EU industrial structure - EU Bookshop - Europa

EU industrial structure 2011 — Trends and Performance
sectors except textiles, paper, machinery n.e.c, electrical
equipment and basic metals, half or more of EU‑27 exports
are destined for high income countries.
Part of international trade consists of cross‑border flows
of products of different industries (inter‑industry trade)
reflecting relative different factor (labour and capital)
endowments and technology. Countries which are relatively
endowed with capital tend to trade capital intensive goods
in exchange for labour intensive goods from countries
which are relatively well endowed with labour: for example,
pharmaceuticals for textiles or motor cars for food.
However, there is a high share of exchange of similar goods
between countries, with comparable levels of income. High
income countries tend for example to trade different brands
of cars with each other and low income countries different
types of clothes for each other. This intra‑industry trade
(IIT) is explained by factors such as economies of scale and
demand for differentiated products, rather than by relative
factor endowments. As demand for differentiated products,
and varieties of different qualities, tend to rise with income,
per capita incomes of countries play an important role in
determining trade patterns.
Almost 54 % of world trade occurs between countries in
the groups composed of the EU‑27 and other high‑income
countries. If upper‑medium countries are included, this
share rises to 70 %.
China stands out in the group of BRIC countries (Brazil,
Russia, India, China). More than 40 % of EU imports
in furniture, leather and footwear, clothing, electrical
equipment, non‑metallic mineral products, and metal
products come from China. Brazil captures 14 % and 12 % of
EU imports of paper and food products.
Competitiveness on world markets is measured by indices
of revealed comparative advantages. The measurements
of revealed comparative advantages for manufacturing
in 2009 show that the EU‑27 had comparative advantages
in industries such as printing, beverages, tobacco products,
motor vehicles and pharmaceuticals. In contrast, the
EU‑27 did not have any comparative advantages in
the production of computers, electronic and optical
products, textiles, other manufacturing, clothing and
refined petroleum. The measure of revealed comparative
advantages has some weaknesses which should be
taken into account. It is sensitive for the level of sectoral
aggregation, which may mask differing performance in
various categories of goods within the same group of
products. This is particularly relevant for industries which
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have a large variety of brands and quality levels for the
same type of goods. Another consideration is country
heterogeneity within the EU, as the performance of the EU
as a whole is explained in some cases by the performance
of a few EU countries. Finally, the weight of each sector and
country in the export structure of the EU should be borne
in mind to get to a balanced assessment of the EU’s sectoral
performance in external trade.
Analysing comparative advantages for individual Member
States reveals that many EU countries, in 2009, have
comparative advantages in the production of wood and
wood products. The high revealed comparative advantages
for Austria, Estonia, Finland, Latvia and Portugal are in line
with the specialisation patterns that could be observed in
the analyses of industrial structure. Belgium, Cyprus and
Ireland appear to have comparative advantages in basic
pharmaceutical products. Bulgaria, Greece, Portugal and
Romania have comparative advantages in clothing and
Italy, Portugal and Romania have comparative advantages
in leather and footwear.
US manufacturing industries have comparative advantages
in chemicals, pharmaceuticals, machinery and other
manufacturing goods. Japanese manufacturing industries
have comparative advantages in motor vehicles, other
transport equipment, machinery, computers, electronic
and optical products. Analyses of the BRIC countries show
that the Brazilian, Indian and Russian manufacturing
industries have comparative advantages in the production
of labour intensive goods or products which are based on
endowments of natural resources. Chinese manufacturing
industries display a different pattern. It may seem as if China
has become one of the most important trade partners
in high technology goods but the high comparative
advantage of China in this type of trade should be
taken with a pinch of salt. China exports proportionally
more technology‑intensive goods, but a large share of
the content is imported from developed countries. As
confirmed by data on trade in intermediate goods, China is
still more an ‘assembler’ than a producer of high technology
goods. While the Chinese import of intermediate goods
consists of high quality goods, their exports seem to be of
a lower quality.
The analyses of trade in service show that the EU,
in 2009, has comparative advantages in almost all sectors
except personal, cultural and recreational, construction
services and travel. 1 Cyprus, Luxembourg and the
UK has comparative advantages in financial services.
1 See Chapter IV for a definition of these types of services.