International trade introduced
From Statistics Explained
- Data from August 2012. Most recent data: Further Eurostat information, Main tables and Database.
The European Union (EU) has a common trade policy, often referred to as the common commercial policy. In other words, the EU acts as a single entity on trade issues, including issues related to the World Trade Organisation (WTO). In these cases, the European Commission negotiates trade agreements and represents Europe’s interests on behalf of the EU Member States.
Main statistical findings
Having been disrupted by the global financial and economic crisis in 2009, there was a return to progressively more trade integration for the EU-27 in 2010 and 2011 – see Figure 1. The crisis had a considerable impact on the international exchange of goods and services in 2009 – however, this was relatively short-lived and the level of trade integration for goods and services bounced back in 2010 to levels that were above those recorded in 2008.
The average value of EU-27 credits and debits relative to gross domestic product (GDP) corresponded to 12.9 % of GDP in 2011 for goods, up from a relative low of 9.8 % in 2009. The level of trade integration for services was less pronounced (than for goods) and the pace of recovery following the financial and economic crisis was less rapid. Nevertheless, the average value of credits and debits rose to 4.2 % of GDP in 2011, up from a relative low of 3.8 % in 2009. The latest data for 2011 shows that the relative importance of trade integration for both goods and services within the EU-27 economy was at its highest level ever in 2011; these figures confirm that the recovery from the crisis was more rapid for international trade than for GDP.
The EU-27 trade deficit for goods and services (see Table 1) was equivalent to -0.2 % of GDP in 2011, a smaller deficit than in the United States (-3.7 %) or Japan (-0.7 %). The EU-27’s deficit in 2011 was composed of a surplus for services (0.9 % of GDP) and a slightly larger deficit for goods (-1.1 %).
Among the EU Member States, the combined trade balance for goods and services in 2011 was positive in 14 Member States. Positive balances exceeded 10 % of GDP only in Ireland (21.7 %) and Luxembourg (41.3 %); in the case of Ireland this was due to a particularly large surplus for goods, while for Luxembourg it was due to a large surplus for services. The two largest trade deficits for goods and services were recorded in Romania (-5.2 % of GDP) and Greece (-5.9 %); in both cases the deficit was driven by a relatively large deficit for goods.
Data sources and availability
Within the EU, there are two main sources of international trade statistics. One is international trade in goods statistics, providing information on trade in merchandise goods, collected on the basis of customs and Intrastat declarations. This provides highly detailed information on the value and quantity of international trade in goods as regards the type of commodity. The second main source is balance of payments statistics (BoP), which register all the transactions of an economy with the rest of the world. The current account of the BoP provides information on international trade in goods and services, as well as income (from employment and investment) and current transfers. For all these transactions, the BoP registers the value of exports (credits) and imports (debits), this source is used to present information on international trade in services.
Trade integration of goods and services is defined as the average value of debits and credits (summed and divided by two), presented in relation to GDP: the terms credits and debits are used for international trade in services which can roughly be considered to be equivalent to exports and imports for international trade in goods. This indicator is calculated for both goods and services, based on balance of payments data; if the values increase over time, then the reporting territory became more integrated within the international economy. It is normal that smaller countries will display a higher degree of trade integration, as they are more likely to import a range of goods and services that are not produced within their domestic markets.
The EU Treaty (TEU) (also called the Treaty of Maastricht) establishes the overall aims and objectives of the EU’s trade policy: Article 3 sets out the general aims, including a competitive social market economy, aimed at full employment and social progress. Article 206 of the Treaty on the functioning of the Union (TFEU) explains how the common commercial policy must operate in principle: ‘to contribute, in the common interest, to the harmonious development of world trade, the progressive abolition of restrictions on international trade and on foreign direct investment, and the lowering of customs and other barriers’. Article 207 of the TFEU sets out the scope, instruments and decision-making procedures, while Article 218 establishes the current inter-institutional procedure for the conclusion of international agreements, principally by the Council.
The EU’s trade policy aims to make the EU competitive in foreign markets. Being an open economy, the EU seeks to secure improved market access for its industries, services and investments, and to enforce the rules of free and fair trade. A coordinated trade policy takes on even greater importance in an era of globalisation, where economies and borders have opened-up, leading to an increase in trade and capital movements, and the spread of information, knowledge and technology, often accompanied by deregulation. The economic impact of globalisation on the EU is felt through trade in goods and services, as well as through financial flows and the movement of persons linked to cross-border economic activity.
In August 2012, Russia became a member of the WTO. This development has the potential to provide a boost to the European economy, as Russia is the EU’s third largest trading partner. Russia is expected to lower its import duties, limit its export duties and grant greater access to its markets, as well as introducing a range of other measures.