Verso Economics
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Verso Economics provides economic forecasts on a quarterly basis as well
as regular updates on the economy, social and environmental issues. To keep updated follow us on twitter.
March 2011 Worth The Candle? The Economic
Impact of Renewable Energy Policy in Scotland and the UK A new report
into the economic case for renewable energy in Scotland and the UK. The executive summary is available for
download [here]. |
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August 2010 Trading Up or Trading Off? Recently
released data suggests Europe’s economy is growing more quickly than many
people thought. The standout part of
this story was record growth in the German economy [link
to eurostat], fuelled in part from increased
exports to the roaring economy of China. |
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Photo: Hamburg, (c) Fotolia |
These figures have led to speculation that Germany is
enjoying an export boom, and economic recovery, at the expense of other
European countries. On BBC Radio 4 last week (13 August 2010) Jonty Blume
said: “Many of the world’s biggest and
most important economies are emerging from the deepest recession since the
1930s and nearly all of them have pinned their hopes on doing so by boosting
their exports. The problem is that not everyone
can do that at the same time. If one country exports more another has to
import more. And what today’s figures from Europe show is that Germany has
won the race.” |
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This paints
a clear picture of winners and losers with Germany expanding their share of global
export markets in a race with their European peers. There are several
shortcomings in this view. It’s true
that exports for one country are imports for another; across the globe
imports and exports should be equal in value. But the size of export (and
import) markets is not fixed and has increased significantly over the last
thirty years. As barriers
to trade have fallen throughout the world, countries have had been able to
source a wider range of goods and services from overseas. The latest data published
by the World Trade Organisation (WTO) shows global manufactured exports (and
imports) were around $1.8 trillion in 1983, rising to around $16 trillion 25
years later in 2008 [link
to WTO]. Trade is not
a zero sum game; there are benefits to both the buyer and seller. Exports to
China are allowing the German economy to sustain jobs and wages whilst
technology and engineering products from Germany are allowing China to
continue rapid economic development creating the potential for further trade. Germany has
reaped the benefits of improving trading conditions due the competitiveness
of its economy, able to produce high quality goods and services embedding
high levels of technology. Countries lacking the competitiveness of the
German economy have struggled to recover including Greece, Spain and
Portugal. Improving
competitiveness more broadly across Europe has the potential to stimulate the
demand for goods and services for all countries in Europe. Europe already has
well established trading networks where they have a comparative advantage in
producing goods and services and where it makes more economic sense for
countries to specialise. It is unlikely there is significant direct
competition within Europe for the recent expansion in exported German good
and services. For example commercial services from the UK are arguably more
likely to compete with (and within) North America than Germany. It is
misleading to think of European trade as a single race with a single winner
securing the prize of economic recovery. Indirectly we will all feel the
successes, and failures, of our trading partners. |
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