International trade

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University of National And World Economy

Internacional Trade

Created By Erasmus From Portugal – Ricardo Reis

March, Sofia of 2012

This paper compares the international trade pattern of Portugal with the other three EU15 Cohesion countries - Spain, Greece and Ireland - over the last forty years. The paper adopts a fact-finding approach, investigating the degree of openness ofthese economies and making extensive use of the standard Balassa (1965) index to assess the technological content of these countries' manufacturing trade. In order to infer on international trade specialization and on the persistence of trade patterns, the paper provides empirical evidence on the shape of the cross- sector distribution of 120 manufacturing exports and examines theintra-distribution dynamics. The Balassa index is also computed using import data, which allows for an assessment on the similitude of relative import structures and a crude identification of major vertical specialization
activities. The paper concludes that there was a significant increase in the degree of openness of all economies, particularly in Ireland. Over the last four decades, Portugal shows a tendencyto reduce its overall extent of export specialization, but significant differences with the world average still remain. The same behaviour is found in Greece and, more strongly, in Spain, which is the least specialized country. Conversely, Ireland shows the strongest export specialization and there is evidence of an increase in the last twenty years. The overall degree of specialization is higheron the export than on the import side, as the four countries analyzed show an import structure very close to the world average in the 2000-04 period. In the Portuguese case, we also ¯nd evidence
that the degree of persistence of export patterns is higher than that of imports, in particular over longer horizons.

1- Introduction

Over the last four decades, trade openness has increased andinternational trade pat-terns have evolved significantly. Several papers have studied changes in specialization patterns. From an individual country's perspective it is interesting to identify the modifications in the trade pattern because they may provide insights on the under-lying structural changes in the economy, namely in its structure of production. In addition, the magnitude and the pace ofsuch changes is an indirect indicator of the flexibility of the economy in allocating resources between sectors. Therefore, these elements are relevant to understand the growth performance of the economy. This type of analysis can be enhanced by taking a set of countries as a benchmark, thereby investigating their relative behaviours. In this paper, we are particularly interested in understandinghow does Portugal compare with the other initial EU Cohesion Fund beneficiaries, i.e. the relative sectorial specialization of Portuguese exports and imports and its dynamics since 1967, against those of Greece, Spain and Ireland.2 To our knowledge, no thorough empirical work is available for Portugal, especially comparing with the other Cohesion countries and over such a long period of time. Thispaper starts by assessing the degree of trade openness in the four countries considered and particularly in the Portuguese case. It is typically acknowledged that Portugal became a more open economy since the sixties but it is rarely added that this trend was not stronger than in Spain or Greece, namely when the degree of openness is measured at constant prices. Comparing with Ireland, where thedegree of openness has increased
almost exponentially, it becomes clear that the resemblances are very limited, even in the sixties. Moreover, empirical work on the evolution of international trade patterns typically focus on exports and somewhat disregards the import side. Although relative export structures are sometimes sufficient to reveal comparative advantages, imports hold septic...
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