North/South Trade: A Statistical Ground-Clearing Exercise

EXECUTIVE SUMMARY

The remit of InterTradeIreland is to promote cross-border trade and enhance the competitiveness of firms through North/South co-operation. In order to progress these aims it is necessary to gain a better understanding of the nature of trade flows, the nature of the economies and the types of interaction between firms. An important aspect of this is the degree to which North/South trade sustains businesses and how cross-border synergies through trading and other interaction can help improve the competitiveness of the island economy.

Any analysis that aims at understanding the cross-border trade flows must be based on reliable data. There are three sources of data on trade between Northern Ireland and Ireland. When these are compared inconsistencies emerge. In particular the data that is published by the Central Statistics Office (CSO) of Ireland does not match that published by Her Majesty’s  Customs & Excise (HMCE). Specifically the data series for exports from Northern Ireland to Ireland differ substantially. However, the corresponding flows for trade between Ireland and the UK match quite well. This implies that there are some issues relating to the assignment of trade to regions such as Northern Ireland and definitional differences that have a greater impact at regional levels are responsible for gaps between the HMCE and CSO data.

Indeed an important definitional difference between the HMCE and CSO series relates to the way in which the country of origin is defined. The HMCE data uses the country of despatch as the exporting country rather than the country of origin. As there are substantial exports of goods produced in Great Britain that are despatched from Northern Ireland to Ireland, addressing this definitional difference accounts for more than half of the difference (for exports from Northern Ireland to Ireland). Some of the remaining difference may well be due to the methodology adopted by the HMCE to allocate trade that is recorded by headquarters of large firms to their branches in the UK regions.

A comparison of trade composition for manufacturing sectors showed that the sectoral shares are very similar for both data sources. This implies that an analysis of changes in trade shares can be carried out with both the HMCE and CSO data without seriously biasing the results. Since it appears that definitional issues are the main cause of differences between the data series, an analysis of trends of the trade flows would be meaningful. This exercise shows that trade volumes are steadily increasing and that the composition of these volumes is changing away from more traditional towards more high-tech commodities. However, the trade shares are declining over time. In particular, the proportion of exports from Ireland to Northern Ireland has fallen dramatically.