Belgium’s position in world trade

Abstract

The objective of the article is to give a general overview of the position that Belgium occupies in the world trade stakes and its ability to adjust in response to changes in the international environment. Over the last two decades, world trade has expanded considerably, buoyed up by the rapid growth of new economic centres, the advanced economies generally having seen a drop in their market share. However, the growth in Belgium’s exports has lagged behind the average for twelve European countries going through the same major changes ; and the loss of market share has been higher than the average. A classical econometric analysis of price competitiveness shows up the limited role of relative export prices as a determinant in gains/losses of market share. This finding mainly reflects the fact that prices are largely fixed on international markets, producers cannot adjust their export prices according to the costs that they have to bear. In this context, a reasonable development of production costs, and with stronger reason wage costs, is essential in order to ensure the continuity of export activities. Beyond relative price effects, it is necessary to take into account structural elements in order to explain changes in market share. From this standpoint, it appears that the type of production has a crucial role to play. Faced with competition from emerging economies, Belgium’s external trade performance in the case of standardised products has been well below world demand. On the other hand, high-value-added products or those of a highly innovative nature or with a high research content are the ones that enable it to maintain or improve on its position in global trade. Export activities and innovation share some common features, not least because they are concentrated in the hands of a small number of large enterprises. In view of the high foreign market entry costs, the best performing firms are the ones that tend to be the exporters. However, factors such as the innovative nature of products on offer can of course influence the likelihood of success on foreign markets. Here, innovation efforts by Belgian firms are not creating enough opportunities for marketing new products. Yet, it is most certainly goods with a high value added or highly innovative products that Belgium will be able to count on to ensure sustainable economic development and to support the prosperity of its people.competitiveness, market share, export price, innovation, R&D