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Declan O’Brien: Our deals will have bite in China is price, quality right

CHINA has been trumpeted as the great new hope for Irish exporters and the focus has been firmly fixed on the eastern giant once more this week by the visit of yet another trade mission.

The travelling party is led by the Agriculture Minister, Simon Coveney, and includes some of the country's top players in dairy, meat, equine and agri-services sectors.

But can Ireland secure a real foothold in the Chinese market? And what are the opportunities for those companies that do?

It would be great to answer both in an Obama-esque fashion and roar 'is feidir linn' to the first and 'massive' to the second; but unfortunately things are not that simple in the real world.

The reality is that China is in the driving seat when it comes to those looking for access to its massively lucrative internal market.

Any deals done on trade with China will have to make sense strategically and economically. In short, Ireland Inc will have to prove that it can be competitive on price and guarantee quality of supply and service.

However, one of the things that has come through from this latest visit is that the Chinese officials appreciate the manner in which Ireland has gone about its business.

China may be a state born out of communist revolution but it is a society in which convention and tradition are extremely important.

The fact that Ireland has sent the Taoiseach, as well as two senior ministers in Simon Coveney and Richard Bruton, confirms to the Chinese that we are serious about doing business.

That state bodies such as Bord Bia, Bord Iascaigh Mhara and Teagasc have been on hand to organise and offer technical back-up to the trade mission has also impressed our hosts.

This approach has opened doors at the most senior levels for company representatives and has created linkages between senior officials that could prove extremely important.

Mr Coveney and his travelling party have received a very warm reception and officials say that this has created a good atmosphere for trade talks that have been described as "frank but friendly".

The challenge for the Irish delegation is to turn this goodwill into good business. And on this front, Ireland is blessed with some unique selling points.

Our track record in the bloodstock industry has already delivered on this trip, with Coolmore Stud securing a contract to partner with the developers of a €1.5bn horse-racing centre in the northeast of the country.

The Coolmore deal, which is estimated to be worth around €38m over three years, will involve the Tipperary bloodstock operation sourcing thoroughbred breeding stock for the fledgling racing sector in China and advising on their breeding policy.

Similarly, the agri-services sector nailed a significant bit of business on the trip. Kilkenny horse feed manufacturers Connolly's Red Mills became the first to secure a licence to supply horse feed to China.

Limerick firm Samco agreed a deal to deliver plastic and machines for the sowing and growing of maize, while north Co Dublin fruit company Keelings is to provide a software package to monitor and control stock levels for one of China's main vegetable distributors.

But the real prizes to be won on this trip are in the meat, dairy and seafood sectors. Food and drink exports to China grew by 55pc through 2011, going from €127m to €197m.

If hides and offal are included, the total rises even further. It is widely argued that this figure can be grown significantly.

The dairy sector, and particularly baby food and the whey derivatives from which it is made, offer a certain path to realising this growth.

The Glanbia announcement yesterday that it is to expand its exports of whey products for infant formula to 9,000 tonnes highlights the potential of the market.

Ireland already exports almost €128m of whey and infant formula to China, but the standards demanded for the trade illustrate the near paranoia associated with food quality here -- and for good reason, too.

The infant formula or melamine scandal that erupted in 2008 has seriously damaged consumer confidence in China.

The addition of the illegal substance melamine to infant formula so as to increase its protein levels had disastrous consequences. It cost the lives of three infants and left thousands seriously ill.

This would have been a scandal in any country, but it was particularly so in one with a strict one-child policy.

The thought that families could lose their only child due to the poisoning of baby food had a traumatic effect on the parents caught up in the crisis and a disastrous impact in public trust and confidence in food quality.

Ironically, it has also created export opportunities for foreign companies and this is the space in the market that companies such as Lakeland Dairies, Glanbia, Dairygold and the Irish Dairy Board are now attempting to secure a presence.

The other headline commodity that Ireland is looking to push is meat. At the moment exports of poultry, pork, hides, and offal total €90m. However, the view is that this could be grown significantly if the green light is given for beef exports.

The Chinese market has been closed to Irish beef since the BSE scare of the mid-1990s and the issue of reopening it is one which is extremely sensitive.

Mr Coveney has made some progress on the issue during this visit and the first steps towards the re-opening of the trade could be taken this June when officials from the Chinese quarantine service visit Ireland.

Chinese officials have been impressed by our disease control standards and livestock traceability procedures. But convincing Beijing to change tack on the ban could take time.

It has been suggested that since the ban applies to all EU countries and Ireland takes over the presidency of the union next January, that progress might not be forthcoming on this issue until then.

However, domestic considerations could also prompt a change of policy. Food prices have been blamed for driving inflation last year to almost 5.4pc.

More importantly, long-term food security is a must for a country that has 1.3 billion people and an additional 16 million mouths to feed each year.

Add to this the fact that China's new-found wealth and greater urbanisation has created a middle class of 300 million that has a growing taste for western food and it is clear why 51 companies from the agri-sector have taken part in this trade mission.

But for those companies to capitalise on China's undoubted potential, the price and the quality will have to be right.

Irish Independent