EU‘s Trade with the BRICs and Competitiveness Challenges

1. EU‘s Trade with the BRICs and Competitiveness Challenges Peter Havlik and Roman Stöllinger The Vienna Institute for International Economic Studies (wiiw)

2. EU and BRICs‘ Trade: Global, Regional, Commodity and Specialization Patterns • EU is the biggest world exporter; in imports ranks second after USA • EU plays more important role in BRICs‘ trade than vice versa (even without intra-EU trade which accounts for 2/3 of total) • EU has a large trade deficit with BRICs (EUR 245 bn in 2008) • Russia is the most important export partner among BRICs, China largest import partner among BRICs • NMS‘ trading patterns with BRICs differ from the rest of EU

3. Shares in World Goods Exports: Triad and BRICs • EU is the biggest world exporter (17% of world goods exports) • BRICs (esp. China) are catching up, overtaking Japan (in 2005) and even the USA (in 2007) • EU succeeds in keeping its leading position while USA and Japan are falling behind • USA leads in world import shares (18.5%), EU: 2nd, China: 3rd Source: UN Comtrade

4. Shares of the Triad in Goods Imports of BRICs • EU is BRICs‘ most important trading partner (28% of BRICs‘ exports, 18% of imports) • Yet its importance is declining, though less than that of USA or Japan • EU‘s role is high and rising in Russia; in China, Japan still plays the key role • EU plays more important role in BRICs than vice versa (5.5% of EU exports and 11% of imports come from BRICs) Source: UN Comtrade

5. EU imports from BRICs, shares in total (%) Note: including intra-EU trade Source: Eurostat Comext

6. Uneven importance of BRICs for EU states (imports, year 2007) BRICs‘ import shares range from 4% (Irland, Malta) to 20% (Finland, Lithuania) Russia: for Baltics China: for HU, DE, IT, NL, UK EU average: 11% Note: including intra-EU trade Source: Eurostat Comext

7. EU exports to BRICs, shares in total (%) Note: including intra-EU trade Source: Eurostat Comext

8. Uneven importance of BRICs for EU states (exports, year 2007) BRICs‘ export shares range from 2-3% (Portugal, Greece) to 15% (Finland, Latvia) NMS export shares to BRICs are lower than in EU15 EU average: 5.5% Note: including intra-EU trade Source: Eurostat Comext

9. Structure of EU imports from BRICs, 2007, in % Manufacturing Mining But EU exports to BRICs are mostly manufacturing (90%) (except mining from EU15 to India) Agriculture Note: including intra-EU trade Source: Eurostat Comext

10. EU27: Imports by industry groups (Taxonomy I) Brazil Russia India China Japan USA RoW EU27 World Source: Eurostat Comext

11. Revealed Comparative Advantages of the BRICs Russia Mainstream Labour intensive Capital intensive Marketing driven Technol. driven industries industries industries industries Brazil Source: UN Comtrade.

12. Revealed Comparative Advantages of the BRICs China Mainstream Labour intensive Capital intensive Marketing driven Technol. driven industries industries industries industries India Source: UN Comtrade.

13. EU27: RCAs by industry groups (Taxonomy II) Brazil Russia India China Japan USA Source: Eurostat Comext.

14. EU and BRICs‘ Trade: Tentative Conclusions • BRICs‘ trading patterns differ from each other • Impressive technological upgrading in Chinese exports • China is emerging as a serious challenge for EU competitiveness ! • Global crisis led to a sharp drop in world trade in early 2009 • Signs of recovery already visible