Comment: The impact the continuing weakness of the dollar will have on the economy has been a common theme of much of the recent economic analysis. This is hardly surprising, given that the US accounts for 20 per cent of our exports and that over one-third of exports are to countries in which the dollar is the trading currency.

The potential continuation of a weak dollar during 2005 will clearly have a negative impact both on trade and on Ireland's prospects of attracting future investment from US multinationals.

More pertinently, an in-depth analysis of the industries exporting to these areas reveals that it is the vital growth-generating sectors of the Irish economy that will be hardest hit by the continuation of a weak dollar. The importance of the US market for key growth-generating areas of the Irish economy, notably the pharmachem, medical devices, ICT, and food and drink sectors, means that a prolonged weakness in the dollar will endanger economic growth.

The US is the most substantial trading partner for Ireland outside the EU, accounting for 20 per cent of all Irish exports in 2003 or €16.9 billion. Exports to the US in the first 10 months of 2004 were down €418 million compared to 2003. In addition, Irish exports to other regions where trade is denominated in US dollars were also well down, for example exports to Mexico decreased by €128 million (down 27 per cent) and to Canada by €70 million (down 20 per cent). This trend is quite disconcerting given expectations that the US dollar will remain weak for much of 2005 with currency markets focused on US fiscal and current account deficits.

With trading conditions likely to become even more competitive during 2005, it will be vital for Irish companies to reduce our already high business and manufacturing costs in order to improve our ability to compete - especially since there is little that we can do to alter the exchange rate. Therefore, the onus is on both Government and business to look at other measures that can be taken to help reduce the impact on the competitiveness of Irish exporters. We need to keep costs to business down over the coming year, in areas such as waste disposal, energy and insurance, in addition to labour.

It will also be vital for Irish industry to focus on innovation and increase spending on "near-to-market" research and development, with aid and support from the Government and State agencies.

A recent Danish study, The Global Challenge, ranks Ireland top of the league of EU countries exporting "upmarket products". The study estimated that just over 60 per cent of Irish exports were of upmarket, or value-added, products compared to around 40 per cent for Sweden, Germany and Denmark. This reflects the success of the Irish economy in diversifying over the last 10 to 15 years by increasing its exports of products such as pharmaceuticals, medical devices, computers and telecommunication equipment, processed foods and drink, etc.

However, there is no room for complacency. Ireland should learn from the experience of others, for example in Germany where upmarket exports now make up a much smaller proportion of total exports than at the end of the 1980s.

This situation contrasts with Japan, which has managed to hang on to its top ranking in the price and quality hierarchy since the middle of the 1990s. Unless Ireland increases its spend on near-to-market R&D and focuses on continuing to add value to exports, we could suffer the same fate as Germany.

While fluctuations in currency are to be expected over time, it is also a matter of concern from an investment viewpoint that the dollar could reach new lows against the euro during the first half of 2005 in particular.

The potential impact of a weak dollar, both on income flowing into Ireland through exports and also on potential future investments in Ireland by US multinational corporations, on the overall economy should not be underestimated. It is vital for the economy, and ultimately for jobs in Ireland, that we take every step we can to ensure the negative effect of the exchange rate can be cushioned.

Pat Ivory has recently been appointed head of trade in IBEC.