Trading Places

Finally catching on to a point that Ibex Salad has been making for a long time, El Pais yesterday published an article* on the fairly remarkable progression of Spanish exports over the course of the current recession. The title says it all (translation ours) - 'For the first time, Spain sells more to the EU than it imports'. A glance at the chart on the left confirms this general trend. The number has been positive with respect to the eurozone countries - those with which Spain is presumed to be a weaker partner in a common currency death dance - for 7 of the 9 months leading up to June. Currently at 493 million euros, the improvement since the low of the 3 months ending December 2007 is no less than 12 billion euros. Turning positive for the first time, the balance with respect to the OECD nations has turned around to the tune of 16 billion since the same date.

There are those, however, who would have it that the trade balance figures are primarily a relic of a flat, or recessionary, Spanish domestic economy consuming fewer imported goods. Certainly not irrelevant, but the pictures on the left of actual exports might put paid to that notion. Sales to the EU 17 made an all-time high in May. To the OECD, surpassed the April, 2008 record last March - and remain above through June.

Just for a bit of colour we add two countries with which Spain registers a trade deficit. Exports to Japan are at all time maxima, but the case of China is certainly worth noting. Total exports to that great devourer of the world's current accounts have nearly doubled since the 2009 depths of the crisis.

Of course, we couldn't possibly post a piece on external trade without taking another shot at that most dangerously useless of economics constructs - the real effective exchange rate. According to the Bank for International Settlements' disclaimer to their REER series:

Looking carefully at all the different measures of competitiveness cannot but instil a good deal of reticence about basing strong conclusions on any one measure.

As if to prove their point, the BIS July, 2011 calculations for Spain, Germany and China report, respectively (and keeping in mind that a higher value implies lower competitiveness), figures of 101.73, 95.45 and 117.86. We sincerely hope that the Chinese government has taken note of the imminent demise of its economic model.

*Those who don't read Spanish will have to cut the Google Translate version a whole lot of slack. It's terrible - and for no good reason.

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