The European Union as a Major Trading Player in the Global Economy

The European Union as a Major Trading Player in the Global Economy

Zuzana Kittová (Faculty of Commerce, University of Economics in Bratislava, Slovakia)
DOI: 10.4018/978-1-7998-1188-6.ch003

Abstract

This chapter critically evaluates the position of the EU within the global trade and developments of its position from a long-term perspective, and identifies the main factors behind these developments. With this aim, both the intra-EU trade and the extra-EU trade are analyzed, including the development of export and import values, along with the trade balance development and the structure of the intra-EU and extra-EU trade flows (main trading partners and main product groups). Furthermore, the development of the EU's share on the global trade is studied in comparison to the share of other main world trade players. The chapter examines the main factors that influence the position of the EU within the global trade. Finally, the prediction of the EU trade and of its position in the global economy are developed.
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Background

Several theoretical approaches may be used in explaining trade patterns existing within the world economy. Within this chapter, there is great focus on economic integration theories dealing with the trade effects of integration as well as on theoretical approaches on competitiveness.

Theories of economic integration are useful when explaining both the trade among the EU member states and trade of the EU with the third countries. In the economic literature, the concept of integration became to be used first in connection with business combinations by agreements, cartels, trusts or mergers, either of competing businesses or suppliers and customers. Later, between the 1930s and 1940s, binding of national economies into larger units also started to be defined as integration. A term “international integration” was used here. At approximately the turn of the 20th century, the term integration was used, especially by economists dealing with international trade, where an international economic integration was understood as a discriminatory removal of trade barriers (both tariff and non-tariff) as well as introduction of certain level of cooperation and coordination among involved countries. Interest in the topic was growing in connection with the integration grouping in the Western Europe having been established (namely the European Coal and Steel Community and the European Economic Community). Viner (1950) is considered to be a founder of the customs union theory. Viner pointed at two trade effects of customs union: the trade creation among the members of the customs union and the trade diversion in relation to countries outside the customs union. Authors of further significant works are Meade (1953, 1955), Tinbergen (1954), Scitovsky (1962). These and other theoretical works on economic integration were subsequently summarized by Balassa (1961). The named authors considered the trade for the main element of international economic integration and international labor division for its basic principle.

Key Terms in this Chapter

Quantitative Restrictions: Trade restrictions based on limiting amounts of imported or exported goods such as quotas, import or exports bans, import or export licenses etc.

Intra-EU Trade: Trade in goods or services (e. g. exports and imports) among the EU member states.

Single Market: The term introduced by the Single European Act signed in 1986 setting a deadline of 31 December 1992 for creating the single European market, thus eliminating technical, physical and fiscal barriers to free movement of goods, persons, services and capital within the EU.

Geo-blocking: Geo-blocking refers to a practice of traders who block or limit access to their online interfaces by customers from other countries.

Competitiveness: The term does not have a single definition. It is, however mostly understood as the ability of firms, industries, regions or countries to reach their business / economic goals in rivalry with others.

Extra-EU Trade: Trade in goods or services (e. g. exports and imports) between the EU and the rest of the world excluding the trade among the EU member states. It is calculated as a sum of the extra-EU trade of the EU member states.

Trade Balance: Economic indicator calculated as monetary value of a country’s exports minus monetary value of its imports over a certain period, usually a year.

Brexit: The term that refers to the process of the United Kingdom withdrawing from the EU.

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