Three Regions, three economies ?

Are the production structures in the Flemish, Walloon and Brussels Regions interconnected, or conversely, do they tend to function independently of one another ? The article shines a light on trade between the three Regions and assesses the size of the regional barriers that exist in Belgium. Establishing a trade relationship with a firm located in a different Region does in fact entail an additional cost. The estimates indicate that a Flemish firm faces an implicit barrier equivalent to 10 km when wishing to make a sale to a Walloon firm. A Walloon supplier seeking a Flemish trade customer is confronted by an implicit barrier of 30 km. The presence of interregional barriers does not prevent trade between the Regions. Half of all firms in Belgium sell to trade customers in another Region. Overall, each Region is involved in the export trade of the other two Regions. Moreover, 7 % of Flemish value added is invested or consumed by households or public authorities in the other two Regions. For Flanders, the Walloon market alone is comparable in size to the German or French market, and larger than the Dutch market. For Wallonia and Brussels, the interregional market absorbs 9 % and 40 % respectively of the value added created. It accounts for a bigger share than the German and French markets taken together. In that connection, the authors draw attention to the striking contrast between the foreign markets served by Flanders and those of Wallonia.