Shifting EMU Trade

The ECB’s Economic Bulletin neatly summarizes some interesting trends in eurozone trade patterns.   Included below are the four main points.

First, through the early 2000s, most of the trade was between EMU countries.  Since then, however, trade outside of EMU has increased, and in Q1 of this year, extra-EMU trade accounted for more than 55%.

This shift is over-determined.  The ECB recognizes that the pace of globalization has quickened since 2000, and more countries, notably China, have joined the WTO.  In addition, while domestic demand in EMU countries remains weak, foreign demand has recovered quicker.

This is illustrated in the below charts from the ECB’s report. Chart A shows the rise of extra-EMU trade (blue bar) and the relatively declining intra-EMU trade (yellow bar).  Chart B  shows how domestic demand in EMU is still not above pre-crisis levels (yellow line), while foreign demand is 25% greater (blue line).

Second, while EMU exports are mostly shipped to other high income countries in Europe, about 1/7 of EMU’s trade is within the US.  In addition, the share accounted for by emerging markets steadily rose from 16% in 2000 to a little more than 25% by 2011.  It has been broadly stable since.

Third, among emerging market economies, China is the main extra-EMU export destination.  After the PRC,  Russia, Turkey, Brazil and India round out the top five of the EMU’s main emerging market trading partners.  They account for about 10% of EMU exports.  Of course, there is great variance.  Russia accounts for 10% of exports from the Baltics and Finland.  A little more than an eighth of Greece’s exports are sent to Turkey.   The chart below provides an EMU member breakdown of exports to these emerging market economies.

Fourth, EMU’s export growth to emerging markets has slowed since 2013.  In fact, the ECB reports that since late 2013, the main emerging market export destinations have been a drag on extra-EMU export growth.  This had been largely a function of Russia and Brazil, but in Q1 15, China’s contribution turned negative as well.