The downgrade in America’s credit rating can lead to a boom for Irish business according to an industry body.
The Irish Exporters Association believes Standard & Poor’s decision to cut the US’s triple A credit rating represents a boost for their members.
The organization’s chief executive John Whelan has stated publicly Ireland is now a more attractive location for American companies to set up operations as a result of the downgrading.
The decision, married to the fall in the cost of Irish labor and the financial crisis here, has only increased Ireland’s attractiveness according to Whelan.
“The United States is Ireland’s largest trading partner and, therefore, any major jolts to the US economy must be monitored very carefully,” Whelan told the Irish Examiner.
“The downgrading certainly heralds a changing world order in economic ratings and may force other trading blocks and, in particular, the EU to tackle their sovereign credit management issues more comprehensively.”
As the dollar fell against the Euro in early morning trading on Monday, Whelan believes the currency fluctuation will also benefit American companies with an Irish base.
“Many of the multinationals exporting out of Ireland are US corporations and hence, on repatriating the euro profits back to the USA, show a greater gain when the dollar weakens,” added Whelan.
“Also, as the price of oil is denominated globally in US dollars, a weakening of the dollar will improve our cost base for transport, lighting, heating and manufacturing.”
Ireland exported goods and services worth over $30billion to the United States in 2010, over 15.6 per cent of total exports.
The Irish Exporters Association is however worried about a loss of business confidence in the United States.
Whelan said: “This is not good news for global trade and exporting industry. We can also expect more volatility in currency markets, and higher costs of credit.
“However, it may also provide the basis for a more aggressive and wide-ranging solution by G20 countries to the global sovereign debt funding issues. It may ensure they are tackled more urgently.”