Ciaran Fitzgerald: What have we learned in 2020?
What have we learned in 2020? Accounting trumps reality! There are at least two Irish economies.
Throughout the year and indeed as late as an ESRI report on December 15, it has become more and more evident that the performance of the multinational sector is independent of its impact on the Irish economy and indeed disconnected from the performance of the ‘jobs rich’ traditional Irish economy.
So while Irish gross domestic product (GDP) figures, which are over exaggerated, bypass through profit, income from the multinational sector will show ‘remarkable’ positive economic growth despite Covid-19.
Unemployment is at 20% at year end and may not get below 15% by the end of 2021.
National climate change accounts are not real
Despite a realisation across the globe that reduced economic activity, resulting in less travel and lower manufacturing output due to reduced usage of fossil fuels, has seen global carbon dioxide (CO2) emissions fall by 6.7%, much of 2020 in Ireland has seen a focus on methane emissions from Irish cows.
This is because of accounting procedures relating emission reductions back to a 1990 baseline, when many of these countries were still engaged in coal, steel and other heavy fossil fuel-emitting industries while Ireland clearly was not.
This disconnect between Irish small politics and global climate change challenges is further indicated by the recognition that the announcement by China of a commitment to carbon neutrality by 2060 (Source: The Carbon Trust) and the likely recommitment of the USA to the Paris Agreement following the election of Joe Biden, have led climate experts to say that the policies in place can lead to the avoidance of a 2% increase in global temperatures.
But it is surely perverse for a country that incessantly lauds its economic openness and global reach that we are moving to a policy mindset that is ignoring global demand for sustainable nutrition.
Here again something we learned in 2020 is that the EU, based on a number of policy studies, accepts that unilateral reduction of European livestock outputs will, in effect, lead to higher global agricultural emissions as evolving global demand will be met from non-compliant or higher-emitting suppliers!
The agri-business sector is one of the most resilient sectors in the Irish economy. Proof if needed, is clearly shown by the manner in which the sector from farm to fork kept serving domestic and international market demands despite severe Covid-19 disruption; not least the closing of the food service sector domestically and internationally through the pandemic.
What else does 2020 teach us?
Brexit is going to be messy even if a trade deal is achieved:
- Trade diversification is essential;
- Trade diversification requires targeted support both in terms of capital investment in new product (e.g. cheese plants) and in the introduction of a trade credit scheme;
- Environmental lobby opposition to new cheese capacity will undermine trade diversification and severely impact farm incomes post-Brexit;
- The Irish government is the only EU member state that did not introduce a trade credit scheme in response to Covid-19 despite the EU specifically removing state aid restrictions on trade credit and despite recommendations from the EU trade commissioner that trade credit support is an essential diversification policy instrument.
Good news from 2020
In addition to the imminence of Covid-19 vaccines, perhaps the other major good news emerging at the end of 2020 is that the EU has shaken off its post-2008 austerity fixation through the agreement on the multiannual budget and in particular the €750 million Covid-19 rescue scheme.
This is hugely important for Ireland and in particular its agri-sector and the rest of its ’employment-rich’ economy.
Rising tides lift boats and… “It’s only when the tide goes out that you can see who has been swimming naked” – Warren Buffett.
Targeted structured long-term investment is the only way in which Irish agriculture can continue to meet the imperatives of continuing to deliver its huge, unique, economic impact across the national, rural and regional economy and manage the dual challenges of dealing with Brexit while meeting growing global demand for sustainably-produced meat and dairy products within environmental limits.