The Bertelsmann Stiftung has developed a new free interactive online tool called GED VIZ. It’s a great way to discover how terms of trade are changing between countries. For this article, I used the GED VIZ tool to identify some interesting developments in German commodity trade from 2000 to 2011.
Significance of Europe
You can use GED VIZ to analyze and visualize commodity trade flows between 46 countries during the years 2000 to 2011. It includes all OECD countries, all EU countries and the BRIC countries Brazil, Russia, India and China. That’s more than enough to compare developments before and after the turning point that came with the 2008 financial crisis.
The first question I wanted to answer with GED VIZ was, How did Europe change between 2000 and 2011 in terms of its significance as a region of origin for German imports and a region of destination for German exports? The six slides in Presentation 1 show the answer. You can move back and forth between the slides using the buttons at the bottom left, by the way. You can see additional information when you hover your mouse over certain items.
n 2000, German commodity exports to the 45 other countries in the data set totaled €525 billion. That was 88 percent of all German exports. Of those €525 billion, 73.3 percent went to the 29 countries in Europe (EU excluding Germany, plus Switzerland, Iceland and Norway) and 26.7 percent went to the 16 countries outside Europe including Russia and Turkey. (Slide 1)
Now here is where it gets interesting.
Until 2007, the year before the crisis, not only did German commodity exports rapidly increase to €832 billion (nominal figure), the amount going to the “Europe 29” group also continued to grow, with a few dips and spikes, until it reached 75.1 percent. (Slide 2)
Then came the reversal. Since the beginning of the financial crisis, European countries have been rapidly declining in importance for Germany’s export economy. In 2011, only 69.1 percent of exports went to the Europe 29 group while 30.9 percent went to the 16 countries outside Europe. This shift took place against the backdrop of a temporary slump in international trade. Goods exports totaled just €679 billion in 2009 but then recovered and climbed back to €892 billion in 2011 (nominal figure). (Slide 3)
Surprisingly, German imports performed a little differently. In 2000, 72.2 percent of imports came from the Europe 29 group (Slide 4). Europe was therefore only slightly less significant for German imports than for German exports at the time. But by 2007, the number had already fallen slightly to 71.3 percent (Slide 5). Thus the percentages of exports to and imports from the Europe 29 group moved in opposite directions during this period. After 2007, the amount of German imports coming from Europe continued to decline, bottoming at just 68.2 percent in 2011. (Slide 6)
Current account balances
When imports and exports perform differently, the result is seen in the trade balance, which is an important component in a country’s current account balance. The divergent trend in German imports from Europe and exports to Europe has affected that balance too.
2000 was one of the few years when Germany had a current account deficit. It represented 1.77 percent of GDP. In contrast, the Europe 29 group (not including Luxembourg, for which no information is available) had a small combined current account surplus of 0.09 percent that year. (Slide 1)
By 2007, the situation had turned full circle and then some. Germany built up a huge current account surplus equal to 7.51 percent of GDP, while the Europe 29 group slipped into a deficit of 1.51 percent of GDP. (Slide 2)
After 2007, the gap narrowed slightly, with Germany’s surplus shrinking to 5.63 percent of GDP and Europe’s deficit contracting to 0.34 percent in 2011. (Slide 3)
Differences within Europe
GED VIZ also enables users to sort countries according to specific key data. In Slide 1 of Presentation 2, I put the countries of Europe in a clockwise arrangement based on their current account balances in 2007.
If you do this for different years, you quickly see that a particular block of countries in Europe produces a current account surplus almost every year. That block is made up of the Scandinavian countries, the Benelux countries and the German-speaking countries.
In contrast, all other countries nearly always show a current account deficit. The only exception is France. From 2000 to 2005, France had a surplus, but then it moved into deficit. Estonia may also turn out to be an exception. It consistently had a current account deficit until 2008, but from 2009 t0 2011 it produced a surplus.
The deficit countries (including France and Estonia) can be further divided into two groups. One of them consists of ten countries in Western and Southern Europe from Iceland to Cyprus, and the other comprises ten countries in Eastern Europe from Estonia to Bulgaria. The surplus countries (called “Northern Europe 9” without Germany) form the third European block.
Slides 2 to 4 show how German commodity trade with these three European blocks developed from 2000 to 2007 to 2011. I have summarized the most crucial data again in the table below. The percentages refer to the portion of total exports to or imports from the 46 countries in the data set.
|… exports to Northern Europe 9||30.6%||30.9%||29.0%|
|… imports from Northern Europe 9||30.4%||30.9%||28.6%|
|… exports to Western and Southern Europe 10||34.8%||32.1%||28.2%|
|… imports from Western and Southern Europe 10||32.7%||27.9%||25.4%|
|… exports to Eastern Europe 10||8.2%||12.0%||12.0%|
|… imports from Eastern Europe 10||9.2%||12.4%||14.3%|
These numbers show that the competitive countries of Northern Europe declined slightly in terms of their relative importance for German commodity trade after 2007, although they still managed to hold their ground to a certain extent.
Eastern Europe became more important for German commodity trade. Interestingly, Germany often shows a deficit in its commodity trade with these countries (in other words, it imports more from them than it exports to them, in monetary terms).
The Western and Southern Europe 10 group has proved to be a problem child for German trade. This group includes the biggest European economies after Germany – Great Britain, France and Italy. From 2000 to 2011, the significance of the Western and Southern Europe 10 group for German exports declined from 34.8 percent 28.2 percent. The group’s share in German imports, meanwhile, fell from 32.7 percent to 25.4 percent.
The decline in the Western and Southern Europe 10 group appeared first in its significance as an origin of German imports and then later as a destination for German exports. The group lost the most on the import side from 2000 to 2007 and the most on the export side from 2007 to 2011.
We’ve come to the end of my brief analysis of German commodity trade. Who knows, maybe some of the patterns it revealed could also be true for international commodity trade in general. Here are some patterns worth considering:
- Stable, long-term trade relationships occur most frequently with competitive countries that have a current account surplus, such as those in the Northern Europe 9 group.
- With countries that have a current account deficit, additional factors appear to decide whether trade accelerates or slows.
- One warning sign for trade with deficit countries may be that imports from these places begin to decline (in relative terms). When this happens, you can also expect exports from those countries to drop off at a later stage to compensate.