EU industrial structure - EU Bookshop - Europa
EU industrial structure - EU Bookshop - Europa EU industrial structure - EU Bookshop - Europa
EU industrial structure 2011 — Trends and Performance IV.5 Trade in intermediate goods This section aims at providing information about how the globalisation process and increased trade in intermediate goods have impacted on the trade performance of EU industries. This is analysed in two ways. First, the extent of imported intermediates in exports for countries and industries is analysed. This is followed by analysis of the competitiveness of EU manufacturing in intermediate trade. The EU manufacturing industry is compared with those of the BRIC countries, Japan and the USA. A distinct feature of the increased globalisation is the fragmentation of firms’ value chains and establishment of cross‑border networks by an increasing number of firms. This implies that imports and exports move together, since companies’ production process are increasingly characterised 124 box IV.7: Vertical specialisation by sequential production in different locations depending on the comparative advantages of the locations. An increasing share of firms’ exports is composed of imports: for example, it is no longer valid to label a product which is exported from the UK as ‘Made in UK’ since the production of components and services needed to produce the product has taken place in many locations across the world. The concept ‘vertical specialisation’ [Hummels et al. (2001)] which is a measure of the import content of exports, has been proposed to gauge this feature of trade with intermediate goods. The concept of vertical specialisation concerns both imports and exports of goods between at least three countries. Intermediates are imported in one country from a source country and used in the production of further intermediate goods or final goods which are exported to a destination country, cf. Box IV.7. When an industry i in country k uses imported inputs to produce an exported good, vertical specialisation VS is ki defined as: 78 Vertical specialisation for a country k equals the sum of VS for all i, VS = Σ VS . Relating it to exports yields vertical k i ki specialisation share of total exports for a country: 79 VS share of total exports for country k = where X denotes exports. 80 78 Hummels et. at. (2001) p. 78. 79 The concept ‘import content of exports’ is sometimes used to describe the same phenomena, OECD (2010). 80 See Hummels et. al. (2001) p. 79 for details. It is shown that vertical specialisation for a country k is an export-weighed average of the sector vertical specialisation export shares. The equivalent matrix notation of the expression above is uAM[I — AD] -1 X/X k, where u is a vector of 1’s, AM is the n x n imported coefficient matrix, I is the identity matrix, AD is the n x n domestic coefficient matrix, X is n x 1 vector of exports, Xk is total country exports and n is the number of sectors. In order to calculate the shares for sectors, X is replaced by a n x n vector with sector exports in the diagonal and zeros elsewhere. See OECD (2010) for details.
The import dependence of exports, vertical specialisation share of total exports, increased in almost all OECD countries between 1995 and 2005. Vertical specialisation is most pronounced in small countries depending on imports for intermediate goods and countries hosting a large Chapter IV — International competitiveness of EU industry number of multinational firms. Relatively small EU countries such as Estonia, Hungary and Ireland show high import dependencies of exports compared to France, Germany and the UK, cf. Figure IV.19. FIgURE IV.19: Vertical specialisation of exports by country in 1995 and 2005 (%) 70 60 50 40 30 20 10 0 Luxembourg Hungary Estonia Ireland Slovak Republic Czech Republic Slovenia Belgium Portugal Korea Mexico Finland Netherlands Denmark Austria Spain Sweden Source: OECD (2010). OECD Economic Globalisation Indicators. Vertical specialisation as share of total industry exports increased in almost all EU industries between 1995 and 2005. Vertical specialisation is more pronounced in basic EU industries which use a relatively large share of primary goods such as coke and refined petroleum, basic metals and chemicals. Also more knowledge‑intensive industries, such as motor vehicles, radio, television and communication equipment industries, where parts and components are produced before they are exported to another country for assembly into final goods, show high degrees of vertical specialisation. The extent of Poland Italy Romania China Canada Germany Greece France OECD Turkey Chile United Kingdom New Zealand Israel Indonesia South Africa Norway Japan Brazil Australia Russian Federation India United States vertical specialisation is considerably lower in EU service industries, cf. Figure IV.20. 81 81 Due to data constraints it was not possible to calculate vertical specialisation for the same years for all countries. Input-output tables for 1995 and 2005 were used for Austria, Belgium, Italy, Portugal, Spain and Sweden. Input-output tables for 1995 and 2007 were used for Denmark, Finland, France, Germany and Netherlands. Input-output tables for 1996 and 2005 were used for Slovenia. Input-output tables for 1997 and 2005 were used for Estonia. Input-output tables for 1998 and 2005 were used for Hungary and Ireland. 125
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The import dependence of exports, vertical specialisation<br />
share of total exports, increased in almost all OECD<br />
countries between 1995 and 2005. Vertical specialisation is<br />
most pronounced in small countries depending on imports<br />
for intermediate goods and countries hosting a large<br />
Chapter IV — International competitiveness of <strong>EU</strong> industry<br />
number of multinational firms. Relatively small <strong>EU</strong> countries<br />
such as Estonia, Hungary and Ireland show high import<br />
dependencies of exports compared to France, Germany and<br />
the UK, cf. Figure IV.19.<br />
FIgURE IV.19: Vertical specialisation of exports by country in 1995 and 2005 (%)<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Luxembourg<br />
Hungary<br />
Estonia<br />
Ireland<br />
Slovak Republic<br />
Czech Republic<br />
Slovenia<br />
Belgium<br />
Portugal<br />
Korea<br />
Mexico<br />
Finland<br />
Netherlands<br />
Denmark<br />
Austria<br />
Spain<br />
Sweden<br />
Source: OECD (2010). OECD Economic Globalisation Indicators.<br />
Vertical specialisation as share of total industry<br />
exports increased in almost all <strong>EU</strong> industries<br />
between 1995 and 2005. Vertical specialisation is more<br />
pronounced in basic <strong>EU</strong> industries which use a relatively<br />
large share of primary goods such as coke and refined<br />
petroleum, basic metals and chemicals. Also more<br />
knowledge‑intensive industries, such as motor vehicles,<br />
radio, television and communication equipment industries,<br />
where parts and components are produced before they are<br />
exported to another country for assembly into final goods,<br />
show high degrees of vertical specialisation. The extent of<br />
Poland<br />
Italy<br />
Romania<br />
China<br />
Canada<br />
Germany<br />
Greece<br />
France<br />
OECD<br />
Turkey<br />
Chile<br />
United Kingdom<br />
New Zealand<br />
Israel<br />
Indonesia<br />
South Africa<br />
Norway<br />
Japan<br />
Brazil<br />
Australia<br />
Russian<br />
Federation<br />
India<br />
United States<br />
vertical specialisation is considerably lower in <strong>EU</strong> service<br />
industries, cf. Figure IV.20. 81<br />
81 Due to data constraints it was not possible to calculate<br />
vertical specialisation for the same years for all countries.<br />
Input-output tables for 1995 and 2005 were used for Austria,<br />
Belgium, Italy, Portugal, Spain and Sweden. Input-output<br />
tables for 1995 and 2007 were used for Denmark, Finland,<br />
France, Germany and Netherlands. Input-output tables<br />
for 1996 and 2005 were used for Slovenia. Input-output tables<br />
for 1997 and 2005 were used for Estonia. Input-output tables<br />
for 1998 and 2005 were used for Hungary and Ireland.<br />
125
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