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THE EU’S SHRINKING SHARE IN GLOBAL MANUFACTURING: A VALUE CHAIN DECOMPOSITION ANALYSIS

Published online by Cambridge University Press:  28 April 2020

Robert Marschinski  and
David Martínez-Turégano
Robert Marschinski
Affiliation:
Joint Research Centre, European Commission, Seville.
David Martínez-Turégano*
Affiliation:
Joint Research Centre, European Commission, Seville.
*
Corresponding author’s e-mail: [email protected].
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Abstract

The EU´s falling share in global manufacturing has fuelled concerns about an overall loss of EU competitiveness, in particular vis-à-vis China. We analyse the empirical evidence underlying these concerns by applying a newly developed decomposition technique to global input-output data spanning the years 2000 to 2014. Our results confirm the diminishing role of the EU in manufacturing value chains, but also show that this is mostly, by nearly 75 per cent, a consequence of the geographical and sectoral reallocation of global demand, reflecting the lower economic growth in the EU relative to the rest of the world. Still, the other almost 25 per cent of the EU’s loss of global share is explained by its lower participation in manufacturing value chains, which confirms a downturn in EU competitiveness. By extending the analysis to individual manufacturing activities we show that this general trend is more pronounced for low-tech (e.g. textiles) than high-tech sectors, with pharmaceuticals emerging as the most resilient EU industry. Policy concerns appear to be most warranted for electronics, a key sector for which the EU´s global share fell even more than for overall manufacturing, without evidence that EU value added from upstream service inputs could significantly mitigate this trend.

Keywords

Manufacturingvalue addedglobal value chainscompetitivenesselectronicsF14L16L60.
Type
Research Article
Information
National Institute Economic Review , Volume 252 , May 2020 , pp. R19 - R32
Copyright
© National Institute of Economic and Social Research, 2020

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Footnotes

The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the European Commission.

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