New export opportunities worth €500m a year by 2020 could emerge for Irish companies trading with Japan and Korea – particularly in the areas of chemicals and green tech – according to a report conducted on behalf of the European Commission.
The report, The Executive Training Programme’s EU Trade with Japan & Korea, conducted by economist Ronan Lyons of Oxford University, maintains that if export growth from Ireland to Japan and Korea follows growth patterns in Ireland’s non-EU exports over the last 10 years, Irish companies could enjoy significant new export opportunities by 2020.
According to the report, Ireland trades significantly less with Japan and Korea, on a per capita basis, than with Australia, another developed economy that is located about the same distance from the EU.
Per capita, Japan consumes about €13.70 worth of Irish imports per year, while the equivalent figure for Korea is €5.90.
However, Australians consume a significantly higher amount of Irish goods at €35.50 worth per capita. This points to the importance of factors apart from distance, such as culture, language and business environment, in maximising trade and export opportunities.
According to the IMF’s World Economic Outlook, Japan’s economy is expected to grow by about 18pc between 2010 and 2020 while Japanese imports of both goods and services is anticipated to grow by 50pc between now and 2016.
The share of Irish exports outside the EU that went to Japan fell from 10.8pc in 2000 to 4.8pc in 2010. With no change in trend, this could fall further to 2.1pc by 2020. In 2010, Japan was Ireland’s third-largest market for exports outside the EU, down from second largest in 2000. While Ireland’s exports outside the EU have grown on average 2.3pc per year over the past 10 years, exports to Japan have fallen at an average annual rate of 5.8pc in the same period.
Chemical and low-carbon opportunities
“Chemicals comprise 62pc of all Ireland’s exports outside the EU. In the case of exports from Ireland to Japan, however, the figure is just 42pc,” Lyons commented.
“An increase in chemicals exports to Japan in line with other countries could represent a €354m opportunity for Irish firms.
“Foreign direct investment presents a range of further opportunities for Irish firms. For example, construction activity in Japan over coming years will be driven by the reconstruction following the earthquake earlier this year – the most expensive natural disaster in history.”
"The reconstruction package announced by the Japanese government is estimated at €36bn. Also, Japan faces particular challenges in relation to healthcare, with 40pc of its population predicted to be over the age of 65 by 2050. The medical devices market in Japan, worth €20bn in 2009, is currently dominated by American rather the EU firms.”
In relation to Korea, the report shows that the proportion of Irish exports to that market has fallen steadily over the past 10 years, from 3.6pc in 2000 to 0.8pc in 2010. If this trend continues, trade with Korea would be an insignificant proportion of Ireland’s non-EU exports by 2020. However, with the coming into force of a free-trade agreement between the EU and Korea in July of this year, trade may continue to expand rapidly over coming years.
According to the IMF’s World Economic Outlook, Korea’s economy is expected to grow by about 53pc between 2010 and 2020 while imports of both goods and services is anticipated to grow by 75pc between 2011 and 2016.
The research shows that exports of chemicals comprise 62pc of all Ireland’s exports outside the EU but account for just 26pc of its trade with Korea. An increase in chemical exports to Korea to 62pc of the total would present a €100m opportunity for Irish chemical firms.
As a result of the Korean Government’s ‘Low Carbon, Green Growth’ strategy and a €11.5bn economic stimulus package, the environment and green-tech sector in Korea is booming, with the Ministry for the Environment in Korea predicting it will double in size to €45bn by 2013. Also, it is estimated that Korea’s healthcare sector, which was worth €38bn in 2007, will grow rapidly in coming years, by an average growth rate of 12-15pc per annum.