Poland closer than it would seem ( 97,15 KB )

 

Exports of new member states winning markets in EU

  The extension of the European Union (EU) toward the East is an irreversible fact which should broaden our horizons. Among other things, because an unstoppable process has begun that will have important effects on Spain’s trade and investment. As often happens, this represents both opportunity and risk. It offers opportunity because more trade makes it possible to show the best of Spain and enjoy the best of the others, as the Athenians and Venetians discovered, and the classical economists somewhat later. But there is also a risk, given that the new member states are competitors vying with Spain both for customers and direct investment.

  Four countries of Central Europe stand as most significant when speaking of trade (see accompanying graph), all of them members of the EU since 2004, namely Hungary, gripped by domestic rigidities, the former Czechoslovakia and, especially Poland, whose trade with Spain is equal to that of all the other new members.

  The first aspect to be noted is that, following their move into the EU, there has been an opening up of trade in all these countries with exports and imports gaining weight in terms of their GDP which, in turn, each shows a strong growth rate. Simultaneously, their competitiveness has benefited from the increase in foreign direct investment. In terms of foreign capital accumulated by these investments, the total amount of the new member states in Central and Eastern Europe in 1991 amounted to 7% of cumulative foreign capital in Spain. In 1995, this was close to 30% and in 2005, after joining the EU it came to 71%. Partly because of this investment, the share of exports of these countries in the world total has increased, in contrast to what has happened in the countries of the Euro Area as a whole.

  Another notable feature is that the impact of the new member states of Central and Eastern Europe on European trade has been most uneven. We live in the era of Internet and information highways. Nevertheless, in matters of trade matters as prosaic as geography and history have their importance and Poland and the countries of former Czechoslovakia are reaping the benefit. In the competitive German market, the penetration of products from those countries is moving ahead, partly to the detriment of countries of the Euro Area, although it is worthwhile pointing out that Spain’s exports have maintained their level, as may be seen in the following graph. It would appear that, while geographical distance continues to have its effect, it also acts as a cushion, leaving the challenges and opportunities for later. Nothing could be farther from the reality because the process of trade integration is moving ahead rapidly. Trade by Poland, Czech Republic and Slovakia with Spain in terms of total foreign trade growth went from 9% in 2000 to 12.5% in 2006 whereas the weight of trade with Germany, although at a higher starting point, dropped from 32% to 27%.

  A third aspect is related to Spain’s competitiveness, that is, the country’s ability to hold onto its customers and win new ones. In the theory of world trade, each partner is specialized in what it knows how to do relatively better. In this respect, Spain and Poland are very similar while being different from Germany. The Germans are complementary to the Poles and see them as efficient providers of products they do not make. Spaniards, on the other hand, are competitors of Poland and these days the battle is not easy. As shown in the previous graph, whereas Poland’s exports have advanced significantly in the German market, Spain’s exports there have shown something of a drop in market share.

  In order to keep up levels in world markets it is fundamental to improve competitiveness. This is difficult to measure and it is always necessary to qualify the results of the various measures applied. One easy way to do this is to look at how those products that best show competitive advantages become established in the world market. In general, these are products that incorporate higher technology content, such as machinery and electronic equipment, precision instruments, pharmaceutical products and aircraft. Germany, whose products of high technology content in 2005 made up 21% of all its exports, stands well above Spain and Poland, which in the crucial technology sector show similar figures at somewhat above 12% of exports.

  While it is not necessary to beat one’s breast, given that between 2002 and 2005 Spain’s exports with high technology content grew by 60%, a rate similar to that of Germany, there is no room for complacency. Germany’s starting point is much higher whereas Poland, with whom Spain’s is competing more directly, saw its technology exports grow by 113% in the same period, which reminds us that Spain should take the challenge of competitiveness in technology very seriously.

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