Trading partners

Following on from a look at export levels here, we can also use the latest CSO External Trade release to look at Ireland’s trading partners.
The following table gives the top 12 destinations of Irish exports in millions of euro, along with the remaining exports to other EU countries and other worldwide countries.  The table gives the percentage change from the same period in 2008 in exports to this country and the proportion of total exports that go to that country.

Country	Jan-Nov 2008	Jan-Nov 2009	% Change	% of Exports
USA	15,344.8	16,653.7	+8.5%	21.5%
Belgium	11,350.4	13,859.1	+22.1%	17.9%
Great Britain	13,108.4	11,233.4	-14.3%	14.5%
Germany	5,565.6	4,388.2	-21.2%	5.7%
France	4,557.1	4,228.5	-7.2%	5.5%
Spain	3,284.7	3,207.1	-2.4%	4.1%
Netherlands	2,773.6	2,590.9	-6.6%	3.3%
Italy	2,819.0	2,586.7	-8.2%	3.3%
Switzerland	2,378.1	2,261.7	-4.9%	2.9%
China	2,198.5	2,175.9	-1.0%	2.8%
Japan	1,559.8	1,585.7	+1.7%	2.0%
Northern Ireland	1,451.2	1,157.1	-20.3%	1.5%
Other EU	4,596.0	3,912.3	-14.9%	5.0%
Other countries	8,649.0	7,692.7	-11.1%	9.9%
Total	79,636.2	77,533.0	-2.6%	100.0%

After the US, the biggest destination of Irish exports is Belgium, taking nearly 18% of the total exports.  Belgium is the biggest destination of Irish exports in the EU, overtaking Great Britain and is more than three times greater than either France or Germany.  Exports to Belgium also show strong year-on-year performance with a 22.1% increase on the same period in 2008.
This is likely related to pharmaceutical exports, with manufactured products from Ireland exported to central distribution hubs in Belgium.  Again it is likely that the size and increase of this flow is due to transfer pricing behaviour rather than real changes in output and employment. Tweet

An Export-Led Recovery?

On Tuesday the CSO published the latest release of the monthly external trade statistics.  As with many recent patterns from the Irish economy, the data do not paint a positive picture.  At first glance it may seem that all is not too bad as our overall trade balance increased through 2008 and most of 2009.
The following graph gives our trade balance from the start of 2005 through to November 2009.

The trend has turned slightly downward over the past few months, but our trade balance is still substantially higher than it was two years ago.  If we break down the balance into its constituent elements of imports and exports we see that the trade balance is improving because of the rapid fall in imports.  We are buying less stuff from abroad. This is shown in the following graph
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Why isn't the corporate income tax progressive?

The equity principle that underlies most tax system suggests that those who have a higher income should pay a greater proportion of their income in tax.

This progressivity is clear if we consider income tax, but absent for corporation tax.  Using data from the Revenue Commissioners 2008 Statistical Report we can draw the following graph.

This gives the effective tax rate on labour on wages up to €200,000 (lower axis) and the effective tax rate on corporations on profits up to €10,000,000 (upper axis).  We see that the tax rate on labour rises with income, from 0% up to about 28%, while the tax rate on corporations is around 11% for all profit levels.

Why should a company that earns a profit of ten thousand pay the same rate of tax as a company that earns a profit of ten million?  Why is the corporation tax not progressive?

Andrew Chamberlain provides the answer:
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Confusing Income and Wealth

It is very common to see income (a flow measure) confused with wealth (a stock period).  Wealth is accumulated through a period of high income. High income alone does not indicate wealth.  Wealth is accumulated with persistent levels of high income.

This reached a peak when after 2006 among non-oil economies Ireland was declared “the richest country in the world”.  A piece in The Irish Independent declared that “Ireland is rated sixth richest country in global wealth league”.  The piece declared:

IRELAND is now the richest non-oil country in the world, apart from the small financial hubs. With the exception of world financial centres like Liechtenstein and Bermuda and the oil kingdoms of Norway and Qatar, Ireland is now the world's richest country with an average income of €44,000.

The Standard & Poor's agency ratings show Ireland lying in sixth position for the second year in a row, easily beating the likes of the US and the UK, who took 11th and 18th places respectively. Ireland's average income has risen from €39,335 last year to a new high of €44,000. The increase in wealth is reflected in spending both on property and on the high street.

There it is in black and white - “Ireland is now the world’s richest country”.  Everyone bought into it.  A couple of good years and we’re suddenly declared the richest country around.  We started in 1995.  Some countries have a head start on us at wealth accumulation of hundreds of years yet we’re supposed to have wiped that out, and more, in a decade.

This report from National Irish Bank provides an interesting analysis of wealth in Ireland.  Maybe we’re not as “rich” as we thought we were.

Today Davy Stockbrokers have released a report of their own which does not confuse income with wealth.  They analyse what we have done with the money we earned during the high income period from 2000-2008.  Their opening remark is stark.

Ireland ranks reasonably well in income tables, but it is not
a wealthy country; high income in 2000-2008 largely wasted.

The report makes for interesting reading and the conclusion is clear.  Here it is in black and white.

We blew the boom!

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Does Debt Matter?

On his ever interesting blog Steven Landsburg has posted a short piece on Debt and Taxes.  With attention around the world focusing on the debt and deficit problems of governments, Landsburg argues that it is not debt that is the problem but spending.  He concludes

This is why it’s so frustrating to hear talk of blue ribbon commissions assigned to the task of “debt reduction”. “Debt reduction” can mean less spending, or more taxes, or some combination thereof. But to raise taxes solely for the purpose of debt reduction is to mask the problem, not to solve it. Debt is not the problem; spending is. Hysteria about the debt is misdirection.

Read the whole thing. Tweet