in 2009 corresponding to the aftermath of the Global Financial Crisis (GFC), and a less understandable peak towards the end of 2013. Services are dominated by Information and Communications Technology (ICT) and Banking, with goods being dominated by chemicals, vehicles and machinery.

The minerals category seems strange, but this includes both crude and refined petroleum: exports are very oil dominated. Stone includes gems and precious metals according to the standard HS codes used for Exports. London is the centre of the Gold Bullion market and the economics here are unusual, e.g. something like 66% of all UK exports to Switzerland are gold – this article is highly recommended – hat tip to Richard Barfield for the link.

Interestingly given that Agriculture is less than 1% of UK GDP this rises to 5% in terms of exports. This seems to be from a multitude of sources but the largest single item seems to be Scotch Whisky.

Exports reached their peak towards the end of  2013, but declined slightly till 2016 and then picked up again. It would have been interesting to see the 2018 figures to see if this uptick continues.

UK GDP in 2017 was c $2640bn hence exports were c 30% of the total GDP in that year.

The overall performance is lacklustre, apart from the entirely understandable and predictable dip immediately after the GFC, exports are essentially flat over this period.

Irish Exports

Fig 2. IE exports 2007-2017

 

Irish exports are dominated by services and chemicals (including pharmaceuticals). The goods/service sector balance  is similar to that of the UK,  at around 50:50. Service Exports  comprise largely of ICT, which is unsurprising as Ireland hosts the European headquarters of many of the US  IT giants, including Airbnb, Apple, Facebook, Google, Microsoft and Twitter. Goods exports are dominated by chemicals and machinery. Unlike in the UK there is very little vehicle manufacture, largely because the logistics are more difficult, with Ireland being more peripheral, with integrated supply chains and just in time manufacturing more difficult.

The other major contributors are agriculture and electronics, contributing c. 5% each of total exports. It is perhaps surprising that agricultural exports in percentage terms are very similar to the UK (more in the summary). The Irish electronics industry is again dominated by multinationals, including Intel, HP, Segate and Analog Devices.

Total IE export value has increased substantially over the past ten years, reaching $250bn in mid 2010 and just shy of $350bn in 2017. The increase is c. 45% over the past decade.

The GFC downturn in 2009 affected IE exports nowhere nearly as badly as the UK, despite the fact that the GFC hit the Irish economy in general far more severely; indeed it had to be bailed out by the Troika. The Irish recovery after the GFC was largely export driven by multinationals.

Irish GDP in 2017 was c $332bn, hence exports were around 105% of GDP in 2017. Only a handful of countries  have Exports at over 100% of GDP, putting IE in the same category as Hong Kong and Singapore.

Summary

Superficially the UK and Irish economies look roughly similar from the graphs, with IE being less diverse, with a much  smaller minerals, vehicle and stone sectors. The textile sector also seems far more vibrant in the UK.

The UK vehicle sector is however very vulnerable post Brexit, as it relies heavily on integrated EU wide supply chains. The mineral sector should be secure, though as it is dominated by North Sea oil, Scottish independence is the major threat from a London perspective. The stone sector (which includes precious metals) is very secure, as London’s place as the centre of the gold bullion market should be totally Brexit-proof.

An obvious difference between the UK and IE is that whereas UK exports have been, in broad brush terms, fairly static over the past 10 years, Irish exports have seen a c. 45% increase.  This is a pattern replicated over multiple economic measures over the past decade, with the UK stagnating or running in first gear and the Irish economy doing very well and surging ahead.

The UK exports more than twice as much as Ireland (c. $800bn vs c. $350bn),  but it must be remembered that the UK has around fourteen times Ireland’s population.  UK exports are around $12k per capita whereas IE exports are c. $73k per capita. This explains the superficial agriculture sector mystery, even though in percentage terms exports are very similar for the two countries, per capita IE exports around six times as much agricultural produce as the UK. It is just that IE is far more successful at exporting in general.

This may also explain to a considerable part why Irexit is gaining no traction. The Global Britain argument – leaving the EU to increase trade (and about the only remaining economic argument with any credibility at all) is considered deranged by the Irish. Ireland puts its global export success nearly entirely down to being a member of the EU, the Euro, the Single Market and the negotiating heft that the EU has in securing far more favourable trade deals, than could be achieved alone.

The post Brexit future remains uncertain. There is much UK sabre rattling re a No-Deal Brexit, but at the time of writing, there seems to be some rowing back from this position  with the lead candidate Boris Johnson, downgrading the Halloween deadline from ‘essential’ to ‘desirable’. It seems also that Michael Gove and Rory Stewart may work together, again heralding a more measured approach.

In the case of a bad Brexit and Ireland the EY 2019 summer forecast  states:

The Irish economy appears strong enough to avoid outright recession on the back of a ‘bad’ Brexit in which tariffs apply, though it would be very damaging for particular locations and sectors. EY’s Europe Attractiveness Survey shows significant pick up in ROI Foreign Direct Investment (FDI) (52% increase in 2018), a major component of which is an acceleration of British FDI into ROI. This concurs with our EY Financial Services Brexit Tracker which places Dublin as the most attractive destination for Financial Services moving from London. A global slowdown presents a much greater threat to ROI headline GDP growth than Brexit. NI’s growth is weaker and without a relocation boost, would likely be pushed into recession.

Comments

  1. Bill Hughes -

    Very interesting, would the comparitive sucess of Irish exports bear any relationship with the fact that they trade in Euros?

    1. Sean Danaher -

      Bill
      it is difficult to tell. The largest proportion of IE exports go to the Eurozone and I have heard anecdotally that being in the Euro makes budgeting and forward planning much easier as currency fluctuations can be eliminated. The next more important customer for Ireland is the US and I think the Euro/Dollar exchange rate is fairly stable.

      Tthird comes Stirling and there have been problems with Stirling exchange rates, especially with low overhead agriculture such as mushroom farming.

      Of course from an MMT perspective being part of the Euro limits your choices and the GFC was handled very badly. Nevertheless on balance the Euro is very popular in Ireland.

  2. Peter May -

    Yes, Scotch Whisky is a major export earner and, remarkably, where produced in their tiny but growing way English and Welsh whisky seem to be exported as well, so too for English gin.
    Farmhouse Cheddar cheese is also widely exported and also all those terrible prepared meals that are killing us are exported too. So that probably explains the unexpectedly high level of UK agricultural exports.
    Like the bit about “leaving the EU to increase trade is considered deranged by the Irish.” That’s because it is!
    Don’t agree that it is the only remaining economic argument with any credibility at all. I don’t think it does!
    There ia an article around which unfortunately I cannot find the link to that shows that even at the height of the empire (say just before the First World War) the UK did more trade with Europe than the empire!

    1. Sean Danaher -

      Peter thanks. My brother in Dublin said that M&S had recently opened a food only store packed with ready meals, very popular apparently, but expensive.

      There is talk if Ireland becoming far more French facing in the case of a No-Deal Brexit.

      Whisky seems very good for the West Highland economy in particular, I thoroughly approve – just the sort of employment and economy needed in more remote rural areas.

      I agree that this global Britain argument is nonsense but my brother in law believes it – he takes anything written in the Telegraph as Gospel.

      The link regarding trade with Europe just before WWI sounds fascinating.

      I just wish this Brexit madness would end.

      1. Sam Johnson -

        And postscript

        “NB this is only merchandise trade, and even then the UK was a major exporter of services.”

      2. Sean Danaher -

        Sam thanks- the link is to a table in Schlote. These are goods only 1904 figures for the United Kingdom of Great Britain and Ireland.

        Imports World £551M, Europe £240M and Empire £120M
        Exports World £301M, Europe £104M and Empire £112M

        Substantial trade deficit even back then and far more imports from Europe than Empire. Exports much more balanced.

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