How many times in the last few years have you (or any of Europe’s less-than-core leaders) said to yourselves- “EU, what’s the point?” All this ceding of sovereignty, centralization of power, relinquishment of decision-making; and for what? The answer – of course – free-er trade, a customs union enabling cross-border trade to flourish and in the great economics textbooks of the world for each member state to do what they do best (German VWs and Greek yogurt?) and maximally profit from that. That all sounds wunderbar in practice… except this rather uncomfortable truth-seeking chart shows thatthe last decade has seen an accelerating decline in intra-European-Union trade, especially in the last 4 years – to levels that are now below those pre-EU. So, once again, “what’s the point?”
Note: The above figure shows intra-EU and intra-Eurozone shares of export on total export of the two groups respectively. Each of the two lines were constructed taking into account the changing composition of the European Union and the Euro Area over time, meaning that a given country is included in the series only by the time it joined the EU or the Euro. However, further calculations shows results do not change dramatically if considering a fixed group of countries in either series.
The share of the intra-EU export of the EU total export experienced a steady rise since the early 80’. In fact, the rise was up to 8 percentage points in that period. However, after stagnating from the mid-90’s until the end of the 2000’s, intra-EU saw a sharp downward trajectory in the last four years, implying global trading partners have become and are becoming more important. Interestingly, the data also show that the Euro Area has been following nearly the exact same pattern as the European Union as a whole, suggesting the common currency might not have had the expected effect on trade between Euro Area members.
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If Barroso and his muppets can’t even get the customs union right, what hope is there for them to reform their way out of this ever-shrinking paper bag of EU fragility. Perhaps, EUR is declining, not on QE-debasement-jawboning hope; but on a realization that it’s all over again.