Sectoral and Geographical Positioning of the EU in the International Division of Labour

CEPII Research Report No. 2008-02

65 Pages Posted: 31 Jan 2012 Last revised: 11 Jan 2014

See all articles by Angela Cheptea

Angela Cheptea

National Institute for Agricultural Research (INRA)

Guillaume Gaulier

Banque de France

Dieudonné Sondjo

Thélem-Assurances

Soledad Zignago

Banque de France

Date Written: November 2006

Abstract

Today’s international trade in goods is driven mainly by the growth of exports and imports of the South.Emerging countries naturally gain global market shares in manufactured goods from old industrialized countries, including Europe. This trend has became even more pronounced during the last years. We use a detailed and exhaustive database on world trade from 1995 to 2003 to study the way in which the EU as a whole, and each of its 25 members individually faced these recent evolutions of the world market, compared to their main economic partners. For simplicity reasons, and because most European countries sell more and better on the domestic (EU) market, we disregard intra-EU trade flows.

Our analysis draws on a number economic indicators, including the evolution of market shares, adaptation effects, and the revealed comparative advantage, and on a shift-share decomposition of market share growth. First, we examine the overall evolution of countries’ market shares, their geographical and sectoral specialization, export performance, and capacity to adapt to changes in the global demand. Secondly, detailed results on the positioning and the performance of exports on different segments of the world market are produced. In both cases trade unit-values data is employed to separate the evolution of exports in monetary (value), and physical (volume) terms. This differentiation is necessary to distinguish between the impact of pure demand, and price-related factors on countries’ exports performance. Unit values are used as well to segment markets according to the quality of traded products according to the principle that high-quality products (up-market) are also the more expensive ones. Nevertheless, besides intrinsic quality this taxonomy reflects additional aspects, such as trade-mark effects or the capacity of countries to sell their products at high prices.

EU’s position on the global market has eroded during the last years, because of the poor performance of its largest members (except Germany), and despite the favorable sectoral breakdown of its exports. Still, its losses in market share were considerably smaller than those of its American and Japanese competitors, due mainly to the ability of European firms to sell expensive products to foreign consumers. The EU reinforced or acquired leadership in up-market products in a large number of industries, ranging from leather and clothing to machinery and automobiles. At the same time, European countries suffered important market share losses in the high-technology sector. Moreover, the revealed comparative advantage indicator shows that the EU, contrary to other developed countries, does not exhibit a specialization in high-technology products. This result is explained by the large and deepening disadvantage of EU countries in down-market high-tech products, such as computer devices. Nevertheless, the EU has maintained and even reinforced its comparative advantage in up-market (high-price/high-quality) high-technology products.

Keywords: International Trade, Shift-Share, Exports growth, comparative advantage, up-markets and high-technology products

JEL Classification: F12, F15

Suggested Citation

Cheptea, Angela and Gaulier, Guillaume and Sondjo, Dieudonné and Zignago, Soledad, Sectoral and Geographical Positioning of the EU in the International Division of Labour (November 2006). CEPII Research Report No. 2008-02. Available at SSRN: https://ssrn.com/abstract=1994973 or http://dx.doi.org/10.2139/ssrn.1994973

Angela Cheptea

National Institute for Agricultural Research (INRA) ( email )

147, rue de l'Universite
Paris Cedex 07, 78-Yvelines 75338
France

Guillaume Gaulier

Banque de France ( email )

Paris
France

Dieudonné Sondjo

Thélem-Assurances ( email )

France

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