European Commission Report Assesses European Trade Strengths in a Changing Global Economy

A new European Commission report on the competitiveness of the European Union in the global economy has found that in a highly competitive environment, the EU has broadly maintained its world market share, while the U.S. and Japan have lost ground. The EU remains the world's biggest exporter of manufactured goods, and dominates markets for high-quality products. The report warns, however, that the EU must focus on investment in its high-technology manufacturing and continue to improve its market share in the fast growing economies of Asia.

Key elements of the report:

• Thanks to some of its key assets such as chemicals, pharmacy products, motor vehicles and non-electrical machinery, the European Union's trade balance for manufactured products has improved sharply, reaching a surplus of 162bn euros in 2007. The steady increase of 105 billion euros in the trade surplus since 2000 has helped to partially offset the rise in the EU's energy bill, for which the deficit increased by 137bn euros over the same period.
• The EU accounts for 19.5 percent of global markets for merchandise trade (excluding energy) having lost only 1.3 percentage points since 1995. Market share losses are much greater in the case of the U.S. and Japan, falling by 4.4 and 4.1 percentage points respectively. The U.S. and Japan now respectively account for 13.0 percent and 9.5 percent of the world market.
• Two thirds of EU imports (excluding energy) are 'inputs' in manufacturing processes. This demonstrates very clearly that the EU as a whole relies heavily on open markets for inputs for its manufacturing and that open supply chains are integral to its manufacturing strength.
• The EU’s strong performance is due to an upgrading of the quality of its products, combined with the ability of EU companies to sell products at premium price because of quality, branding and related services. The EU accounts for a third of high quality goods and these products represent half of all EU exports of manufactured goods. Building on this ability to sell products at premium price is the only way to uphold EU levels of employment, wages and social protection.
• The EU's performance for high-tech products is disappointing and slightly lower than its overall market share. Given its level of development, the EU should perform better in this sector. This raises concerns about the EU's capacity in the future to keep its products at the cutting edge of quality and innovation.
• The EU has lost significant market share in some of the fast-growing emerging markets, particularly in Asia. In the long run, this underperformance on some of the most promising markets could undermine overall the EU's position in international trade. The new generation of Free Trade Agreements with India, Korea and ASEAN are a direct attempt to correct this trend.
• The EU is the leading exporter of services, with 26.9 percent of the world market against 19.7 percent for the U.S. and 6.1 percent for Japan. The European Union is also the world's biggest investor and the principal host of foreign investment. When intra-EU stocks are excluded, the EU owns 33 percent and hosts 29 percent of world investment stocks.

For more information, please visit: http://ec.europa.eu/trade/