Sterling’s Effect on Exports and Imports
Barry argued that only part of Irish exports would benefit from the punt’s depreciation against sterling, while imports from Britain—including capital goods and raw materials—would become more expensive. Colley said he was addressing only short-term effects and cautioned that the currency divergence might not last.
Is it true that of our exports roughly 50 per cent go to the UK and of that 50 per cent roughly 50 per cent are agricultural products which are not affected by variations in the rate of exchange between the British £ and the IR£?
Comment on this
Therefore, 25 per cent of our total exports will benefit by the devaluation of the IR£ against sterling. On the other hand, is it not true that roughly 50 per cent of our imports come from the UK and that all of them will be affected by the devaluation of the IR£? Therefore, the advantage which the Minister claims—even though he admits that it is only short term—in the revaluation of the two currencies is very temporary and the fact that we have to pay more, particularly for capital goods and raw materials for reprocessing, will reflect very quickly in the increased costs of Irish goods going to other markets.
Comment on this
I indicated in my reply that I would deal at the moment only with the short-term effects of the divergence between the currency of sterling and the EMS currencies on the other hand. This is all I can deal with at the moment. The longer term effects will depend on movement of currencies concerned including the movement of sterling. It would not be wise, to say the least, to assume that the present divergence is going to be of long-term duration.