US Credit rating downgrade should not have major impact on Exports and paradoxically may improve attractiveness of Ireland as investment location; state Irish Exporters Association following the S&P credit rating downgrade announcement of Friday last

The Irish Exporters Association chief executive John Whelan, responding to concerns about the impact on the loss of the triple A credit rating by the US stated;
‘’The United States is Irelands largest trading partner and therefore any major jolts to the US economy must be monitored very carefully. The downgrading certainly heralds a changing world order in economic ratings, and may force other trading blocks and in particular the EU to tackle their sovereign credit management issues more comprehensively.

The IEA chief executive went on to say;
‘’The Standard and Poors downgrading of the US’s credit worthiness is expected to further weakened the value of the Dollar against most currencies, and in particular the Euro.
However, the downgrading may already have been factored into currency markets as the Dollar has fallen in value by 5.2% in the second quarter of 2011, despite the Eurozone sovereign debt crises.

Many of the multinationals exporting out of Ireland are US corporations and hence on repatriating the euro profits back to the USA show a greater gain when the Dollar weakens.
Also as the price of oil is denominated globally in US Dollars, a weakening of the Dollar will improve our cost base for transport, lighting, heating and manufacturing.

Hence, the fall in the value of the Dollar and the general financial crises is paradoxically making Ireland look a more attractive base for US multinationals , particularly as Irish labour costs have also been falling for the past two years .’’

The IEA advised that trade with the US last year was as follows;
Exports to US of merchandise goods = €20.8 billion
Exports to US of services = €4.7 billion
Total Exports of goods and services to US = €25.5 billion, or 15.6% of total exports.
Imports from US of merchandise =€6.4 billion
Imports from US of services= €25.7 billion
Total Imports of goods and services from the US = €32.1billion, or 25.4% of total imports.
Hence, one fifth of all our international trade last year was in Dollars with the US.

John Whelan, concluded by saying;
‘’There is no doubt that the Credit rating downgrading of the US economy will create a loss of business confidence and raise the costs of funds for business internationally, and this is not good news for global trade and exporting industry. We can also expect more volatility in currency markets, and higher costs of credit. However, it may also provide the basis for a more aggressive and wide ranging solution by G20 countries to the global sovereign debt funding issues, and ensure they are tackled more urgently.

Export industry needs a stable financial basis to flourish, and hence wide ranging and urgent measures must be put in place in Europe as well as the US and in Asia, to stabilise government funding and financial markets.’’

END

For further information contact;
John Whelan
087 9271243
jfwhelan@irishexporters.ie