Old and New EU Members Competing for new BRICs’ and Growth Economies’ Markets
External economic relations play a crucial role in the European economy. During the recent economic and financial crisis external demand has...
External economic relations play a crucial role in the European economy. During the recent economic and financial crisis external demand has become the main source of growth, while domestic demand remains weak in most member states. In order to be on a sustainable growth path, economic recovery in Europe therefore needs to be consolidated by stronger links with the new global growth centres. According to the IMF (World Economic Outlook, 2012), 90% of global economic growth by 2015 is expected to be generated outside Europe, a third of it in China alone. The importance of fostering economic relations with emerging economies has been recognised also in Europe 2020 strategy.
The paper aims to explore potential difference in the adjustment to the new centres of economic growth (BRICs and other Growth markets according to Goldman Sachs definition) between the industrial member states (EU-15) and the new transitional members of the European Union (NMS). We attempt to test to what extent these differences can be attributed to structural and competitiveness changes by applying Constant Market Share Analysis (CSMA) to trade flows.
The paper further explores the importance of trade restructuring and reorientation as a crisis exit strategy. A motivation behind such analysis is a theoretical postulate according to which growth rates of partner countries are correlated. Accordingly, if a country enhances cooperation with fast growing economies this will have a simulative effect on its growth.
CMSA provides a suitable methodological framework for decomposing the total change in export market shares of a particular country or group of countries. More specifically, export growth (total effect) over a certain time period is decomposed to competitiveness gains (competitiveness effect) and advantageous export product/market specialization (structure effect). Although some shortcomings of CMSA such as its dependence on the level of product disaggregation are not to be neglected, the most interesting features of CMSA are its straightforwardness in identifying to which factors a gain or loss in export market share is attributable, and in allowing cross-country comparisons. The CMSA has been refined into several different formulas since it was initially postulated. In this paper, our CMAS formula follows the methodology used by the ECB (2005), and Jiménez and Martín (2010). The CMSA calculations are performed on EU-15 and EU-10 trade data with the two groups of emerging economies (BRICs and other GM) at the 2-digit level of Standard International Trade Classification (SITC Rev.3) in the 2005–2012 period by using the United Nations Commodity Trade Statistics Database (UN Comtrade).