Brexit: Analysis of Import Exposures in an EU Context

March 2018 ``

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Brexit: Analysis of Import Exposures in an EU Context

Department of Finance March 2018

Department of Finance Government Buildings, Upper Merrion Street, Dublin 2, Ireland Website: www.finance.gov.ie

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Contents

Executive Summary ...... 4 1. Introduction ...... 5 2. Data and Methodology ...... 7 3. Irish Goods Exposures to the UK ...... 9 4. EU-27 Goods Exposures to the UK ...... 16 5. Conclusion ...... 27 6. References ...... 28 7. Annex: Services Trade Exposures ...... 29 8. Appendix ...... 35

Key Words: Brexit, Sectoral Exposure, International Trade, Imports, Exports, Goods, Services

The author Clíona McDonnell is an economist in the Department of Finance and members of the Irish Government Economic and Evaluation Service (“IGEES”). This document is part of ongoing Brexit analysis and scenario planning for input into a larger Government deliberative processes. Unless explicitly referenced by Government decision, any proposal contained in this document does not represent Government policy and should not be represented as such. The analysis and views set out in this paper do not necessarily reflect the views of the Minister for Finance. The author would like to thank colleagues Brendan O’Connor, John McCarthy, Mike Fahy, Justin Flannery, the Department of Finance Brexit Unit, and members of the Department of Finance Executive Board Policy Development and Review Group. The author also acknowledges comments received from the Department of Agriculture, Food and the Marine, Georgina Hughes-Elders (Department of Public Expenditure and Reform) and various Interdepartmental Brexit working groups.

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Executive Summary This paper examines the import exposures to the UK of Ireland and other EU Member States at a sectoral level. The analysis builds on previous work undertaken by the Department of Finance on sector-level export exposures, in the context of the UK’s decision to leave the EU.

Overall Ireland has a trade surplus with the UK, and within the overall balance, runs a goods deficit and a significant services surplus. On the imports side, the UK represented a far higher share of Irish goods imports (23 percent) than exports (13 percent) in 2016, although the import share has been declining in recent years. This import exposure is spread across a wide range of sectors, compared to the export exposure which is more concentrated in certain sectors. Once again, Food and Live Animals is the most exposed sector, however the analysis also points to the issues facing sectors such as retail, manufacturing and pharma-chem due to supply chain linkages. It is also shown that SMEs are likely to be disproportionately affected by a shock to supply chains as they comprise the majority of importers in certain sectors.

Taking the results into a wider EU context, Ireland’s sectoral imports are substantially the most exposed of the remaining EU-27, across almost all sectors. Furthermore, at a subsectoral level, thirteen of the top fifteen most exposed subsectors across the EU-27 are Irish, and there is considerable overlap between the exposed import and export subsectors, particularly for those in the agri-food sector.

On the services side, Ireland is less exposed to the UK with regard to imports than exports. While on aggregate Ireland is the second most exposed Member State for services exports, it is one of the least exposed for services imports, both at the aggregate and sectoral level.

The results further highlight the disproportionate exposure of both Irish business and consumers to Brexit. The high import exposures show that it is not just Irish exporters that are exposed to Brexit but also firms integrated into supply chains, and disturbances to retail and distribution supply chains could have a direct impact on Irish consumers through reduced competition and higher prices. These issues indicate that Brexit is likely to cause a structural, rather than cyclical, change in the Irish economy. As such, a comprehensive trade agreement between the UK and EU that is as close as possible to the status quo is imperative for Ireland to prevent a rise in the cost of imports for firms across all sectors and minimise the impact on the Irish economy.

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1. Introduction

While a sizable body of work now exists on the impact of a UK exit from the EU on exports across the EU, there has been less focus on how Irish and European imports may be affected. This paper aims to address this by analysing the import exposures of the remaining EU-27 at a sectoral level, with a view to identifying which sectors and countries are most reliant on the UK, in particular with respect to goods.

Two previous Department of Finance papers (2017a, 2017b) looked at sectoral export exposures to the UK, firstly within the Irish economy and then in a wider European context, using two measures of trade exposure, size exposure and proportional exposure. These quantify both the importance of each sector’s UK exports in a country’s overall exports (size exposure) and the importance of the UK to each sector (proportional exposure). This paper utilises the same methodology to calculate the equivalent import exposures to the UK of each sector in the EU-27, focusing primarily on trade in goods. As trade data for 2016 are now available, the export exposures are also updated, facilitating an examination of whether there is overlap in the sectors that export and import the most to and from the UK.

Looking firstly at the Irish economy on a standalone basis, the results show the considerable extent to which Ireland’s imports are sourced from the UK. Ireland records a goods trade deficit with the UK, importing €17bn of goods in 2016, representing 23 percent of total goods imports, compared with 13 percent (€15bn) of goods exports (though Ireland has an overall trade surplus due to a surplus in services trade). It is also apparent, however, that the share of imports from the UK has declined materially in the last three years as Irish imports from other countries have risen. Similar to the results of the export analysis, the Food and Live Animals sector is the most exposed on an import basis, particularly the cereals, dairy products and eggs, and meat subsectors, although Ireland maintains a trade surplus with the UK in the sector. This once again highlights the need to minimise any future disruptions to trade in the agricultural sector with both Northern Ireland, which accounts for 14 percent of the sector’s imports, and Great Britain.

An important difference on the imports side, however, is that the UK exposure is spread across a greater variety of sectors, compared to a more concentrated export exposure in certain sectors. The other sectors with particularly significant exposure levels are Chemicals, Machinery and Transport Equipment, Manufactured Goods (manufactured items for intermediate consumption), Miscellaneous Manufactured Articles (essentially consumer goods), and Mineral Fuels. This reflects the importance of the UK as a provider of imports to the wider Irish economy and its essential position in many Irish

Page | 5 supply chains. Any disruption to imports from the UK would be relevant for Irish-based producers importing raw materials, or intermediate input goods, and for consumers purchasing final consumption goods. This issue is especially pressing for SMEs, who are less likely to have capacity to alter supply chains, and who have a particularly large share in the retail and distribution sector. It is also worth noting that this analysis does not consider the use of the UK as a landbridge for goods in transit from the rest of the world, which would increase the exposures of each sector to the UK beyond those estimated in this paper.

In the wider European context, the analysis shows that Ireland’s imports are the most exposed, and by a significant distance, of the remaining EU-27 countries, on both measures of trade import exposures. Within the majority of sectors, Ireland has the highest level of dependency on the UK (reflected in the proportional exposures), and Ireland is also the most exposed Member State when the macroeconomic context of a sector’s imports is considered (the size exposure). While Ireland is more exposed in terms of imports than for exports in most sectors, the remaining EU-27 countries are relatively less exposed in respect of imports. Disaggregating the data to a subsectoral level shows that thirteen of the top fifteen most exposed national subsectors are Irish.

While services sectors are not the primary focus of this paper, not least because they are less impacted by tariffs, the results for these sectors are also presented in an annex. The results show that Ireland is significantly less exposed to the UK in terms of services imports compared to exports, with 6 percent of services imports coming from the UK, compared to 16 percent of services exports. Furthermore, Ireland’s services imports are not the most exposed across the EU-27, in fact, Ireland is one of the lesser-exposed Member States across the majority of services sectors.

The remainder of the paper is structured as follows: firstly, the data sources and methodology used is outlined in section 2. In section 3, the exposures of Irish import sectors will be examined, as well as import trends over time. Section 4 follows by putting these exposures in a European context, presenting the most exposed countries across the key sectors identified. This section also contains a discussion of some of the key issues that Ireland faces regarding imports, and looks at the particular exposure of small businesses. The most exposed subsectors across the EU-27 are also shown in section 4, before section 5 concludes. A summary of services sector exposures is then presented in an annex.

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2. Data and Methodology

2.1. Data The data for the primary analysis were obtained from the United Nations Conference on Trade and Development (UNCTAD) database. This dataset contains information on the imports and exports of goods by product and destination.1 These products are aggregated into sectors according to the SITC reference codes, further detail of which is presented in Appendix Table 1.2 Central Statistics Office (CSO) External Trade and Balance of Payments data are used to complement the UNCTAD data for the analysis of Irish trade on a standalone basis.

For the services analysis presented in the Annex, OECD EBOPS 2010 data on trade in services by partner country were used, along with CSO and Eurostat Balance of Payments data. The OECD dataset does not include data on Bulgaria, Croatia, Cyprus, Malta or Romania, however, and as such, these are not included in the sectoral analyses.

2.2. Methodology The methodology used to calculate the exposure measures presented here follows that used in Department of Finance (2017b) to measure export exposures. These measures are applied to both imports and exports here and encompass two dimensions of trade exposure to the UK. The sectoral size exposure measure is calculated as the value of the imports in each sector from the UK as a proportion of a country’s total imports. The sectoral proportional exposure measure represents the proportion of each individual sector’s imports from the UK as a proportion of that sector’s global imports. Together, the two dimensions give a measure of both the importance of a sector in a country’s overall imports and the importance of the UK to that sector (see Box 1 below).

1 Available from UNCTAD (http://unctadstat.unctad.org/). Note: all data are in US dollars. 2 SITC is defined as the Standard International Trade Classification which is a statistical classification of the commodities entering external trade. It is designed to provide the commodity aggregates required for purposes of economic analysis and to facilitate the international comparison of trade-by-commodity data.

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Box 1: Measuring the concepts of Size and Proportional Exposure (Department of Finance 2017b)

i,UK ′ X j 푆푒푐푡표푟 푠 퐼푚푝표푟푡푠 푓푟표푚 푡ℎ푒 푈퐾 푆푖푧푒 퐸푥푝표푠푢푟푒 = = i,World 푇표푡푎푙 퐶표푢푛푡푟푦 퐼푚푝표푟푡푠 푓푟표푚 푡ℎ푒 푊표푟푙푑  X j i

i,UK i,World where X j are imports in sector i to country j, imported from the UK. The denominator X j represents sum of total imports of all sectors to country j, imported from the world.

i,UK ′ X j 푆푒푐푡표푟 푠 퐼푚푝표푟푡푠 푓푟표푚 푡ℎ푒 푈퐾 푃푟표푝표푟푡푖표푛푎푙 퐸푥푝표푠푢푟푒 = = i,World 푆푒푐푡표푟′푠 푇표푡푎푙 퐼푚푝표푟푡푠 푓푟표푚 푡ℎ푒 푊표푟푙푑 X j

i,World where are imports in sector i to country j, imported from the UK. The denominator X j represents total imports of sector i to country j, imported from the world.

The equivalent methodology is used to calculate export exposures, replacing imports with exports to the UK and to the world.

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3. Irish Goods Exposures to the UK

Previous work has established both the diversity of exposures across export sectors in Ireland and the particularly significant exposure of Irish exports compared to the other remaining EU-27 (Department of Finance 2017b). This paper turns the attention to imports. In this section, we firstly look at the variation in the exposure of the Irish import sectors, and compare the import exposures to the export exposures within each sector, allowing us to identify both which sectors are most exposed and whether those exposures are symmetric across imports and exports.

At an aggregate level, the importance of Ireland’s trade relationship with the UK, in terms of goods, is more pronounced from an imports than exports point of view. Ireland imported €17bn in goods from the UK throughout 2016, representing 23 percent of its total goods imports, compared to 13 percent (€15bn) of goods exports.3 This is comprised of both intermediate inputs (c.€7bn) and final consumption goods (c.€7bn), however, a detailed analysis of this split at the sectoral level is not feasible here; instead, the focus is restricted to an analysis of aggregate import types.4

Moving to the sectoral level, Ireland’s trade balance with the UK in each goods sector is first presented in Figure 1. There are three sectors in which Ireland records a trade surplus: Chemicals, Food and Live Animals, and Crude Materials. In the remaining sectors, Ireland’s imports outweigh exports to the UK, with the largest deficits visible in Mineral Fuels, Machinery and Transport Equipment, and the two Manufacturing sectors.

3 As per CSO external trade data. 4 As per CSO Merchandise Imports by Main Use (external trade) data. A further €1.5bn of imports are classified as producer capital goods, with the remainder undisclosed.

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Figure 1. Ireland’s Trade Balance with the UK by Sector, 2016 (€m)

2,000 1,729

1,500 984 1,000

500 246

0 -52 -47 -500 -652 -1,000 -690 -776 -994 -1,500 -1,586 -2,000

Source: CSO External Trade goods data. Department of Finance analysis.

This aggregate data does not show the intensity of imports or exports in each sector, however, and as such the trade exposures for both statistics are presented in Figure 2. It is clear that whilst the level of import exposure to the UK varies across sectors, the exposure is more evenly distributed across sectors for imports than for exports. While on the exports side, Food and Live Animals and Chemicals are clearly the two most exposed sectors (on a size exposure basis), on the imports side, these sectors are two of six sectors with significant size exposures, the others being “Machinery and Transport Equipment”, “Manufactured Goods”, “Miscellaneous Manufactured Articles”, and “Mineral Fuels, Lubricants and Related Products”. The implications of these exposures and the differences in the relative positioning of these sectors in terms of imports versus exports, i.e. that some sectors’ imports are more exposed to the UK than their exports, will be discussed further in Section 4.

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Figure 2. Irish Goods Import and Export Exposures to UK, 2016 80 Imports 70

60 Mineral fuels, Commodities and lubricants and related transactions, n.e.s. 50 materials Beverages and tobacco Food and live animals 40 Manufactured goods Animal and vegetable 30 oils, fats and waxes Miscellaneous manufactured articles Crude materials, 20 Chemicals and Machinery and inedible, except fuels

related products, transport equipment ProportionalExposure 10 n.e.s.

0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Size Exposure

80 Exports Mineral fuels, lubricants and related 70 materials

60 Manufactured goods

50 Commodities and transactions, n.e.s. 40 Crude materials, inedible, Food and live animals except fuels 30 Beverages and tobacco 20 Machinery and Animal and vegetable transport equipment oils, fats and waxes ProportionalExposure Chemicals and related 10 Miscellaneous products, n.e.s. manufactured articles 0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Size Exposure Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

As is the case for exports, Food and Live Animals is the most exposed sector to the UK in terms of imports, on a size exposure basis. Food and Live Animals represents approximately 19 percent of Ireland’s goods imports from the UK (€3.2bn), or 4.6 percent of Ireland’s total global goods imports (the size exposure).5 As can be seen in Figure 3, Northern Ireland accounts for 14 percent (€453m) of this, indicating that the majority of Ireland’s agricultural imports are from Great Britain rather

5 This figure is based on CSO external trade data, classified according to SITC codes. Data sources using alternative classification methods may produce differing values for the agri-food sector.

Page | 11 than Northern Ireland, with the same true on the exports side. This is, however, the sector with the highest proportion of UK imports from Northern Ireland, which is generally low across sectors.

Figure 3. Proportion of UK Trade with Northern Ireland, 2016 (€m) Imports Exports

Great Britain Northern Ireland Great Britain Northern Ireland 4,500 4,500 12% 4% 4,000 4,000

3,500 14% 3,500 4% 3,000 3,000

2,500 3% 3% 2,500 7% 1% 2,000 7% 2,000 1,500 1,500 10% 20% 14% 1,000 1,000 17% 8% 33% 500 11% 25% 500 29% 29% 36% - -

Source: CSO External Trade data. Department of Finance analysis.

Within the Food and Live Animals sector, the proportional exposure shows that 48 percent of imports are from the UK. A breakdown of Ireland’s exposures within this sector can be seen in Figure 4, with “Cereals and Cereal Preparations”, “Meat and Meat Preparations”, and “Dairy Products and Birds' Eggs” the most exposed subsectors to the UK on a size exposure basis, with Cereals accounting for almost 1 percent of all imported goods. The majority of these imports are from Great Britain, with the main exposure to Northern Ireland coming in Dairy Products, from where 25 percent (€156m) of the subsector’s imports come. Again, on the imports side, there is more diversity in the exposure of subsectors to the UK, whereas on the exports side, the “Meat and Meat Preparations” subsector is substantially the most exposed in terms of size.

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Figure 4. Breakdown of Irish Food and Live Animals Product Exposures, 2016

90 Imports 90 Exports Fish, crustaceans Cereals Vegetables and fruits 80 and molluscs Dairy 80 Live animals products Live animals and birds' 70 70 Feedstuff eggs Cereals Meat and 60 60 Coffee, tea, meat Coffee, tea, cocoa and spices cocoa and preparations spices 50 Meat and meat 50 Sugar and Dairy preparations honey products 40 40 Vegetables and birds' and fruits eggs

30 Feedstuff 30 Proportional Exposure Exposure Proportional

Proportional Exposure Proportional Sugar and honey 20 Miscellaneous 20 Miscellaneous edible edible products 10 products 10 Fish, crustaceans and molluscs 0 0 0.0 0.5 1.0 1.5 0 0.5 1 1.5 Size Exposure Size Exposure Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

In Department of Finance (2017b), it was shown that despite the aggregate trend of the UK’s share of Irish goods exports declining over the last 40 years, some sectors have seen a rise in their exposure in the last 15 years. Here, we examine the evolution of sectoral proportional exposure for both imports and exports since 2000. Firstly, Figure 5 shows that although Ireland’s current share of imports from the UK is considerably lower than it was 15 years ago, this figure has been volatile with a material decline only beginning in 2014. This has been driven by strong growth in Irish imports from other countries, with total Irish imports rising from €56bn in 2013 to €77bn in 2017. This compares to the broader downward trend in exports to the UK.

Figure 5. Evolution of UK Share of Irish Goods Trade

40% 36% 37% Imports Exports 32% 35% 32% 31% 32% 31% 30% 31% 30% 30% 30% 28% 29% 28% 30% 26% 24% 25% 23%

20% 22% 24% 24%

15% 18% 18% 18% 18% 19% 18% 16% 15% 15% 16% 16% 15% 14% 10% 13% 13%

5%

0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: CSO External Trade goods data. Department of Finance analysis. Dotted lines represent linear trendlines.

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A breakdown of proportional exposures at the sectoral level (for the six import sectors with the largest size exposures) can be seen in Figure 6. With regard to imports, these sectors’ dependence on the UK has broadly been declining, with some sectors, notably Mineral Fuels and Machinery and Transport, more volatile than others. However, the importance of UK imports in certain sectors to the wider economy has also increased, with the size exposure of Food and Live Animals and Mineral Fuels trending upwards since 2000. On the exports side, while the proportional exposure in most sectors has declined, as noted above, certain sectors have risen or remained flat (Manufactured Goods, Food and Live Animals).

Figure 6. Ireland's Sectoral Proportional Exposures to the UK Over Time Chemicals10 Food and Live Animals Machinery Manufactured2000 Goods 2002 2004Minerals2006 2008 2010 2012Misc. Manufacturing2014 2016 70 Imports 70 Exports

60 60

50 50

40 40

30 30

20 20

10 10

0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. Dotted lines represent linear trendlines. See Box 1 for an explanation of the Proportional Exposure measure.

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Box 2: Ireland’s Current Account with the UK (2016)

Ireland maintained a trade surplus of €9.6bn with the UK in 2016, with deficit of €1.1bn in goods trade and a surplus of €10.7bn in services. Ireland’s Current Account balance with the UK, however, shows a deficit of €1.1bn, when the negative income balance is taken into account.

While the 2016 Current Account deficit was unchanged from the previous year, the balance has turned positive in 2017. In the first three quarters of 2017, Ireland recorded a Current Account surplus with the UK of €2.3bn.

At a sectoral level, Ireland’s services surplus with the UK is driven by a notable surplus in computer and financial services, as well as in transport. The main services deficit is seen in the business services sector.

€m Exports / Inflows Imports / Outflows Balance

Goods 20,386 21,474 (1,089) Services 22,497 11,840 10,656 Total trade balance 42,882 33,315 9,567 Primary income 13,644 23,943 (10,300) Secondary income 1,857 2,245 (388) Income balance 15,500 26,188 (10,687)

Current Account - Total 58,383 59,503 (1,120)

Services sectoral breakdown: Transport 2,355 505 1,850 Tourism and Travel 828 1,177 (348) Insurance 2,393 1,603 790 Financial services 4,238 632 3,606 Royalties/Licences 858 595 263 Computer services 6,932 200 6,731 Business services 3,713 6,435 (2,722) Other 1,179 693 486

Source: CSO Balance of Payments data. Note: a breakdown of goods sectors is not provided in Balance of Payments data as goods trade here includes contract manufacturing and merchanting, not included in the External Trade data. For this reason, the Current Account goods figures do not match those used elsewhere in the paper.

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4. EU-27 Goods Exposures to the UK

4.1 National Exposures In this section, the analysis considers Ireland’s import exposures to the UK in a wider European context, with the sectoral trade exposures of the other EU-27 also included. Ireland imports considerably more from the UK than any of the other EU-27, as can be seen in Table 1, with this difference more explicit for imports than for exports. At $18.4bn, or 24 percent of total goods imports, Ireland’s UK share of imports is four times higher than the second most-exposed nation, Cyprus, which imports 6 percent of its goods from the UK.6 Whilst Germany, the Netherlands, and France have a higher value of UK imports than Ireland, these represent a much lower share of their total goods imports.

Table 1: Import and Export Exposure of EU-27 to UK Total Imports UK Share of Total Total Exports to UK Share of Total Rank Country from UK ($m) Imports UK ($m) Exports 1 Ireland 18,360 24% 16,541 13% 2 Cyprus 427 6% 147 8% 3 Netherlands 26,179 5% 55,175 10% 4 Sweden 7,275 5% 8,179 6% 5 Belgium 17,776 5% 35,417 9% 6 Malta 265 4% 116 4% 7 Denmark 3,520 4% 5,651 6% 8 Spain 12,382 4% 21,204 8% 9 France 21,536 4% 34,446 7% 10 Germany 39,421 4% 94,076 7% 11 Portugal 2,089 3% 3,917 7% 12 Italy 12,169 3% 24,875 5% 13 Finland 1,818 3% 2,585 5% 14 Lithuania 748 3% 1,064 4% 15 Greece 1,293 3% 1,178 4% 16 Rest of EU-27 18,392 2% 40,236 5% Note: Countries ranked by UK share of total imports. Source: UNCTAD

4.2 Sectoral Exposures Next, the sectoral exposures across the EU-27 are compared to discern if the relative aggregate exposure differences are also evident at the sectoral level. The analysis here focuses on those sectors in which Ireland’s goods imports are most reliant on the UK, as identified in Section 3.

6 This figure differs slightly to the CSO figure for Irish imports, however for the purposes of international comparison, UNCTAD figures are used in this section.

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Firstly, Figure 7 details the cross-country import exposures in the Food and Live Animals sector, highlighting that Ireland is a clear outlier across the EU in this sector. With the exception of Cyprus, whose exports are also substantially exposed to the UK, and Malta, all of the other EU nations have negligible import shares from the UK, with size exposures of less than 0.5 percent and proportional exposures less than 5 percent. The Appendix contains further detail on Food and Live Animals subsectors in a wider European context, which indicates again that Ireland is a substantial outlier amongst the EU-27 in terms of UK import exposures for its three largest Food and Live Animals import subsectors, namely Cereals and Cereal Preparations, Meat and Meat Preparations, and Dairy Products and Birds’ Eggs. With the agricultural sector facing among the highest tariffs under WTO rules, as well as potential non-tariff barriers, Irish agriculture and its supply chains could face substantial disruption if there is a significant departure from the status quo trade arrangements.

Figure 7. Food and Live Animals Trade Exposures to the UK (2016)

50 Imports Ireland 50 Exports 45 45 Ireland 40 40 35 35 30 30 Cyprus 25 25

20 Malta 20

Proportional Exposure Exposure Proportional Exposure Proportional 15Germany 15 France Spain Portugal Spain Germany Poland Netherlands Sweden Portugal Sweden 10 France Cyprus 10 Denmark Hungary Hungary Greece Slovenia Netherlands Slovenia Italy 5 5 Belgium Poland Lithuania Denmark Slovakia Lithuania Latvia Greece Latvia Austria Slovakia0 Belgium 0 Finland Austria Finland Malta Italy0 1 2 3 4 5 0 1Bulgaria 2 3 4 5 Estonia Bulgaria Luxembourg Estonia Size Exposure Czechia LuxembourgSize Exposure Czechia Croatia Romania Croatia Romania Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

Turning the analysis to Ireland’s other most exposed sectors yields similar results. Figure 8 shows the UK exposures of the Machinery and Transport Equipment sector. While exports to the UK in this sector are relatively diversified across a number of EU-27 countries, Ireland is clearly the most exposed in terms of imports, with Cyprus the other notable exposure. Machinery and Transport Equipment includes the aircraft leasing subsector (within “Other transport equipment”), which often comprises a substantial portion of Ireland’s trade due to the purchase or sale of aircraft by Irish resident

Page | 17 companies.7 We also perform the same analysis excluding aircraft, and find the size exposure results broadly unchanged for all countries, though the proportional exposure increases for Ireland and Cyprus. This occurs because Ireland generally does not import such aircraft from the UK, thus excluding this subsector increases the UK’s share of other Machinery and Transport Equipment imports (see Appendix Figure 4).

Figure 8. Machinery and Transport Equipment Trade Exposures to the UK (2016)

25 Imports 25 Exports

20 20

15 15 Belgium

Ireland Netherlands Ireland Spain 10 Cyprus 10 Cyprus Portugal

Germany Proportional Exposure Exposure Proportional

Proportional Exposure Exposure Proportional Denmark Denmark Belgium Luxembourg Poland Slovakia Greece Sweden Lithuania Spain Greece Romania France Czechia 5 Finland Italy Malta Portugal 5 Malta Italy Bulgaria France Slovenia Hungary Luxembourg Estonia Germany Sweden Austria Bulgaria Finland Slovenia Czechia Netherlands Lithuania Croatia Austria Romania Croatia Latvia Latvia Poland 0 Hungary 0 Estonia Slovakia 0 1 2 3 4 5 0 1 2 3 4 5 Size Exposure Size Exposure Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

The Chemicals sector (Figure 9) provides another example of a sector whose exposures are asymmetric: UK export exposures are broadly spread across the EU-27, however Ireland is by far the most exposed on the imports side. While on the exports side, Ireland has the highest size exposure, its lower relative proportional exposure reflects the diverse nature of Ireland’s export markets in the sector. Ireland’s Chemicals imports, however, are decidedly more dependent on the UK, with UK Chemicals imports comprising 3.5 percent of total goods imports, and 16 percent of the sector’s entire imports. As Chemicals includes intermediate inputs used in pharmaceutical production processes in Ireland, the UK’s EU exit could lead to a disruption of supply chains, regulatory divergence and other non-tariff barriers, as well as possible import tariffs, which could have a significant negative impact on the sector.

7 Whilst these aircraft are not manufactured in or necessarily physically imported to Ireland, for statistical purposes they are considered as exports or imports as trade in aircraft is recorded on the basis of a change in economic ownership.

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Figure 9. Chemicals and Related Products Trade Exposures to the UK (2016) 18 Imports 18 Exports Ireland 16 16

14 14

12 12 Malta Netherlands 10 10

Netherlands Greece 8 Sweden 8 France

Belgium Proportional Exposure Exposure Proportional

Proportional Exposure Exposure Proportional Ireland Portugal Denmark Poland Portugal Germany 6 Germany 6 Poland Greece Romania Luxembourg Malta Finland France Spain Italy Italy Cyprus Hungary Finland Lithuania Romania4 4 Hungary Czechia Lithuania Belgium Slovakia Denmark Spain Slovakia Luxembourg Bulgaria Estonia Czechia Austria 2 BulgariaAustria Latvia2 Latvia Slovenia Croatia Cyprus Croatia Slovenia 0 0 Estonia 0 1 2 3 4 0 1 2 3 4 Size Exposure Size Exposure Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

The manufacturing sector is of particular importance in Ireland’s trading relationship with the UK, in terms of both intermediate inputs and final goods. The “Manufactured Goods” sector, shown in Figure 10, is primarily comprised of intermediate inputs, such as paper or manufactures of metals, while the “Miscellaneous Manufactured Articles” sector in Figure 11 consists primarily of final consumption goods, such as clothing apparel or articles of plastics. In both sectors, Ireland’s imports are by far the most exposed in the EU-27. Ireland’s Manufactured Goods are more exposed to the UK, with a proportional exposure of 39 percent, compared to 28 percent for Miscellaneous Manufactured Articles. However, from a wider-economy viewpoint, the UK’s share of Miscellaneous Manufactured Articles is more important, with a size exposure of 3.3 percent, versus 2.7 percent for Manufactured Goods. These sectoral imports contrast somewhat with their equivalent exports, whereby Ireland’s Manufactured Goods are the most exposed on a proportional basis, however a number of other EU- 27 countries have a higher size exposure to the UK. Furthermore, in the Miscellaneous Manufactured Articles sector, exports to the UK come from a range of EU-27 countries, with no one Member State considerably more exposed.

These exposures in particular highlight the threat to Irish supply chains from Brexit. The UK is important not only in the provision of intermediate inputs to Ireland’s manufacturing sector, but also in the delivery of final consumption goods, despite the fact that, relatively, the UK is not a large manufacturing economy. These consumer goods are in general not produced in the UK but rather in

Page | 19 third countries before being transported to retail parent companies in the UK and subsequently distributed in Ireland. This supply chain involves goods being held or warehoused in the UK and, as such, is reflected in Irish imports from the UK (and is a separate issue to the landbridge whereby goods are transported directly through the UK to Ireland from third countries). Any disruption to this supply chain after Brexit would, firstly, raise costs for retailers operating in Ireland. As well as directly leading to higher prices, this could also cause some firms to simply exit the Irish market, reducing competition ultimately making Irish consumers worse off. The ESRI has estimated the impact of Brexit on consumer prices in Ireland will cost the average Irish household between €892 and €1,360 per annum, based solely on changes in tariff and non-tariff barriers on goods and assuming no change in consumer or producer behaviour.8

Figure 10. Manufactured Goods Trade Exposures to the UK (2016) Imports Exports 55 55 Ireland 50 50 45 45 40 Ireland 40 35 35 30 30 25 25

20 Exposure Proportional 20 Proportional Exposure Exposure Proportional 15 Denmark Netherlands Malta 15 Denmark Lithuania Netherlands Spain 10 Sweden Lithuania Germany France Latvia Cyprus 10 Belgium Estonia Spain France Malta Hungary Portugal 5 Hungary Belgium 5 Sweden Finland Slovenia Germany Estonia Italy Luxembourg Portugal Finland Cyprus Czechia 0 Italy Czechia Austria Austria Poland Bulgaria 0 Slovenia Greece Poland 0 Romania 1 2 3 Romania Bulgaria Croatia 0 1 2 3 Latvia Greece Luxembourg Croatia Slovakia Slovakia Size Exposure Size Exposure Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

8 Brexit and Irish Consumers (Lawless and Morgenroth, 2018).

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Figure 11. Miscellaneous Manufactured Articles Trade Exposures to the UK (2016)

30 Imports 30 Exports Ireland

25 25

20 20

15 15 Malta Netherlands Cyprus Belgium 10 10 Ireland Greece Portugal Proportional Exposure Exposure Proportional Malta

Proportional Exposure Exposure Proportional France Romania Belgium Bulgaria Spain Cyprus Germany Italy Lithuania Bulgaria Greece Hungary 5 Sweden Denmark 5 Spain Czechia Denmark Finland Italy Slovenia Poland Slovenia Netherlands Sweden SlovakiaAustria Hungary Portugal Lithuania Latvia FranceCzechia Finland Estonia Luxembourg Germany Estonia Poland Croatia Romania0 CroatiaSlovakia 0 Luxembour Latvia 0 1Austria 2 3 4 0 1 2 3 4 g Size Exposure Size Exposure Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

The final sector in which Ireland imports a significant portion of goods from the UK is Mineral Fuels, wherein Ireland primarily imports petroleum and gas products from the UK. Again, Ireland is an outlier amongst the EU-27 on this front, with a proportional exposure of 55 percent within the sector and a size exposure of 3 percent. This differs to the exports side, where Ireland’s proportional exposure is very high, however other countries have higher size exposures.

Figure 12. Mineral Fuels Trade Exposures to the UK (2016) 80 Imports 80 Exports 70 70 Ireland

60 60 Ireland 50 50

40 40

30 30

Proportional Exposure Exposure Proportional Proportional Exposure Exposure Proportional Slovakia 20 20 Sweden Italy Croatia Latvia Austria Spain Cyprus Slovakia Czechia France Lithuania10 Germany Netherlands 10 Finland Malta Belgium Germany Denmark Netherlands Poland Spain Denmark Poland Belgium France Sweden Bulgaria Hungary Lithuania Portugal0 Slovenia0 Malta Greece Luxembourg Estonia Austria Greece Czechia Romania Croatia Finland0 Estonia 1 2 3 0 0.5 Bulgaria1 1.5 2 2.5 3 Romania Slovenia Portugal Italy Hungary CyprusLuxembourg Size Exposure Latvia Size Exposure Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

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The exposures presented above highlight both the extent to which Ireland’s imports are markedly dependent on the UK and the uniqueness of Ireland’s importing relationship with the UK within the EU. This directly poses a particular problem to Irish businesses for whom UK imports form a key link in their supply chains, with knock-on effects on households. Disruption to supply chains could impact both exporting and non-exporting firms, raising costs and requiring considerable resources to modify current supply chains or establish new ones. The retail, agriculture, and pharmaceuticals sectors are among those most likely to be affected by this.

Box 3: Impact on SMEs: Trade by Enterprise Characteristics Data

The issue of supply chain disruption is particularly pronounced for SMEs, who are less likely to have capacity to source imports from elsewhere in the EU or to deal with customs procedures for goods travelling from Great Britain or Northern Ireland. The SME sector represented 93 percent of the c.31k firms importing goods to Ireland in 2016, or 62 percent (€45bn) of the total value of imports.9 This is substantially more than is the case for Irish exports, where large enterprises, including multinationals, dominate, with SMEs accounting for 31 percent (€ 36bn) of total exports.

This issue is most salient within the wholesale and retail sector, where 78 percent (11,000) of importing firms are micro enterprises, with 96 percent being either micro or small sized firms.10 With €13bn in goods imported, these firms represent a considerable share of the total value of wholesale and retail imports (53 percent). Including medium enterprises, this figure rises to €18bn (75%). In the agri-food and manufacturing sectors, micro and small enterprises also comprise the vast majority of importers, at 89 percent and 92 percent respectively, however the value share of their imports is markedly less at 19 percent and 17 percent, respectively. In comparison, pharmaceuticals imports are largely attributed to large firms, with micro and small enterprises representing 68 percent of the number of firms but just 8 percent of the value of imports.

9 CSO Trade by Enterprise Characteristics 2016 data. The data represents businesses whose value of exports or imports exceeds €5,000 in a calendar year. 10 Micro enterprises are defined here as having less than 10 employees, while small enterprises have 10-49 employees. Medium enterprises have 50-249 employees.

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Box 3 (cont’d): Impact on SMEs: Trade by Enterprise Characteristics Data

Figure 13. Value of Import Trade by Sector, 2016 (€m)

10,000 Micro Small Medium Large 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Agri/food Pharmaceuticals Other Wholesale / retail Services / other manufacturing and construction

Source: CSO Trade by Enterprise Characteristics 2016 data. Department of Finance analysis.

Figure 14. No. of Importing Enterprises by Sector, 2016 (€m)

Micro Small Medium Large 12,000

10,000

8,000

6,000

4,000

2,000

0 Agri/food Pharmaceuticals Other Wholesale / retail Services / other manufacturing and construction

Source: CSO Trade by Enterprise Characteristics 2016 data. Department of Finance analysis.

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4.3 Subsectoral Exposures The analysis now turns to the next level of sectoral disaggregation, namely the SITC 2-digit level, to examine where exposures to the UK are most concentrated. The thirty most exposed subsectors, in terms of the proportional exposure, across the EU-27 by country and subsector are presented here for imports and exports.11 Subsectors whose imports from the UK comprise less than 1 percent of their country’s total imports from the UK are excluded in order to add an element of economic size and remove small niche sectors which may have a high proportional exposure to the UK but may be less economically significant to the broader economy.

The results in Figure 15 show that Irish import exposures are even more prominent than export exposures in the subsector rankings, with thirteen of the EU 27’s top fifteen most exposed import subsectors to the UK being Irish. Furthermore, eight of these are also in the top fifteen most exposed export subsectors, indicating the considerable overlap in the trade direction of the exposures across subsectors. Gas is the most exposed subsector, with almost 100 percent of Ireland’s gas imports coming from the UK. Three of the top five are in the Agri-food sector (Live Animals, Dairy Products and Vegetables and Fruit), and are also among the most exposed export subsectors, further highlighting the vulnerability of this sector to Brexit, particularly if WTO tariffs were to be introduced. The other Irish product groups that dominate are in the Mineral Fuels, Chemicals, Manufactured Goods and Miscellaneous Manufactured Articles sectors, and as such are in line with the exposures identified in Section 3. On the exports side, updating the analysis with 2016 data leaves the results largely unchanged: eleven of the EU-27’s top fifteen export subsectors most exposed to the UK are Irish, as can be seen in Figure 16.

11 This replicates the Department of Finance (2017b) analysis of 2015 exports. Note that paper uses the term “product” rather than “subsector” to describe the 2-digit SITC codes.

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Figure 15. Top 30 Proportional Import Exposures to the UK, by Country and Product (2016)

Import Exposures Irish import product Malta: Coffee, tea, cocoa, spices, and manufactures… Irish import product also in top 30 most exposed exports Portugal: Metalliferous ores and metal scrap Ireland: Specialised machinery Non-Irish import product Netherlands: Gas, natural and manufactured Ireland: Articles of apparel & clothing accessories Ireland: Other industrial machinery and parts Ireland: Plastics in non-primary forms Slovakia: Gold, non-monetary (excluding gold ores and… Latvia: Textiles fibres and their wastes Ireland: Vegetables and fruits Ireland: Chemical materials and products, n.e.s. Ireland: Miscellaneous manufactured articles, n.e.s. Ireland: Non metallic mineral manufactures, n.e.s. Ireland: Feedstuff for animals (excluding unmilled… Malta: Paper and paper manufactures Ireland: Manufactures of metal, n.e.s. Ireland: Beverages Ireland: Miscellaneous edible products and… Cyprus: Power generating machinery and equipment Ireland: Petroleum, petroleum products and related… Ireland: Meat and meat preparations Spain: Gold, non-monetary (excluding gold ores and… Ireland: Coffee, tea, cocoa, spices, and manufactures… Ireland: Iron and steel Ireland: Paper and paper manufactures Ireland: Essential oils for perfume materials and… Ireland: Cereals and cereal preparations Ireland: Dairy products and birds' eggs Ireland: Live animals other than animals of division 03 Ireland: Gas, natural and manufactured

0 10 20 30 40 50 60 70 80 90 100 110 Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. Note: products under 1 percent of UK size exposure are not included in analysis.

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Figure 16. Top 30 Proportional Export Exposures to the UK, by Country and Product (2016) Export Exposures Belgium: Road vehicles Irish export product Portugal: Power generating machinery and equipment Irish export product also in top 30 most exposed imports Ireland: Beverages Non-Irish export product Cyprus: Professional and scientific instruments, n.e.s. Ireland: Specialised machinery Latvia: Cork and wood Belgium: Gold, non-monetary (excluding gold ores and… Ireland: Manufactures of metal, n.e.s. Hungary: Photo apparatus, optical goods, watches and… Ireland: Plastics in non-primary forms Ireland: Dairy products and birds' eggs Ireland: Plastics in primary forms Malta: Manufactures of metal, n.e.s. Cyprus: Dairy products and birds' eggs Spain: Gold, non-monetary (excluding gold ores and… Ireland: Meat and meat preparations Slovakia: Gas, natural and manufactured Malta: Road vehicles Cyprus: Road vehicles Ireland: Road vehicles Ireland: Coffee, tea, cocoa, spices, and manufactures… Ireland: Petroleum, petroleum products and related… Ireland: Cork and wood manufactures (excluding… Cyprus: Gold, non-monetary (excluding gold ores and… Ireland: Feedstuff for animals (excluding unmilled… Ireland: Live animals other than animals of division 03 Ireland: Non metallic mineral manufactures, n.e.s. Ireland: Vegetables and fruits Ireland: Cereals and cereal preparations Ireland: Cork and wood 0 10 20 30 40 50 60 70 80 90 100 110 Source: UNCTAD Statistics External Trade goods data. Department of Finance analysis. Note: products under 1 percent of UK size exposure are not included in analysis.

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5. Conclusion

The results outlined in this paper highlight the substantial exposures of Irish imports to the UK, which could face disruption after Brexit. While Department of Finance (2017b) found certain export sectors are more exposed than others, in particular Food and Live Animals and Chemicals, it has been shown here that the high exposure of Irish imports to the UK is spread across numerous sectors. In particular, the Machinery and Transport Equipment, Manufactured Goods, Miscellaneous Manufactured Articles, and Mineral Fuels sectors are also heavily exposed, although it has also been shown that the share of imports from the UK has fallen substantially in recent years. These substantial exposures highlight the potential impact not just on the cost of importing goods but also on Irish supply chains, which will be particularly relevant for the retail, pharmaceuticals and agri-food sectors.

Ireland’s deep linkages with the UK economy on both the exports and imports sides make it clear that Brexit is likely to cause a structural change in the Irish economy, not simply a cyclical variation in trade. A permanent shift in trade could have implications for the economy’s production function, with potential negative impacts on productivity, labour supply and capital investment. Any such changes will require close monitoring, given the role of potential output in the fiscal framework.

One of the most striking results obtained in this paper has been the significantly greater exposure of Irish imports to the UK compared to the remainder of the EU-27 across almost all sectors, further evidence that Ireland is likely to be disproportionately impacted by Brexit. It is therefore imperative for Ireland that an agreement is reached to ensure the future trading relationship between the EU and the UK is as close to the status quo as possible.

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6. References

1) Department of Finance. (2017a). “UK EU Exit – An Exposure Analysis of Sectors of the Irish Economy”. Department of Finance Research Working Papers.12 2) Department of Finance. (2017b). “UK EU Exit: Trade Exposures of Sectors of the Irish Economy in a European Context”. Department of Finance Research Working Papers. 3) Lawless, M., and Morgenroth, E. (2018). “Brexit and Irish Consumers”. ESRI Quarterly Economic Commentary Special Article.

12 This paper is a March 2017 update of a previous version published in October 2016.

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7. Annex: Services Trade Exposures

An analysis of the data on services imports shows a contrast to goods imports. While Ireland is the second most exposed Member State when it comes to services exports, it is one of the least exposed for imports, as can be seen in Annex Figure 1. The UK comprises 6 percent of services imports, compared to 16 percent of services exports, with the majority of Irish sectors not significantly exposed to the UK. As per Annex Figure 2, Other Business Services is the only sector with a notable size exposure of 3.5 percent, importing €6.4bn from the UK. This is driven by imports of trade-related services and ‘other business services’, which includes inter-affiliate management fees and agricultural services, amongst others.13 Insurance has the next largest size exposure of 0.9 percent, however this is substantially smaller than its export size exposure of 1.7 percent. Tourism and Travel is the only other sector importing over €1bn in services from the UK.

On the exports side however, as illustrated in Department of Finance (2017b), a number of sectors are substantially exposed, with size exposures above 1.5 percent, namely Computer Services, Financial Services, Other Business Services, Insurance and Transport. With regard to exports, the Other Business Services sector is again primarily comprised of exports of ‘other business services’ as described above.

This paper has shown how Ireland is an outlier across the EU-27 in terms of import exposure in the majority of goods sectors, however the sectoral breakdowns across Member States illustrate that this is not the case for services. The remaining figures present the cross-country exposure comparisons for the services imports sectors in which Ireland is most exposed. Ireland has a high proportional exposure relative to other Member States in Transport, Tourism and Travel, Insurance and Telecommunications, Computer and Information Services, however the relatively low size exposure in these sectors suggests that these exposures are of less significance in a macroeconomic sense.14 In Other Business Services, the sector with the highest size exposure, Ireland is only the 6th most exposed Member State of those included from a size point of view and one of the least exposed on a proportional basis. In relation to Financial Services, Ireland’s relatively high export exposure to the UK is not replicated in imports, with Ireland’s import exposure negligible compared to EU peers.

13 According to the CSO, other services covers “inter-affiliate management fees and waste treatment, agricultural & mining services as well as any other business services that cannot be classified to any of the business services listed above.” 14 The CSO separates the Telecommunications, Computer and Information Services sector into ‘Communications’ and ‘Computer Services’, however for international comparison purposes, OECD nomenclature is used.

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Annex Figure 1. UK Share of EU-27 Services Trade Services Imports

20% 18% 16% 13% 12%12% 11%11% 11%10% 10% 9% 9% 9% 8% 8% 7% 7% 7% 7% 6% 6% 5% 4% 4% 4% 3%

Services Exports 22%

16% 16%15%15%15% 13% 12%11% 10% 9% 8% 8% 8% 8% 8% 8% 7% 7% 6% 6% 5% 5% 5% 4% 4% 3%

Source: Eurostat Balance of Payments.

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Annex Figure 2. Irish Services Import and Export Exposures to UK, 2016 Irish Services Imports 50 Communications 45 40 35 30 25 Other services Insurance 20 Transport Tourism and travel

15 Computer services ProportionalExposure 10 Financial services Other business services

5 Repairs and processing Royalties/licences 0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Size Exposure Irish Services Exports 50

45 Other services 40 Financial services 35 Transport 30 25 Insurance Communications 20 Tourism and travel 15 Other business services Computer services

ProportionalExposure Repairs and processing 10 Royalties/licences 5 0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Size Exposure Source: CSO Balance of Payments. Department of Finance analysis. Note OECD EBOPS 2010 data is used to calculate services imports for Communications and Repairs and Processing. See Box 1 for an explanation of Size and Proportional Exposures.

Annex Figure 3. Breakdown of Other Business Services Imports from UK (2016) Legal, Operational R&D, 3%accounting leasing, 1% and other professional, Advertising Other 2% and market business research, 5% services, 42%

Trade Architectural related and services, 47% engineering, 0% Source: CSO Balance of Payments. Department of Finance analysis.

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Annex Figure 4. Transport Trade Exposures to the UK (2016)

Transport Imports Transport Exports 35 35 Ireland 30 30

25 25 Greece 20 20 Ireland Greece 15 15 Portugal France Netherlands

10 Netherlands 10 Sweden Hungary ProportionalExposure ProportionalExposure Belgium Portugal Denmark Belgium Latvia Sweden Czech Republic Denmark France Estonia Lithuania Poland5 Hungary 5 Finland Luxembourg Italy Lithuania Italy Estonia Finland Luxembourg Austria 0 Germany 0 Poland Germany Latvia Austria Slovenia Slovakia Slovenia 0 2 4 6 8 10 0 2 4 6 8 10 Slovakia Czech RepublicSize Exposure Size Exposure

Source: OECD EBOPS 2010. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

Annex Figure 5. Tourism and Travel Trade Exposures to the UK (2016)

Tourism and Travel Imports Tourism and Travel Exports 25 25

Spain Ireland 20 20 Portugal Ireland

15 Sweden 15 Greece France

Lithuania Portugal Netherlands 10 10 Italy France Greece Latvia Italy

Denmark Netherlands Denmark Hungary Sweden ProportionalExposure ProportionalExposure Latvia Estonia Belgium 5 Czech Republic 5 Slovakia Austria Finland Luxembourg Poland Austria Belgium Finland Germany Estonia Slovakia Germany Slovenia Czech Republic Hungary 0 0 Poland Luxembourg Lithuania 0 2 4 6 8 10 0 2 4 6 8 10 Slovenia Size Exposure Size Exposure

Source: OECD EBOPS 2010. Department of Finance analysis. Note CSO sector name used; OECD refers to the sector as “Travel”. See Box 1 for an explanation of Size and Proportional Exposures.

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Annex Figure 6. Insurance Trade Exposures to the UK (2016)

Insurance Imports Insurance Exports 45 45 Germany 40 Netherlands 40 Denmark 35 35 Denmark 30 30 Greece Ireland 25 Germany 25 Ireland Belgium 20 France 20 Greece Slovenia Belgium Portugal Portugal 15 Slovenia 15

Austria Poland Sweden ProportionalExposure ProportionalExposure France 10 Latvia Czech Republic 10 Poland Netherlands Sweden Estonia Estonia Hungary 5 Lithuania Italy 5 Finland Austria Italy Finland Slovakia Hungary Slovakia 0 0 Czech Republic 0.0 0.5 1.0 1.5 2.0 Latvia 0.0 0.5 1.0 1.5 2.0 Size Exposure Size Exposure

Source: OECD EBOPS 2010. Department of Finance analysis. Note CSO sector name used; OECD refers to the sector as ‘Insurance and Pension Services’. Export data not available for Lithuania. See Box 1 for an explanation of Size and Proportional Exposures.

Annex Figure 7. Financial Services Trade Exposures to the UK (2016)

Financial Services Imports Financial Services Exports 40 40

35 35 Ireland Denmark 30 Poland 30 Poland Portugal 25 Greece Luxembourg 25 France Estonia Hungary Belgium 20 Latvia 20 Greece Germany Italy Netherlands Germany Czech Luxembourg 15 Portugal 15 France Hungary Estonia Republic Latvia

Finland Slovenia Lithuania ProportionalExposure ProportionalExposure 10 Sweden 10 Denmark Netherlands Belgium Ireland Austria 5 Italy Austria 5 Czech Republic Slovakia Slovakia Sweden Slovenia Lithuania 0 0 Finland 0 2 4 6 8 10 12 0 2 4 6 8 10 12 Size Exposure Size Exposure

Source: OECD EBOPS 2010. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

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Annex Figure 8. Telecommunications, Computer and Information Services Trade Exposures to the UK (2016)

Telecommunications and Computer Telecommunications and Computer 40 Imports 40 Exports Greece 35 35 Ireland 30 30

25 25 Netherlands Greece 20 Netherlands 20 Latvia Portugal Portugal Belgium Poland 15 Hungary Sweden 15 France France Belgium Italy Ireland

Italy Germany Lithuania Germany ProportionalExposure ProportionalExposure Hungary 10 Austria Denmark 10 Austria DenmarkSweden Finland Lithuania Finland Estonia Poland Czech 5 Slovenia 5 Latvia Republic Slovakia Estonia Slovenia Czech Republic Slovakia 0 0 0 1 2 3 4 5 0 1 2 3 4 5 Size Exposure Size Exposure

Source: OECD EBOPS 2010. Department of Finance analysis. Note CSO data separates this sector into ‘Communications’ and ‘Computer Services’, however for international comparison purposes the OECD Balance of Payments sectors are used. See Box 1 for an explanation of Size and Proportional Exposures.

Annex Figure 9. Other Business Services Trade Exposures to the UK (2016)

Other Business Services Imports Other Business Services Exports 30 30 Greece 25 25 Luxembourg 20 Luxembourg 20

Denmark Netherlands Italy 15 15 Greece Netherlands Belgium Poland France Ireland Portugal Germany Poland Denmark Hungary Sweden 10 10 France Estonia Finland Portugal Germany

Sweden Italy ProportionalExposure ProportionalExposure Latvia Belgium Austria Latvia Ireland Hungary Lithuania Estonia 5 5 Czech Republic Czech Republic Finland Lithuania Slovenia Austria Slovakia Slovakia Slovenia 0 0 0 1 2 3 4 5 6 0 1 2 3 4 5 6 Size Exposure Size Exposure

Source: OECD EBOPS 2010. Department of Finance analysis. Note this sector includes research & development, operational leasing, and miscellaneous business services. See Box 1 for an explanation of Size and Proportional Exposures.

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8. Appendix

Appendix Table 1. SITC Codes and Division Descriptions SITC Division Codes SITC Economic Division Descriptions (0) Food and Live Animals 00 Live animals other than animals of Division 03 01 Meat & meat preparations 02 Dairy products & birds’ eggs 03 Fish, crustaceans, molluscs and preparations thereof 04 Cereals & cereal preparations 05 Vegetables & fruit 06 Sugar, sugar preparation & honey 07 Coffee, tea cocoa, spices & manufactures thereof 08 Feeding stuff for animals (excl. unmilled cereals) 09 Miscellaneous edible products & preparations (1) Beverages and tobacco a.k.a. 11 Beverages “Beverages/Tobacco” 12 Tobacco & tobacco manufactures (2) Crude Materials Manufacturing, 21 Hides, skins & fur skins, raw inedible, except fuels a.k.a. “Crude 22 Oil seeds & oleaginous fruits Materials Manufacturing” 23 Crude rubber (include synthetic & reclaimed) 24 Cork & wood 25 Pulp & waste paper 26 Textile fibres & their wastes 27 Crude fertilisers & minerals, excl. coal, petroleum etc. 28 Metalliferous ores & metal scrap 29 Crude animal & vegetable materials nes (3) Mineral fuels, lubricants and related 32 Coal, coke & briquettes products a.k.a. “Minerals” 33 Petroleum, petroleum products & related materials 34 Gas, natural & manufactured 35 Electric current (4) Animal and vegetable oils, fats and 41 Animal oils & fats waxes a.k.a. “Agricultural Residuals” 42 Fixed vegetable fats & oils 43 Processed animal and vegetable oils and fats (5) Chemicals and related products nes 51 Organic chemicals a.k.a. “Chemicals” 52 Inorganic chemicals 53 Dyeing, tanning & colouring materials 54 Medical & pharmaceutical products 55 Essential oils for perfume materials and cleaning preparations 56 Fertilisers (other than those of Division 27) 57 Plastics in primary forms 58 Plastics in non-primary forms 59 Chemical materials & products nes (6) Manufactured Goods classified 61 Leather, leather manufactures and dressed furskins chiefly by material a.k.a. “Manufactured 62 Rubber manufactures nes Goods” 63 Cork & wood manufactures (excl. furniture) 64 Paper and paper manufactures 65 Textile yarn & related products 66 Non-metallic mineral manufactures nes 67 Iron & steel 68 Non-ferrous metals 69 Manufactures of metals nes (7) Machinery & transport equipment 71 Power generating machinery & equipment a.k.a. “Machinery” 72 Machinery specialised for particular industries 73 Metalworking machinery 74 Other industrial machinery and parts 75 Office machines & automatic data processing machines 76 Telecommunications & sound equipment 77 Electrical machinery, apparatus & appliances nes

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78 Road vehicles (include. air-cushion vehicles) 79 Other transport equipment (8) Miscellaneous manufactured articles 81 Prefab buildings, plumbing & electrical fixtures & fittings a.k.a. “Misc. Manufactured” 82 Furniture & parts thereof; bedding, cushions etc 83 Travel goods, handbags & similar containers 84 Articles of apparel; clothing accessories 85 Footwear 87 Professional and scientific instruments nes 88 Photographic apparatus. optical goods, watches & clocks 89 Miscellaneous manufactured articles nes (9) Commodities and transactions not 91 Postal packages not classified according to kind classified elsewhere a.k.a. 93 Special transactions and commodities not classified according to “Commodities n.e.s.” kind 96 Coin (other than gold coin), not being legal tender 97 Gold, non-monetary ( excluding gold ores and concentrates ) 98 Gold coin and monetary gold 99 All other commodities and transactions

Source: UNCTAD Statistics External Trade Goods data.

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Appendix Table 2. Value of Irish Goods Imports and Exports by Sector from and to the UK (2017)

Imports Exports

% of Total Irish % of Total Irish Goods Sectors (SITC Categories) Total (€m) UK (€m) Goods Imports from Total (€m) UK (€m) Goods Exports to UK UK

Food and live animals 7,156 3,592 19.3% 11,354 4,611 28.1%

Machinery & transport equipment 30,033 3,176 17.1% 20,501 2,292 14.0%

Chemicals 17,423 3,058 16.5% 67,767 5,218 31.8%

Mineral fuels 4,679 2,725 14.7% 1,025 455 2.8%

Miscellaneous manufactured articles 8,261 2,278 12.3% 14,834 1,356 8.3%

Manufactured goods 5,036 1,952 10.5% 2,266 1,212 7.4%

Commodities and transactions n.e.s. 2,241 1,137 6.1% 1,135 503 3.1%

Beverages and tobacco 900 345 1.9% 1,360 293 1.8%

Crude materials, inedible, except fuels 897 238 1.3% 1,803 456 2.8%

Animal and vegetable oils, fats and waxes 263 70 0.4% 93 20 0.1%

Total 76,889 18,571 100.0% 122,139 16,416 100.0% Source: CSO External Trade data. Ranked by value of UK imports.

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Appendix Table 3. Value of Irish Goods Imports and Exports by Sector from and to the UK (2016)

Imports Exports

% of Total Irish % of Total Irish Goods Sectors (SITC Categories) Total (€m) UK (€m) Goods Imports from Total (€m) UK (€m) Goods Exports to UK UK

Food and live animals 6,689 3,240 19.2% 10,096 4,224 28.1%

Machinery & transport equipment 31,581 3,140 18.6% 21,420 2,364 15.7%

Chemicals and related products 14,963 2,445 14.5% 66,385 4,174 27.8%

Miscellaneous manufactured articles 8,253 2,312 13.7% 14,645 1,318 8.8%

Mineral fuels 3,776 2,089 12.4% 691 503 3.3%

Manufactured goods 4,751 1,859 11.0% 2,144 1,169 7.8%

Commodities and transactions n.e.s. 2,135 1,155 6.8% 969 503 3.3%

Beverages and tobacco 914 361 2.1% 1,333 309 2.1%

Crude materials, inedible, except fuels 824 206 1.2% 1,529 452 3.0%

Animal and vegetable oils, fats and waxes 245 65 0.4% 78 18 0.1%

Total 74,131 16,872 100.0% 119,292 15,034 100.0% Source: CSO External Trade data. Ranked by value of UK imports.

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Appendix Figure 1. Meat and Meat Preparations Trade Exposures to the UK (2016)

60 Imports 60 Exports

Ireland 50 50 Ireland

40 40

30 30 Proportional Exposure Exposure Proportional 20 20 Romania Proportional Exposure Exposure Proportional Netherlands Germany Sweden Germany Portugal France Hungary Poland Poland France Denmark Hungary Spain Portugal Spain 10 Netherlands 10 Italy Sweden Slovenia Cyprus Slovenia Lithuania Latvia Denmark Cyprus Belgium Lithuania Slovakia Belgium Latvia Greece 0 Italy Slovakia0 Austria Finland GreeceAustria 0 Bulgaria 0.5 Luxembourg 1 1.5 Finland Croatia Malta Malta 0 Bulgaria0.5 1 1.5 Romania EstoniaCzechiaCroatia Size Exposure Czechia Estonia Luxembourg Size Exposure Source: UNCTAD Statistics External Trade Goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

Appendix Figure 2. Dairy Products and Birds' Eggs Trade Exposures to the UK (2016) Imports Exports 70 Ireland 70

60 60

50 50 Cyprus Ireland 40 40

30 30

Proportional Exposure Exposure Proportional Portugal

Proportional Exposure Exposure Proportional 20 Poland 20 France Portugal France Germany Greece Hungary Spain Denmark Germany Spain Netherlands Poland Sweden 10 Sweden 10 Netherlands Hungary Cyprus Slovenia Slovenia Denmark Belgium Lithuania Slovakia Italy Slovakia Belgium Latvia Lithuania Latvia0 Greece 0 Austria Austria Finland Malta 0 Italy 1 2 3 0 Bulgaria1 2 3 Finland Bulgaria Luxembourg Malta Luxembourg Estonia Size Exposure Estonia Romania Size Exposure Czechia Croatia Romania Czechia Croatia Source: UNCTAD Statistics External Trade Goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

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Appendix Figure 3. Cereals and Cereal Preparations Trade Exposures to the UK (2016)

Imports Exports 90 90 Ireland 80 80

70 70 Ireland 60 60

Exposure 50 50

40 40 Malta

30 Exposure Proportional 30 Spain Proportional France Malta PortugalGermany Cyprus 20 Spain 20 Germany Portugal France Netherlands Hungary Sweden Cyprus Netherlands Hungary Sweden Poland 10 10 Belgium Slovenia Greece Denmark Slovenia Italy Slovakia PolandLithuania Slovakia Greece Lithuania 0 Italy Belgium Latvia0 Denmark Finland Finland Austria Latvia 0 0.2Austria 0.4 0.6 0.8 1 0 0.2 0.4 0.6 0.8 1 Estonia Bulgaria Luxembourg Estonia Bulgaria Luxembourg Size Exposure Size Exposure Czechia Croatia Romania Czechia Croatia Romania Source: UNCTAD Statistics External Trade Goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

Appendix Figure 4. Machinery and Transport Equipment excl. Aircraft Exposures to the UK (2016)

Imports Exports 25 25

20 Ireland 20

15 Cyprus 15 Belgium

Ireland Netherlands 10 10 Cyprus Portugal Spain Malta

Denmark Germany Proportional Exposure Exposure Proportional Belgium Exposure Proportional Poland Greece France Denmark Sweden Greece Italy Czechia Slovakia 5 Lithuania 5 MaltaRomania Bulgaria Italy Netherlands Luxembourg Luxembourg France Spain Austria Hungary Germany Portugal Bulgaria Slovenia Austria Finland Sweden Slovenia Czechia Finland Lithuania Croatia Croatia Poland Estonia Romania Estonia Latvia 0 Hungary 0 Slovakia 0 1 Latvia 2 3 4 5 0 1 2 3 4 5 Size Exposure Size Exposure Source: UNCTAD Statistics External Trade Goods data. Department of Finance analysis. See Box 1 for an explanation of Size and Proportional Exposures.

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