Speech by Dr Orlaigh Quinn,

Secretary General of the Department of Business Enterprise and Innovation at

Asia Matters Brexit Briefing

25 January 2018

Good afternoon Ladies and Gentlemen.

Before starting, I would like to say thank you to Martin and to all at Asia Matters, who, under Alan’s guidance, work to promote trade and investment between Ireland and our Asian counterparts. My Department is very pleased to be a member of Asia Matters and I would encourage others to do so too.

Thank you for the kind invitation to speak with you today and to outline some of the priority issues for my Department - the Department of Business, Enterprise and Innovation - in relation to Asia, and the impact of Brexit on our work.

The Department has a wide remit across all aspects of business. This covers Enterprise and Innovation, Workplace Relations, the broad Business Regulatory Framework – from company law enforcement and white collar crime to costs on business such as personal injury insurance - and Competitiveness. We are the lead government Department championing the development of a competitive and conducive environment to promote enterprise and employment growth, to attract investment and to drive productivity growth. With regard to Trade, the Department is responsible for the identification, formulation and development of Ireland’s international trade policies. We also promote Ireland’s trade interest at (EU) trade policy negotiations, and actively participate at the World Trade Organisation (WTO).

The Department supports 9 Agencies and 5 offices. These include

- the enterprise development agencies - Enterprise Ireland, the IDA, Science Foundation Ireland and 31 Local Enterprise Offices,

- the regulatory agencies such as the Companies Registration Office, the Office of the Director of Corporate Enforcement and the Patents Office, and

- in the industrial relations area, the Workplace Relations Commission and the Labour Court.

The Department’s Response to Brexit

I would firstly like to present a brief overview of my Department’s response to the challenges and opportunities which arise from the UK’s decision to leave the EU. Brexit, as we all know, is the most significant challenge facing Irish enterprise in many years. It is likely, depending on the path chosen by the UK, to involve long term structural and disruptive change that will have a significant impact on how business in Ireland is conducted in the years ahead.

The negotiations have now moved into a new phase after the decision by the European Council that sufficient progress has been made in phase one of the Article 50 negotiations, and that the process can now move to phase two. This is a very significant step. Work will focus on agreeing transitional arrangements and the framework for the EU’s future relationship with the UK. It will also ensure that the commitments made in phase one on citizens’ rights, the financial settlement, and the Irish specific issues, are given legal effect in the Withdrawal Agreement. During phase two, one of Ireland’s key aims will be to seek to minimise the impact of Brexit on our trade and economy, and this is a key priority for my Department. But we cannot shy away from the fact that there will be short and medium term negative impacts for Irish enterprise which we must continue to work to mitigate. More on that anon!

We have already seen the impact of Brexit in terms of currency – the drop in the value of sterling has impacted on profit margins and the value of our exports to the UK. However,

the impact of Brexit will go beyond currency. While there is still a lot of uncertainty in terms of what Brexit will look like – especially in relation to trading relationships, the Single Market, and the Customs Union - there is no doubt that UK market dynamics will change. Exporting to the UK may be more challenging in a wide variety of ways.

But like all crises it is also likely to provide new opportunities. Ireland has traded its way out of challenging times before - most recently the economic downturn of 2008 and the banking crisis - and we will do so again. However, this won’t happen by accident; preparation is key - at Government level and at the level of the firm.

That is why the Government is intensifying its focus on the potential economic implications of Brexit, as evidenced by Budget 2018 which included a number of measures aimed at supporting firms in advance of Brexit challenges.

The Department of Business, Enterprise and Innovation, together with Enterprise Ireland and the IDA, in particular, is central to the Government-wide effort to prepare our economy to respond to Brexit. Our approach is to minimise risks and maximise opportunities by supporting the growth and resilience of Irish enterprises.

In November, we launched the document “Building Stronger Business” which sets out the range of actions underway and planned by the Department and its Agencies to prepare for Brexit across 4 key pillars – competitiveness, innovation, trade and supporting the negotiations.

The first pillar of our approach is to further strengthen our partnerships with business to help firms to achieve their competitive potential. We are working to create the best environment for business to grow, export and create jobs and this includes ensuring that firms have access to finance.

The recently announced Brexit Loan Scheme, for example, will provide affordable financing to firms impacted by Brexit. The scheme aims to make up to €300 million available to businesses with less than 500 employees, at a proposed interest rate of around 4%.

Other actions aimed to help firms to compete successfully include ensuring that our tax regime and infrastructure-spend promote national competitiveness, and that the enterprise agencies are appropriately resourced to help business focus on competitiveness at firm level. An additional €3 million secured in Budget 2018 is enabling the recruitment of an additional 50 Brexit-related staff across the Agencies and the Department to support our work in this regard. This builds on a similar Brexit related increase in staff resources in 2017.

Through the second pillar, we are taking action to drive firm level innovation. We are targeting R&D funding of over €230m for 2018, through our agencies, to support innovation in new products and processes, which firms need to compete and grow. And to invest, through SFI, in the pipeline of the next generation of innovators through a new postgraduate researcher programme worth €5.5 million.

Thirdly, we are supporting firms to trade. We are helping firms to start exporting, to grow their exports in existing markets and to diversify into new markets and regions. For example, Enterprise Ireland is seeking to increase client exports to the Eurozone by 50% by 2020, with the obvious aim of avoiding currency fluctuation challenges. At Government level, we will be working with EU partners to expand the portfolio of Free Trade Agreements which the EU negotiates on behalf of Member States across the globe. Current priorities include Mexico, Mercosur, Chile, Japan, Australia, New Zealand, Indonesia and Vietnam to name check several. And the IDA will continue to attract overseas investment to Ireland, including from the UK, capitalising on Ireland’s continued Single Market membership.

Finally, we are working across government to ensure that we get the best outcome possible for business from Brexit negotiations. The Department is leading on a range of Brexit research projects which will provide an extensive evidence base and valuable analysis to inform and guide Ireland’s position within the EU-27.

In tandem with the ongoing work of Government, however, businesses need to play their part. We know that some businesses are planning for Brexit but many, surveys indicate, are not. I would urge all companies to engage with the agency supports that are available to help them to assess their preparedness. I am aware that Enterprise Ireland and Local Enterprise Offices, in particular, are ready to support firms in this regard.

The Positioning of Asia within this Response

So how does this work impact on our trade relations with Asia? Well, essentially, it is now imperative that Irish companies build new and stronger trade links in dynamic and growing international markets such as Asia.

Ireland is one of the world’s most open, export based economies. With a small domestic market, and in light of Brexit, diversification and growth of Ireland’s exports into new international markets is now more critically important than ever before.

As exports continue to be a significant driver for our economy, and as Asia is the highest growing market for imports globally, countries in the region are becoming an increasingly strong source of export growth for us and our EU colleagues.

The Asian market has in excess of two billion consumers, with a growing middle class. It is regarded as the engine of global economic growth for the future. Two of the world’s three largest economies, China and Japan, are in the Asia-Pacific region, which now accounts for over 30% of global GDP. By 2025, Asia is likely to account for almost half of the world’s output while the continent is set to overtake the combined economic output of Europe and North America before 2030.

In Ireland, the value of our exports worldwide is at a record high, having reached a value of €260 billion in 2016. The latest data available, shows that export growth continued in 2017, with an 8% increase in the value of total exports up to the end of quarter 3. But, in order to sustain this growth, we must make sure that we are ready and able to enter new markets for our indigenous firms. For an economy which exports some €260 billion in goods and services globally, only €1.6 billion of that total went from indigenous firms to the Asian market. Clearly, there is enormous potential for growth in trade and jobs in this region.

As part of the diversification drive, we are working to promote the advantages of sourcing suppliers from Ireland, directly to buyers in key export markets, where trade opportunities and Free Trade Agreements exist.

The rapid rate of economic growth in Asia represents an exciting opportunity for Irish companies which have the capability to engage, and can offer world class products and services suitable for the market. Over the last five years, Enterprise Ireland client exports to Asia have more than doubled, growing from €747 million in 2011, to €1.6 billion in 2016. The number of companies exporting to the region has also grown rapidly with more than 600 Irish companies now selling products and services across Asia last year.

Take China - as the largest Asian economy with a population accounting for one fifth of the world’s grand total, its market potential is tremendous. The commitment to further deepen economic and trade cooperation with China has already borne fruit to our mutual benefit, particularly in the fields of agriculture, financial services, health sciences, ICT technologies, and other important industries.

Trade flows in both directions continue to grow strongly and recent years have seen substantial Chinese investment in the Irish economy. In fact, China’s two-way trade with Ireland is growing more quickly than China’s trade with any other EU country, and our trade with China reached nearly €13 billion in 2016.

It is significant that the areas of innovation, greentech, research and technology more broadly, areas where Irish companies are rapidly expanding, are all strongly prioritised in China’s 13th Five Year Plan.

China’s ambitious One Belt One Road Initiative, including six corridors across Eurasia, is opening up the potential for even further trade links and growth in our connectivity. Ireland is particularly pleased that Cathay Pacific has chosen Ireland as one of its new routes direct from Hong Kong, starting this summer. This will be the first ever direct scheduled passenger service between Ireland and anywhere in the Asia Pacific region. This new service will help foster growing trade, tourism, education and cultural links between Ireland, Hong Kong, the rest of China and the Asia-Pacific region at large. Indeed, strong tourism, educational and cultural links are often a gateway to deepening trade opportunities in goods and other services.

It might now be useful to recall that International Trade Policy is a competence vested in the EU Commission under the EU Treaties. Under this architecture the Commission makes legislative proposals and leads on international trade negotiations – such as with the Mercosur Region in South America at present, or, more recently, with Japan, Canada and many others - and the Member States approve the opening negotiating directives – or mandates. As negotiations progress, the Member States engage with the Commission on the substance of all trade proposals through various Committees, principally the Trade Policy Committee, and at Ministerial level through the Trade Council. Finally, Member States, at Council level, approve or reject the terms of Free Trade Agreements when negotiated. The leadership on Trade Policy for Ireland is led by the Minister for Business, Enterprise and Innovation, , supported by my colleagues in the Department. In such negotiations, the EU and its individual Member States would have “offensive” interests on market access, as well as “defensive” interests and we in DBEI take a considered and balanced view on the plusses and minuses in any proposed Free Trade Agreement in terms of Ireland agreeing or demurring from their terms. Crucially, I would suggest, that as the EU Commission negotiates for all 28 – soon to be 27 – Member States, this brings far greater leverage to the negotiations than an individual Member State does, which, for us in Ireland means that we benefit greatly from this pooling of sovereignty in the area of Trade Policy.

Ireland remains supportive of the European Commission’s negotiations of a comprehensive EU-China Investment Agreement which aims to remove market access barriers to investment between us. It will replace the 26 existing EU Bilateral Investment Treaties with China with one single comprehensive Investment Agreement. The last round of negotiations took place in in December 2017 and marked significant progress towards agreeing a common approach.

Ireland and our EU partners are also keen to assess the opportunities and recognise the legitimate economic challenges that “Made in China 2025”, which sets out China’s ambitious economic programme, represents.

The importance of the EU relationship with Asia is also critical to our relationship with Japan. Japan is our largest trading partner in the region for services, and the largest source of FDI into Ireland from Asia. There will be further exciting opportunities for Irish businesses once the new EU-Japan Economic Partnership Agreement comes into force. I was delighted that negotiations on the Agreement were finally completed in December 2017, and that there are plans for it to come into force as early as 2019.

This Agreement, the largest free trade agreement ever reached in value terms, will take the EU-Japan relationship to a higher strategic level and will cover some 30% of the world’s GDP. It will establish a firm base for a free, fair and open system of international trade, that is mutually beneficial. In the context of the current threats to free trade, what the EU and Japan have agreed together is very significant. I believe it will be a model framework for the world.

In practical terms, the Economic Partnership Agreement will allow Ireland and Japan to do more business together. It will address issues related to market access for goods, services

and investment, procurement, non-tariff measures, the protection of geographic indicators and intellectual property rights. It will stimulate more business activity between our two countries and contribute to our economic growth. It will boost trade and investment, create jobs and offer better choice to consumers. On the basis of the Agreement, we can look forward to seeing the partnership between the EU and Japan, and Ireland and Japan, grow even stronger in the coming years.

Taken together with the EU’s agreements with Korea, Vietnam and Singapore, and with prospective negotiations with Australia and New Zealand, the conclusion of the Agreement with Japan demonstrates the European Union’s sustained commitment to global trading and developing stronger relationships across the Asia-Pacific Region. Indeed, an October report by the European Commission’s Trade Directorate showed that since the Free Trade Agreement with South Korea came into force in 2011, EU exports grew by almost 60% and imports from South Korea over 50%. A previous trade deficit of €11.6 billion is now in surplus to the amount of €3 billion in 2015.

India is one of the fastest growing economies in the world and a key strategic partner for the EU. It is unfortunate that greater progress has not been achieved to date on a comprehensive EU-India Free Trade Agreement given that negotiations were started in June 2007. This would be one of the most significant trade agreements for both sides, touching the lives of over 1.7 billion people. Ireland is fully supportive of the EU’s trade negotiations with India and continues to support discussions on an ambitious Free Trade Agreement. An Agreement with India would open up opportunities for Irish exporters and companies across a wide range of sectors.

The revised dynamic informing the current negotiations for a Trans Pacific Partnership presents opportunities for the European Union as a strategic partner and like-minded trading bloc for Asian economies. Reports earlier this week indicate that the TPP under its new title of a “Comprehensive and Progressive Agreement for Trans-Pacific Partnership” is edging closer to final agreement.

So, we are working on growing trade and investment both at domestic and EU level; and Brexit has reinforced the importance and the urgency of pursuing an ambitious programme of negotiations at EU level. Accelerating the delivery of EU trade deals with leading economies and regional blocs such as Asia, under the EU’s “Trade for All” Policy, has therefore never been so important to ensuring domestic growth.

My Department recently commissioned a major new study to examine the economic opportunities and impacts for Ireland arising from Free Trade Agreements. The objective of this Study is to deepen our understanding of how Ireland can best take advantage of these opportunities, and ensure that our businesses are ready and prepared to access new markets and to compete internationally.

Trade Missions

Last November, I witnessed the massive potential for trade growth in the region personally when I visited Japan and Singapore as part of a trade mission led by the former Tánaiste, Frances Fitzgerald. The mission was an opportunity to position Ireland as a post-Brexit solution for companies across the Asia-Pacific region. It was designed to help Irish companies to further their relationships with new and existing customers, and to deepen relationships with IDA clients to promote further investments for Ireland.

Throughout the visit, we highlighted the role that Ireland can play for Asian companies looking to locate part of their business in Europe in the context of Brexit. As a committed member of the EU, Ireland has an excellent mix of a stable democracy, a skilled and talented workforce, a track record and a pro-business environment, to offer potential and existing client companies – with guaranteed access to the European single market. Membership of the EU has not only given Ireland access to the 27 markets within the single market, but also to a wide range of global markets through the series of Free Trade Agreements, some with individual countries and others with trading blocs.

After more than 40 years of EU membership, we have built up strong bonds of partnership with other member states and with the European institutions that will continue to serve our economy and our global partners well. And while Ireland’s future lies within the European Union, we will also work to maintain our excellent bilateral relationship with the UK.

Global institutions, including many Asian companies, are already showing a very keen interest in moving some of their operations to Ireland. A number of them have visited Ireland in recent months. Asian companies already have a large presence in Ireland and feedback from these companies about their experiences in Ireland is hugely positive.

During the trade mission to Japan and Singapore, we attended a large number of meetings with businesses and their representative organisations, involving the 60 Enterprise Ireland client companies who participated. It was inspiring to hear their positive experiences. The businesses involved are proof that Ireland offers truly world-class products and services across a range of sectors in Asia.

Such high-level visits to the region play a crucial role in developing trade and investment links. A number of Government Ministers will be visiting Asia for St Patrick’s Day, including missions to China, Japan, Korea, Singapore, Vietnam, Australia and New Zealand, with ambitious programmes planned for all. In addition, my Department is working closely with Enterprise Ireland in finalising the trade mission programme for 2018, which aims to include ministerial led missions to India and China.

In 2017, Enterprise Ireland delivered an impressive programme of international trade events in 2017, giving Irish companies the opportunity to meet with potential buyers and to network with key influencers in countries around the world. In total, 57 internationally focused trade events were organised by Enterprise Ireland during the year, with 20 of these

held in Asia-Pacific, including ministerial led missions to Japan, Singapore, Korea and Thailand, with a major trade programme as part of the President’s State visit to Australia and New Zealand. These trade missions are a central element of Enterprise Ireland’s Strategy for 2017-2020: Build Scale, Expand Reach. The events support the key goal of securing high-level international market access for Irish companies aiming to grow their businesses overseas and increase domestic employment.

Maximising Asia trade opportunities for Ireland through a New Strategic Focus

I have been very pleased to witness at first-hand the excellent work that our state enterprise and investment agencies are doing in Asia. They are working tirelessly to promote Ireland, both as a potential location for companies from the Asia-Pacific Region and as a source of high-quality, innovative products and services.

Therefore, as Ireland’s relationship with the Asia Pacific region grows, the Government is prioritising expanding our diplomatic and agency footprint there. The ambition set by the to double Ireland’s global footprint by 2025 responds to the scale and complexity of challenges that we face as a country in the years ahead.

Ireland is now represented right across the Asia-Pacific region, with State Agencies and Diplomatic Missions in sixteen cities, including plans to open a new Embassy in New Zealand, and a new Consulate General in Mumbai. The announcement of these new Missions is an important step. Our “twenty-four/seven” presence in such locations, augmenting the on- the-ground activity by the EI, IDA and other enterprise development agencies and partners, will further assist in diversifying Ireland’s trade portfolio as we prepare for Brexit, as well as look to exploit new trade opportunities on their own merits.

To complement our increased presence in the region, the government is committed to developing a new cross-sectoral Asia Pacific Strategy. This will encompass engagement across the broad spectrum of our interaction with the region, including at political, economic and cultural levels, as well as with our diaspora.

The objective of significantly developing trade with the region is a central pillar of the Strategy. Work on the Strategy by my Department, with the Department of Foreign Affairs and Trade, has been ongoing, and I am pleased that it is now close to finalisation.

Conclusion

In closing, I would like to again thank the Asia Matters team, led by Chairman Alan Dukes and Executive Director, Martin Murray, for their continued support and work in promoting better connections between Asia and Ireland. The personal and business links developed in gatherings such as this are essential to our strong relations with the region. As trade between Ireland and Asia strengthens at a rapid rate, Asia Matters is playing a very important role in growing that relationship and further deepening our mutual understanding. To that end, my Department is delighted to partner with your work on the ground in the region.

Thank You.