Spain: Foreign Trade Doing Well Enough

Luis Alcaide (Capital Madrid) | The recent agreement, between the EU and the US, not to extend tariff restrictions can’t be taken as an indicator of the final outcome of the pending disputes between EU and the US. The US is stubbornly opposed to the EU imposing new and higher taxes on its technology companies, the controversial digital levy. Nor is the outcome of the proposed American sanctions on the Russian gas pipeline to Europe known; even the tariffs protecting the European car industry are still under discussion. Not to mention Donald Trump’s “American First”.

But amid Covid19 and a gloomy international outlook, Spanish exports increased in June by 29.3% when compared with May and even higher when compared with March. However, in year-on-year terms, foreign sales fell by 9.2% compared with June 2019. We are still far from the figures before the coronavirus hit, but they mark an improvement when compared to the ones of the three months prior to June 2020, the period of confinement. On the other hand, in terms of purchases from the rest of the world, imports are also up on the previous months, confirming a recovery in demand. However, in year-on-year terms, imports fell by 20%.

So in this import-export game, Spain’s traditional trade deficit turned into surplus in June. For every 100 euros Spain spent on imports, it sold Spanish goods for 107 euros to the rest of the world. An excellent indicator in these difficult times for tourism.

In the first half of the year there was again a greater drop in imports than in exports, which also fell. And as a result, the trade deficit was cut by almost 50%. The trade in non-energy products went from a negative balance in the first half of 2019 to a positive one in 2020.

The distribution of our imports and exports by geographical area confirms a growing trade surplus with the EU and the euro area and a shrinking trade deficit with the rest of the world.

Food and beverages lead the ranking of exporting sectors and account for 21% of all exports and show a 6% year-on-year increase compared to the first half of 2019. Capital goods, despite a year-on-year decline of 21.5%, and machinery are in second place.

In year-on-year terms, the car sector fell by 29.2%. Nonetheless, car sales accounted for 13% of all exports, which were worth 124,101 million Euros in the first half of the year.

With regard to imports, capital goods continue to occupy first place, while cars and energy products show the sharpest declines.

Beyond international trade, the trade dispute between America and Europe and the huge economic slowdown brought about by coronavirus are looming threats in the horizon. A kind of perfect storm which would be damaging to Americans and Europeans, Spaniards included.

About the Author

Luis Alcaide
Luis Alcaide works as an economist for the Spanish government since 1961. He has been state adviser in the European Union and Bank of Spain director of communications. Alcaide published editorial articles in Spain's leading newspaper El País between 1977 and 1983, and in Diario 16 between 1985 and 1988. He regularly contributes to Economía Exterior and Política Exterior. He's founder member of Grupo Consejeros.