External Trade

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Marlene Rosemarie MadsenChief Economist Unit

DG TRADE

European Competitiveness and EU Trade Policy

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Global Europe – EUs Trade Policy

Increased importance of trade liberalisation

Results from new study - EU businesses are

doing well

Outline

- Global Europe

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Main objective is to contribute to growth and jobs

An effort to see trade policy as part of the wider

globalisation agenda

To make sure we are addressing the most

important challenges of the global age

To ensure that EU trade policy instruments are fit

for that purpose

Global Europe – EUs Trade Policy

- Global Europe

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Opening up markets abroad

Pushing for Doha Development Agenda

Negotiating FTAs with India, Korea and South

East Asian countries

Market Access Strategy

External dimension of the Lisbon Strategy

Global Europe – main pillars

- Global Europe

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A key part of increasing European competitiveness

A framework towards removing barriers on a global scale

Market Access Database

Benefits all sectors

The New Market Access Partnership

Commission, Member States and EU industry

Identify the barriers that matter the most to EU business

Work together to address them through FTAs, bilateral

negotiations, dialogues or trade diplomacy

Global Europe – market access strategy

- Global Europe

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The financial crisis has turned into a global economic

crisis

Global trade is slowing due to sluggish global demand

and the disruption of trade finance markets

The World Bank forecast of a 2.1% fall in global trade is

looking increasingly plausible (the first decline since

1982)

We know from past global crises that there is a danger

of emergence of protectionist policies. The challenge is

to make sure that this will not be the case this time

Increased importance of trade liberalisation

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The report analysed EUs strengths and

weaknesses in international trade

It did so by examining EU competitiveness by

category of trade through evolutions of EU’s

market share vis-à-vis main competitors

EU is doing well - Performance in the Global Economy based on a CEPII Study

- Global Europe

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Europe is part of global production chains

Europe’s trade performance is remarkable

Europe has strong position in up-market

products

But we should not be complacent – risks

EU leading exporter of services

EU Performance in the Global Economy – main findings

- Global Europe

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the EU has managed to roughly maintain its share of the global market

More important losses for the US and Japan China stands out

Good performance in merchandise trade

World Market Share

0%

5%

10%

15%

20%

25%

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

EU 25

Japan

USA

China% of total world exports by value excluding energy

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EU’s trade balance has largely improved: +€156.4bn in 2007

The rise of €100.7bn since 2000 has partially offset the increasing deficit in energy (+€139.6bn over the period)

Positive development of trade balance for manufactured products

Trade balance for manufactured products

-400.0-300.0-200.0-100.0

100.0200.0300.0400.0

United StatesJ apanChinaEuropean Union

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EU’s overall good performance due to an upgrading of product quality

EU’s Specialisation: Up-market products

World Market Sharefor Up-Market Products

0%

5%

10%

15%

20%

25%

30%

35%

EU Japan US China

1995

2004

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Up-market products = products sold at premium price due to quality, branding and related services

Represent 1/3 of world demand and 50% of EU exports

Not only luxury goods but across the whole range of EU exports (intermediary goods, machines, textiles…)

Represent the only way to uphold EU levels of social protection, employment and wages

EU Specialisation: Up-market products

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Innovation and High-Tech products are key for future competitiveness

EU Market Shares in High-Tech products is below average EU Market Shares for all products

Good performance but the situation is at risk (I)

All major competitors lose market shares except China – but US and Japan lose more market shares than the EU

World Market Sharefor High-Tech Products

(2005)

0%

5%

10%

15%

20%

25%

EU Japan US China

All products

High-Tech products

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EU has suffered losses of market share on some of the fast growing emerging markets

Good performance but the situation is at risk (II)

EU's Market Share in fast growing markets

0%

10%

20%

30%

40%

50%

60%

Russia India China Brazil

1995

2005

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EU is the largest exporter of commercial services with 28.3% share of world market (US 19.2% ; Japan 5.7%)

EU’s market share is expanding while US’s is decreasing and Japan’s is stable

Good Performance in Services

World Market Sharein Commercial Services

0%

5%

10%

15%

20%

25%

30%

EU US Japan China

2001

2007

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EU MS: The Competitive Position

Some MS are specialised in up-market goods and are the main engines of EU exports to third markets, some are specialised in up-market services

Almost all MS are increasing their market share for up-market products

Some (e.g. small MS and new MS) are doing well on extra-EU markets when looking at it in a dynamic way

Some EU15 have developed strong production interlinkages with other MS and in particular new MS. This means that success in EU 15 MS on extra-EU markets is also a success in many EU 10 MS which actively participates in the process (though this is not reflected as extra-EU exports)

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Main comparative advantange

Dynamiccomparative advantage

Manufactures Belgium Finland LuxembourgGermany Ireland Slovakia Sweden, Italy

Czech Rep.Hungary PolandNetherlandsLithuania

Services France, Greece, Estonia, Lithuania, Latvia, Portugal, Slovenia, Spain, UK

Belgium, Netherlands, Finland Sweden

Sectoral Competitiveness – EU member states clustering

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2/3 of extra-EU imports (excl. energy) are inputs => EU as whole relies heavily on global sourcing

Being able to import at a competitive price is crucial for EU competitiveness

Importance of remaining open

country in %

EU 25 65.3Netherlands 73.5 Italy 62.9Poland 72.8 Belgium 60.3Germany 68.4 United kingdom 59.4France 63.5 Spain 56.9

Inputs: equipment goods + intermediate goods + parts and components - primary products excluded

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Conclusions (I)

- Global Europe

EU is the largest trading block (goods, services,

investment) and thus has a major stake and

responsibility in open, transparent and effective

multilateral rules

It is EUs interest to keep trade flowing and

markets open both at home and abroad

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Conclusions (II)

- Global Europe

EUs good performance in a very competitive

environment is very much due to export of up-market

goods and services

Innovation remains a key component of EU

competitiveness but is also a potential risk in future

=> Internally, calls for an increase of investment in

innovation and skills; externally, justifies strong

emphasis on IPR protection

EU weak performances on some fast growing markets

=> strong support to FTAs under negotiation

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Conclusions (III)

- Global Europe

We are currently facing a major economic crisis

The EU’s overall sound competitive position makes it

relatively well equipped to face the crisis but our

specialisation in up market products and equipment

goods may also create some challenges

Reinforce the need to keep global markets open. Trade

should be part of the solution to the crisis. We must

ensure that:

- The G20 commitment on a protectionism standstill is respected

- The DDA is finalised (the value of the deal has greatly increased)

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Thank you !

Contact:

Marlene.MADSEN@ec.europa.euEuropa CommissionDG TradeCHAR 07/951049 BruxellesBelgium