Transcript EUROPEAN INTEGRATION AND EUROPEAN CCI NETWORK

IMPACT OF EUROPEAN
INTEGRATION:
WHICH RELEVANCE FOR LATIN AND
CENTRAL AMERICA?
MARCO LOPRIORE
Atlas Study Visit
Montevideo, November 5, 2002
TODAY’S AGENDA
1) Internal market
- Impact on prices, benefits for companies
- FDI and trade
2) Cohesion
- Impact on closing development gap
- Macroeconomic impact on trade balance
3) Enlargement
- Impact on trade with Central and Eastern Europe
- And with Mediterranean area
4) Economic and Monetary Union
-
Macro impacts
Regional
INTERNAL MARKET
INTERNAL MARKET – CECCHINI
REPORT 1988 (A)
• Delays at frontiers for custom purposes,
administrative burdens impose costs on trade,
restrictions on competition for public purchases,
Restrictions on financial and transport sector;
• Empirical estimates: frontier formalities cost 1,8
% of value of intra EU traded goods; technical
regulations cost 2% of companies total cost;
• Forecasted: Increase in GDP of 5% or 20-30%
intra EU trade
• Too optimistic ?
INTERNAL MARKET (A)
• Impact on public purchase: imports of public sector from
6% in 1987 to 13% in 1997;
• Impact on peripherical regions: (Portugal, Ireland,
Greece);
• Prices are becoming more similar (except for motor
vehicle - see table);
• Large industries reap benefits: in particular from smaller
countries (Greece, Finland, Denmark, Ireland);
• Difficulties of SMEs (higher fixed costs);
CAR PRICE DIFFERENCES IN EUR10:
annual average of difference of highest to lowest price in %
• The introduction of the euro has
not yet had an impact on
manufacturers’ pricing policies:
• the highest price can still differ
more than 25% from the
cheapest country within the
euro area
PARTICIPATION OF LARGE COMPANIES
IN INFRASTRUCTURE PROJECTS
INTERNAL MARKET
(B)
• EU attracted 44% FDI in 1990 compared to 28%
in 1980;
• While mergers / acquisitions doubled between
1991 and 1999, only 30% between 1986-1995
were between 2 different Member States;
• Foreign businesses reaping benefits?
• US companies produced in 1997 48% of value
added and 44% of jobs in UK and respectively
44% and 33% in NL;
EU INTEGRATION AND TRADE
• Pattern of trade tend to become more
similar as EU become more interdependent;
• Intra industry trade is high for all EU;
• Exception for Greece, Ireland and Portugal
where it is low because of their
development gap in the productive
structure;
INTRA-EU TRADE INTEGRATION
• BLUE (B + L), IRL and NL
intra-EU trade GDP ratio is
higher than 30%;
• Small MS intra-EU trade GDP
ratio is higher than Large MS
ratio;
• D,E,F and I intra-trade GDP
ratio is lower than 15%;
COHESION
REDISTRIBUTING INCOME
BETWEEN COUNTRIES AND REGIONS
Million €
MAP OF EUROPE:
THE MODEL CENTRE-PERIFERY
THE PENTAGON:
London, Paris, Milan, Munich,
Hamburg
• 20% of territory;
• 40% of population;
• 50% GDP of EU
TRADE EFFECTS OF COHESION POLICY
(see next table)
• 25% of the Cohesion Fund returned to rich
countries through imports;
• in 1999 this estimation has reached an average of
35%;
• Structural funds have an impact on trade balance
in cohesion countries
• In a short term: Greece and Portugal increased
their imports towards rest of Europe;
• In a long term: the trade balance will improve;
MACRO ECONOMIC IMPACT OF SF:
Trade balance variations in % relative to GDP
FOREIGN DIRECT INVESTMENT
AND STRUCTURAL FUNDS (1989-1993)
% of GDP
ENLARGEMENT
TRADE IMPACT OF ENLARGEMENT
• CEEC are already oriented to EU since 1990 Trade between EU and CEEC grew 20% annually;
• Export compatibility;
• Benefits for border countries: Germany, Italy,
Austria;
• But strong growth from Portugal, Ireland,
Switzerland and Spain;
• UK is compatible but not using it;
• Regional effects and frontier regions?
SIMILARITIES IN TRADE STRUCTURES
BETWEEN EU MEMBER STATES AND CEEC (1993 and 1997)
EU exports and CEEC imports
("Trade creation")
EU imports and CEEC exports
("Trade diversion")
1993
1997
1993
1997
Austria
-
0.98
-
0.92
Germany
0.98
0.96
0.69
0.86
Greece
0.31
0.39
0.53
0.48
Ireland
0.78
0.81
0.51
0.71
Italy
0.94
0.92
0.72
0.86
Sweden
-
0.94
-
0.90
United
Kingdom
0.93
0.95
0.67
0.87
Country
IMPACT OF EUROMED PROCESS
(see next table)
• Free-Trade Area 2010;
• 4 of 15 EU Member States are benefiting (F, I, G, UK);
• EU invest to improve production process of traditional
sectors:
– 80% of textile FDI
– 50% of Motor vehicle FDI (sector particularly sensitive
to trade zones – Turkey)
• US however important presence:
– 50% of telecoms FDI ;
– 41% chemicals FDI;
– 48% beverages FDI;
MAIN EUROPEAN AND FOREIGN INVESTORS IN SECTORS OF
MEDITERRANEAN ECONOMIES
Sectors
Principle investors
Larger European countries
Telecommunications
USA (50%); UE (41%)
France (15%); UK (6%)
Tourism
UE (42%); USA (40%)
Arab Countries (15%)
France (21%); Italy (6%)
Car
UE (50%);
Japan (16%)
Italy (23%)
IT
UE (46%; USA (41%)
Germany (13%); Italy (13%);
France (12%)
Chemical
USA (41%); UE (40%)
Germany (10%); France (8%);
Italy (7%); UK (7%)
Textile/clothing
UE (80%; USA (19%)
Italy (40%); France (24%)
Food /beverage
USA (48%); UE (28%;
Switzerland (10%)
France (16%); Denmark (7%)
NL (5%)
UE (49.5%); USA (38%)
France (10%); Italy (10%); UK
(7%); NL (4%)
Petrol
and
resources
gas
USA
(28%);
Economic and Monetary Union
MORE STABILITY THROUGH EMU
• Enhanced stability in all EU countries through
coordination and surveillance of economic
policies (Ireland, Germany)
• Price inflation reduced from 20% in Greece and
13% in Portugal in 1999 to less than 5% in 2000.
• Lower transaction costs (no exchange costs, risk)
with the euro brings increasing market integration
and growth: especially for EU countries wich
trade a lot with other Euro-area countries
CONCENTRATION AND SPECIALISATION
WITHE EMU ?
• Regional specialisation in US – see manufacturing
sector in Lake district – Chicago, Theories of
Mundell
• Euro and Single Market will bring the same in
Europe?
• Vulnerability to sector-specific shocks
(assymetric)
• Studies show no fast specialisation/concentration
• Ireland only very specialised in IT industries