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A closer look at some drivers of trade performance at Member State level

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  • Jesus Maria Irigoyen
  • Josefa Monteagudo
  • Alexander Rutkowski

Abstract

This chapter takes a closer look at some drivers of the trade performance of individual euro-area Member States. It shows that the import content of exports is high and rising, particularly in smaller Member States. This has important implications for the impact of exports on growth and the trade balance. Decomposition of export growth based on a constant-market share technique shows that country differences in export performance are mainly driven by market share gains or losses within geographical destinations and product markets, with the overall geographical and sectoral specialisation playing only a modest role. There is some persistence in export performance over time, with market share gains within geographical destinations and product markets in pre-crisis years correlated with gains since the crisis. This inertia in export performance is a factor that could contribute to the persistence of external imbalances. And there does not seem to be any trade-off between strategies which enhance product competitiveness horizontally (across all geographical markets) and those which may customise products to local needs or tastes in destination countries. Finally, export performance appears to be only partly related to price competitiveness, leaving an important explanatory role for non-price competitiveness. In a policy perspective, strategies to rebalance current account deficits should aim to enhance both price and non-price competitiveness, with a key role to be played by increased competition in the service sector, export promotion programmes and the promotion of R&D and skilled labour.

Suggested Citation

  • Jesus Maria Irigoyen & Josefa Monteagudo & Alexander Rutkowski, 2012. "A closer look at some drivers of trade performance at Member State level," Quarterly Report on the Euro Area (QREA), Directorate General Economic and Financial Affairs (DG ECFIN), European Commission, vol. 11(2), pages 29-39, July.
  • Handle: RePEc:euf:qreuro:0112-03
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    References listed on IDEAS

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    Keywords

    foreign trade;

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