UK TRADE PERFORMANCE OVER
THE PAST YEARS
Trade and Investment
Analytical Papers
Topic 3 of 18
Contents
Summary ................................................................................................................. 3
Introduction............................................................................................................. 3
1. UK Total Trade: Exports and Imports ............................................................... 3
2. UK Exports of Goods ......................................................................................... 7
2.1 Performance over time...................................................................................... 7
2.2 Technological export structure .......................................................................... 8
2.3 Trends in UK Trade across Markets ................................................................. 9
3. UK Exports of Services .................................................................................... 12
3.1 Performance over time.................................................................................... 12
3.2 Trends in UK Trade across Markets ............................................................... 13
4. UK Imports of Goods........................................................................................ 15
4.1 Performance over time.................................................................................... 15
4.2 Technological import structure ........................................................................ 16
4.3 Trends in UK Trade across Markets ............................................................... 16
5. UK Imports of Services .................................................................................... 17
5.1 Performance over time.................................................................................... 17
5.2 Trends in UK Trade across Markets ............................................................... 18
6. Underlying factors influencing trade performance ....................................... 19
References ............................................................................................................ 20
Trade and Investment Analytical Papers............................................................ 21
2
Summary
Over the decade 1998-2008, the UK’s exports of goods and services
increased 99.8% while imports grew by 111.5%. In the same decade between
1998 and 2008, UK services exports increased 156%, to 288 billion USD and
goods exports increased by 72%, to 468 billion USD. Although the value of
services exports was below that of goods, its growth rate has been more than
twice as high over the last 10 years. UK manufacturing exports have been
shifting over time towards high and medium high technology manufactures: in
1990 there were around 100 billion USD, rising to over 250 billion USD in
2008.
Introduction
This paper provides an overview of UK Trade Performance over the past
years. It begins by looking at total trade by the UK over time with a brief
overview of trends in world trade and how the sterling exchange rate has
impacted on trade. It then goes on to examine exports of goods and services
in more detail, followed by a similar section on imports. Finally the paper
concludes with a short discussion of factors which may influence trade
performance.
1. UK Total Trade: Exports and Imports
UK imports and exports of goods and services totalled 1,256 billion USD in
2009, equivalent to 4.3% of world trade. Over the decade of 1998-2008, UK’s
exports of goods and services increased 99.8% while imports grew by
111.5%. The financial crisis led to a large slump in trade flows across the
world. Figure 1 shows the development over time for the UK. From 2008 to
2009, world exports of goods and services fell by 21.5% (OECD 21.6%) and
imports by 22.6% (OECD 24.0%). In comparison, UK’s trade performed
similarly: exports dropped by 22.1% in USD and imports by 22.5% in USD 1 .
1
3
Due to exchange rates, exports decreased 8.6% and imports fell 9.1% in sterling.
Figure 1: Total UK Exports, Imports and GDP, 1980-2009, Million USD
3,000,000
700,000
goods exports
goods imports
services exports
services imports
GDP
600,000
500,000
2,500,000
2,000,000
400,000
1,500,000
300,000
1,000,000
200,000
500,000
100,000
0
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
0
Source: IMF and WTO GDP figures shown on right-hand axis, all in current prices.
Figure 2: Monthly UK Trade Data on Services and Goods, £ Million
45,000
Britain nationalised
Northern Rock
40,000
Sterling interbank lending rate fell
dramatically
35,000
30,000
25,000
20,000
15,000
10,000
G20 meeting in
London
Sterling interbank lending
rate peaked at highest
rate since 1998
Lehman Brothers collapsed, AIG
received below "AA" ratings,
Britain nationalised mortgage
lender Bradford & Bingley
UK Exports in £mio
UK Imports in £mio
5,000
2010 Nov
2010 Sep
2010 Jul
2010 M ay
2010 M ar
2010 Jan
2009 Nov
2009 Sep
2009 Jul
2009 M ay
2009 M ar
2009 Jan
2008 Nov
2008 Sep
2008 Jul
2008 M ay
2008 M ar
2008 Jan
2007 Nov
2007 Sep
2007 Jul
2007 M ay
2007 M ar
2007 Jan
0
Source: ONS Monthly Review of External Trade Statistics
Events in the financial sector do not immediately link to international trade
flows but they do affect business sentiments and investment decisions. Figure
2 shows UK’s monthly export and import data over the course of the financial
crisis. It can be seen that trade was rising while the first signs of the financial
crisis became apparent. This may be due to businesses exporting orders they
had received before the crisis. Trade peaked in July 2008, fell dramatically
until summer 2009 (the drop started before the actual collapse of Lehman
4
Brothers) and then gradually picked up again. The latest UK trade figure
(November 2010) shows that trade has exceeded pre-crisis levels again.
Yearly trade data showing up until 2009 should therefore not be interpreted as
showing a continuous downward trend. We have therefore decided to exclude
2009 figures for most of our analysis and to focus on the decade 1998-2008.
During 1998 and 2008, world trade increased at a faster rate than UK’s trade
flow. Exports grew by 185.2% and world imports, by 196.0%. This means that
the UK’s relative share of world trade has declined over this period: the UK
accounted for 4% of the world’s export market of goods and services in 2008
compared to 5.8% 10 years earlier, despite higher absolute export levels.
Similarly, its share of world imports went from 6.2% in 1998 to 4.5% in 2008.
However, Figure 3 demonstrates that other developed countries have had
similar experiences.
Figure 3: Share of World Exports and Imports (selected countries)
Share of World Imports of Goods & Services
Share of World Exports of Goods & Services
20%
USA
15%
USA
UK
UK
Germany 15%
Germany
France
France
Japan
10%
20%
China
(PR)
India
5%
Japan
10%
China
(PR)
India
5%
Russian
Fed
Brazil
Russian
Fed
Brazil
0%
0%
1994
1994
1996
1998
2000
2002
2004
2006
1996
1998
2000
2002
2004
2006
2008
2008
Source: International Balance of Payments, IMF, current prices.
World trade has experienced a faster growth rate (730%) than world GDP
(417%) over the last three decades (BIS Economics Paper No.8, 2010). A
major driver of this phenomenon has been the rise in intermediate goods
trade. Each time goods cross a border, an international transaction is
recorded. When production processes are divided up between different
countries, unfinished products can cross the border multiple times. In 2008,
the share of intermediate manufactured products in non-fuel world trade grew
to around 40% (BIS Economics Paper No.8, 2010).
5
1.1 Sterling – impact of exchange rates on trade
Figure 4: GBR Average Monthly Effective Exchange Rate Index over the
last 10 Years;
110
105
100
95
90
85
80
75
08
-J
an
-1
0
01
20
Ja
n
-J
an
-0
6
01
-J
an
-0
4
01
02
20
Ja
n
-J
an
-0
0
01
96
-J
an
-9
8
01
19
Ja
n
99
4
Ja
n1
99
2
Ja
n1
Ja
n1
99
0
70
Source: Bank of England
Sterling experienced a strong depreciation during 2007 and 2008. Aggregate
data suggests that the response of exports to the weakening of the pound has
been limited. Recent indicative estimates by the Bank of England (2010)
suggest that exports of goods and services have responded differently to the
weakening of sterling. The estimates suggest that relative to previous trends,
exports of goods have been supported by the weakening. This indicates that
export performance with respect to goods is influenced by price. However, for
services, export performance seems to be influenced by global demand, with
services exports underperforming, mostly due to a fall in financial service
exports. Other analysis published by the World Bank 2 found that trade in a
range of business, professional and technical services has been more
resilient than goods trade during the financial crisis.
Most studies of the impact of exchange rates on exports have tended to look
at appreciations rather than depreciations. A study by the University of
Nottingham 3 found that exchange rate fluctuations have little impact on the
decision to start or stop exporting. However, appreciations have had a
negative impact on the amount firms export: a one point increase the real
effective exchange rate (REER) is associated with a decrease in exports as a
proportion of output of 1.28%. If this relationship were linear, one might expect
that depreciation would lead exporters to increase the amount of output which
they export.
2
3
6
Borchert and Matto (2009)
Greenaway, Kneller and Zhang (2007)
Surveys of internationalising firms give some insight into what occurs at firm
level. In a 2010 UKTI survey 4 of firms which sold goods or services overseas
only 40% of respondents indicated that they would try to increase the share of
business accounted for by overseas sales if sterling stayed at the same level
or fell further. Similarly, just under one third (27%) of surveyed firms indicated
that the decline in the value of sterling had been a benefit to their business.
The survey findings suggest that the majority of firms did not seek to increase
their exports in response to the decline in the value of sterling. A recent
survey by the British Chambers of Commerce 5 suggests that the high value of
sterling during most of the 2000s led exporters to cut back on their profit
margins in export markets in order to maintain market share, while the
subsequent fall in sterling has provided them with an opportunity to increase
their profit margins and shore up their balance sheets. Consequently, the
depreciation of Sterling has not fed through to the export prices of firms which
have pursued this strategy,
2. UK Exports of Goods 6
2.1 Performance over time
Figure 5: UK Export of Goods in Billion USD
500
400
300
200
100
0
1994
1996
1998
2000
2002
2004
2006
2008
Source: International Balance of Payments data, IMF, current prices.
In the decade from 1998-2008, the UK increased its exports of goods by 72%,
to 468 billion USD. The rates of increase have been stronger in other
developed countries like USA (95%), Germany (176%), France (100%) or
Japan (100%). However all these developed economies have lost market
share in goods exports to emerging and developing countries (Figure 6). A
main contribution to this trend has been China whose goods exports have
increased 682% since 1998, to 9.5% of world exports in 2009.
4
OMB (2010)
BCC (2011)
6
Analysis of sectoral strengths will be carried out in the “Comparative advantage of the UK”
analytical paper.
5
7
Figure 6: Share of World Exports of Goods (selected countries)
15%
USA
UK
Germany
10%
France
Japan
China
(PR)
India
5%
Russian
Fed
Brazil
0%
1994
1996
1998
2000
2002
2004
2006
2008
Source: International Balance of Payments, IMF, current prices.
The UK share of world goods exports has declined from 5.3% to 3.1%
between 1994 and 2009 as shown in Figure 6. Other major developed
countries, with the exception of Germany, have experienced a similar trend.
However, the majority of the emerging markets increase in world goods
exports has been in low value goods according to Curran and Zignago 7 . They
show that the EU continues to enjoy a good position in high-value goods with
a 31% world share compared to 20% in all non-energy goods.
2.2 Technological export structure
UK manufacturing exports have changed in composition with a shift towards
higher technology manufactured goods. In 1990, exports of high and medium
high technology manufacturers were around 100 billion USD but by 2008 they
were valued at over 250 billion USD 8 . According to Curran and Zignago
(2009), the share of high technology exports in UK goods exports is higher
than that of the EU25 average and for the world average, above Germany,
Netherlands, and Sweden, but just below Finland and France. 9
7
Curran and Zignago (2009)
Values for 1990 and 2008 are in current prices
9
For further information see BIS Economics Paper 10B Manufacturing in the UK:
Supplementary Analysis available URL http://www.bis.gov.uk/assets/biscore/businesssectors/docs/m/10-1334-manufacturing-in-the-uk-supplementary-analysis.pdf
8
8
Figure 7: UK Manufacturing Exports, by Technology, 1990-2008
450
400
350
Billions USD
300
250
200
150
100
50
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
HIGH TECHNOLOGY M ANUFACTURES
M EDIUM -HIGH TECHNOLOGY M ANUFACTURES
M EDIUM -LOW TECHNOLOGY M ANUFACTURES
LOW TECHNOLOGY M ANUFACTURES
Source: OECD Bilateral Trade Database.
2.3 Trends in UK Trade across Markets
Figure 8: UK Exports of Goods to Selected Partner Countries in £
billion 10
World
EU27
USA
Germany
Oth. emerging pow ers
2008
France
1998
BRIC
Japan
0
50
100
150
200
£ billion
250
300
350
Source: ONS Pink Book, current prices.
The EU27 is the UK’s most important export destination for goods with 56% of
all UK goods being exported to the 27 European Member States in 2008.
While exports to all major destinations have increased over the previous
10
Other emerging powers include: Indonesia, Malaysia, Mexico, Saudi Arabia, Singapore,
South Africa, Thailand, United Arab Emirates, Bahrain, Iraq, Kuwait, Oman, Qatar, and
Yemen.
9
decade, exports to BRIC 11 countries grew the strongest at a rate of 286%.
BRIC countries bought 6% of all UK goods exports in 2008.
Figure 9: UK Share of Goods Imports by Emerging Powers in 2002 and
2007
UK proportion of 2002 goods imports
UK proportion of 2007 goods imports
UK share of w orld goods imports 2002
UK share of w orld goods imports 2007
Ch
i
M na
Ko ex
re ico
a,
Si Re
ng p.
ap
M ore
In
al
di
ay
a
Th sia
Ex
ai
cl
la
ud
nd
in
g
I
n
D
ia d ia
m
on
d
Ru
Tu s
r
s
ke
U sia
ni
y
te n F B
ra
d
e
Ar de zil
ab ra
E t io
Sa m ir n
ud at e
iA s
In rab
i
d
So on a
e
ut
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Af
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yp Vi rica
t , et n
Ar a
ab m
Re
Ku p.
w
a
O it
m
Ba an
hr
ai
n
Q
at
ar
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Source: UN COMTRADE sorted by size of import market in 2002.
Although the UK’s share in China’s and India’s goods imports has fallen, the
absolute value has trebled over the last decade (Figure 9). Despite its low
value in the graph, UK exports to China are the highest among the Emerging
Powers at 7.6 billion USD in 2007 followed by India at 5.9 billion USD. One
complicating factor is the importance of precious stones and metals to India’s
imports from the UK. As this trade tends to be quite erratic and is rather
unrelated to the UK’s underlying competitiveness, Figure 9 shows the UK’s
share both including and excluding precious stones (HS(2002)71).
Other European countries and the USA and Japan have also experienced a
decline, with the exception of Germany. This is mainly due to Germany’s
strength in capital equipment exports for which demand has been strong in
China. Two factors have influenced the UK’s decline in share in Chinese
imports; these are:
11

China’s increased demand for raw materials, combined with a rise in
commodity prices. This has meant that suppliers of raw materials, such
as Australia, Brazil, Chile and Saudi Arabia, have increased their share
of imports;

Sectoral specific factors e.g. China’s imports of telecoms equipment
have fallen as domestic production has been growing in China. This
shift has affected UK exports in this sector. Growth in intra-Asian trade,
Brazil, Russia, India and China
10
particularly within complex supply chains means that countries in the
region such as Korea and Indonesia have maintained their share of
China’s imports.
Analysis of UK trade across a range of sectors and markets by Eaton et al
(2007) indicates that although the UK exports almost as wide a range of
products as Germany, Japan and the USA in emerging markets, it exports
less of them. At the time at which the analysis was done (2007) it seemed that
loss of market share in these markets could be due to higher prices charged
for UK goods, which could be related to the strong Sterling at that time (it has
since depreciated) and may also have been that UK firms were exporting
higher quality goods than their competitors. The analysis suggested that at
least some UK firms were successful at selling products in these markets at
higher prices than their overseas competitors, albeit in lower quantities.
Analysis based on exports alone may underestimate UK performance in
overseas markets. This is because the UK has relatively high levels of
outward FDI and surveys of UK based internationalising firms suggest that the
majority of overseas sites set up by firms have a sales related function.
Future opportunities will increase for UK businesses as emerging markets are
predicted to experience growth rates up to seven times higher than
established markets over the next five years (BIS Economics Paper No. 8,
2010). According to long term forecasts by PWC (PWC, 2008), the combined
size of the seven largest developing economies will grow from 85% of the G7
(in purchasing power parity terms (PPP)) in 2007 to 150% by 2050. . Figure
10 shows how the total value of imports has increased strongly for all
emerging powers over the period 2002 to 2007 showing increased demand
for foreign goods in these countries. China, for example, bought nearly 900
billion USD worth of goods from abroad as shown in Figure 10.
Figure 10: Total Value of Goods Imports in Million USD
1,000,000
900,000
2002
800,000
2007
700,000
600,000
500,000
400,000
300,000
200,000
100,000
Ba
hr
ai
n
B
Eg
ra
zil
yp
t,
C
A r hin
ab a
Re
p.
In Ind
d
ia
Ko one
re si
a, a
Re
Ku p.
w
M ai
al t
ay
M sia
ex
ic
Ru
O o
m
ss
an
ia
n
Fe Qa
d ta
Sa era r
ud t io
iA n
Si rab
n
i
So ga a
ut por
h
e
Af
r
U
i
Th ca
ni
ai
te
la
d
nd
Ar
ab Tur
Em ke
y
ira
t
Vi es
et
na
m
0
Source: UN COMTRADE, current prices.
11
3. UK Exports of Services
3.1 Performance over time
Figure 11: UK Export of Services in Billion USD
300
250
200
150
100
50
0
1994
1996
1998
2000
2002
2004
2006
2008
Source: International Balance of Payment data, IMF, current prices.
In the decade between 1998 and 2008, UK services exports increased 156%,
to 288 billion USD. The value of services exports is lower than goods exports
but its growth rate has been more than twice as high over the last 10 years.
The UK compares well globally being the second biggest exporter of services
after the USA.
Figure 12: Share of World Exports of Services (selected countries)
20%
USA
UK
15%
Germany
France
Japan
10%
China
(PR)
India
5%
Russian
Fed
Brazil
0%
1994
1996
1998
2000
2002
2004
2006
2008
Source: International Balance of Payments, IMF, current prices.
During 1998-2008, the UK retained its global position (losing only 0.6% world
market share) despite the emerging powers’ rise as illustrated in Figure 11.
12
The USA (-5.1%), France (-1.8%) and Japan (-0.6%) all lost more. Germany
was the only major industrialized country to increase its world stake by 0.7%
over the decade. All BRIC economies saw a strong increase ranging from
0.2% (Brazil) to 2.1% (China).
3.2 Trends in UK Trade across Markets
Figure 13: UK Exports of services to selected partner countries
World
EU27
USA
Oth. emerging pow ers
Germany
France
2008
BRIC
1998
Japan
0
20
40
60
80
100
£ billion
120
140
160
180
Source: ONS Pink Book, current prices.
The EU27 is UK’s most important export destination for services with 41% of
all UK services being exported to it in 2008. Over the previous decade,
exports to EU27 grew 154% compared to 319% to BRIC countries. In 2008,
BRIC countries bought 4% of all UK services exports.
The UK has a stronger position in emerging Asian markets in business and
financial services and consultancy and is relatively weak in road and rail
services, construction services and agricultural and mining services. Services
providers from Europe have been facing increasing competition from Asian
economies. However, the services in which the UK is strong are knowledge
intensive and are likely to be in increasing demand as incomes increase in
emerging economies.
Casson 12 found that the UK seems to be a hub for US businesses seeking to
export services to some Asian markets. The precise reasons for this are not
clear but it may be that this route is preferred due to greater expertise in the
UK for accessing markets such as India with which it has historical ties.
Figure 14 shows UK’s services import share and value in Emerging Powers
markets in 2002 and 2007. It shows that in 2007 the UK enjoyed more
services market access to 6 Emerging Powers than it did to the world, i.e. its
import share in these specific markets was higher than to the world overall.
This represents an increase of four countries from 2002 to 2007.
12
Casson (2007)
13
Figure 14: Share & Value of Imports of Services by Emerging Powers in
2002 and 2007
30%
UK share of service imports 2002
25%
UK share of service imports 2007
20%
UK share of w orld service imports 2002
15%
UK share of w orld service imports 2007
10%
5%
S.
Af
ri
ca
Q
at
ar
S.
Ar
ab
ia
Tu
rk
e
Si
ng y
ap
U
ni
or
te
e
d
Ar
Eg
ab
y
Em pt
ira
te
s
Ru
ss
ia
In
di
a
M
al
ay
si
a
M
ex
ic
o
Br
az
il
Ko
re
a
Ch
in
In
do a
ne
Vi sia
et
N
am
Th
ai
la
nd
0%
7,000
6,000
Value of UK imports 2002
Value of UK imports 2007
5,000
4,000
3,000
2,000
1,000
So
ut
h
Af
ri c
a
Q
Sa
ud at a
iA r
ra
bi
a
Tu
rk
Si
e
ng y
ap
or
e
Eg
yp
t
U
AE
Ru
ss
ia
In
M dia
al
ay
si
M a
ex
ic
o
Br
az
il
Ko
re
a
Ch
in
In
do a
ne
Vi sia
et
N
a
Th m
ai
la
nd
0
Both sources: UN COMTRADE sorted by import share in 2007. Import values are in Mio.
USD.
14
4. UK Imports of Goods
4.1 Performance over time
Figure 15: UK Imports of Goods in Billion USD
700
600
500
400
300
200
100
0
1994
1996
1998
2000
2002
2004
2006
2008
Source: International Balance of Payment data, IMF, current prices.
UK imported 642 billion USD worth of goods in 2008. Over the previous
decade, UK imports have increased by 108% compared to a 202% increase
in world imports. Emerging economies have taken up an increasing share in
world imports over time. In 1998, China imported goods worth 137 billion USD
from the world and in 2008 this number rose to 1.1 trillion USD (684%
increase). UK’s share in world imports of goods decreased from 6.1% to 4.2%
over the decade 1998-2008 (Figure 16).
Figure 16: Share of World Imports of Goods (selected countries)
25%
USA
UK
20%
Germany
France
15%
Japan
China (PR)
10%
India
5%
Russian
Fed
Brazil
0%
1994
1996
1998
2000
2002
2004
2006
2008
Source: International Balance of Payments, IMF, current prices.
15
4.2 Technological import structure
Over the period 1990 to 2008, manufacturing imports more than doubled,
rising from 194 billion USD to 535 billion USD in 2008. In terms of
composition, the proportion of imports classified as medium-low manufactures
and high technology manufactures increased. In 2008, around a quarter of
imports were classified as high technology, a third classified as medium high
technology, with around a quarter consisting of low technology and the
remainder attributed to medium low technology goods.
Figure 17: UK Manufacturing Imports, by technology, 1990-2008
600
Current £ Billion
500
400
300
200
100
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
HIGH TECHNOLOGY M ANUFACTURES
M EDIUM -HIGH TECHNOLOGY M ANUFACTURES
M EDIUM -LOW TECHNOLOGY M ANUFACTURES
LOW TECHNOLOGY M ANUFACTURES
Source: OECD Bilateral Trade Database.
4.3 Trends in UK Trade across Markets
Figure 18: UK Imports of Goods from Selected Partner Countries
World
EU27
Germany
BRIC
Oth. emerging pow ers
2008
USA
1998
France
Japan
0
50
100
150
200
£ billion
Source: ONS Pink Book, current prices.
16
250
300
350
The UK sources most of its goods from the EU27 (52% in 2008). Imports grew
from each major destination (apart from Japan) over the decade 1998-2008.
BRIC countries provided 4.7 times more imports to the UK in 2008 than they
did in 1998 while imports from EU27 and USA grew only 27% and 4% in the
time period, respectively.
5. UK Imports of Services
5.1 Performance over time
Figure 19: UK Imports of Services in Billion USD
250
200
150
100
50
0
1994
1996
1998
2000
2002
2004
2006
2008
Source: International Balance of Payments, IMF, current prices.
The UK imported 204 billion USD worth of services in 2008, 80 billion USD
less than it exports to the world. Over the previous decade, UK imports of
services have increased by 131% compared to the 172% increase in world
imports of services. Emerging economies have taken up an increasing share
in global service imports over time. In 1998, the value of services imported by
India was 16 billion USD and in 2008 this number rose to 88 billion USD (a
507% increase). The UK’s share in world imports of goods decreased from
6.8% to 5.8% over the decade 1998-2008.
17
Figure 20: Share of World Imports of Services (selected countries)
20%
USA
UK
15%
Germany
France
Japan
10%
China (PR)
India
5%
Russian
Fed
Brazil
0%
1994
1996
1998
2000
2002
2004
2006
2008
Source: International Balance of Payments, IMF, current prices.
5.2 Trends in UK Trade across Markets
Figure 21: UK Imports of Services from Selected Partner Countries
World
EU27
USA
France
Germany
2008
Oth. emerging pow ers
1998
BRIC
Japan
0
50
100
£ billion
150
200
Source: ONS Pink Book, current prices.
The UK sources most of its £115 billion services imports from the EU27 (51%
in 2008). Imports grew from each major destination over the decade 19982008. BRIC countries provide 360% more imports to the UK than they did in
1998 while imports from the EU27 and the USA grew only 112% and 72%
respectively in the time period.
18
6. Underlying factors influencing trade performance
Trade data show the aggregate activity of firms which sell their goods or
services into overseas markets. Factors influencing the choice of overseas
market by a firm therefore underly trade performance. Many firms start
exporting by entering markets which they perceive to be easier to enter.
Typically these are closer to their home country in terms of geography, culture
and language and they may have historical ties with the home country. Such
markets tend to be easier to enter because they present fewer language
problems or cultural differences, may have similar institutions and are less
costly to ship to when geographically close. Consequently, EU countries and
the USA are popular markets for UK firms 13 . However, some firms often
referred to as Born Globals, internationalise rapidly and in geographically
widespread markets after inception and do not follow this model of gradual
market entry,
Surveys indicate that serendipity and networks influence firms’ choice of
market. Firms may be approached by someone in an overseas market to sell
their product or service, somone in the firm may have experience or
knowledge of a particular market or a market may be suggested to them by
someone outside the company. Migration may be an underlying factor behind
the first two, in that a) knowledge of a product or service in an overseas
market may arise through migrant networks and b) a firm may have
employees from overseas who therefore have experience of their home
country. Similarly, UK-born employees may have lived or studied overseas.
The internet may increasingly be influencing market choice as overseas
customers order goods and services through websites 14 .
13
14
BIS Economics Paper 5 (2010)
BIS Economics Paper 5 (2010)
19
References
Bank of England (2010) “Inflation Report November 2010”
British Chambers of Commerce (BCC) (2011), “Manufacturing for Export:
Make or Break for the British Economy”
BIS Economics Paper No.5 (2010), “Internationalisation of Innovative and
High Growth SMEs “
BIS Economics Paper No. 8 (2010), “UK trade performance: Patterns in UK
and global trade growth”
Borchert, I., Matto, A. (2009) “The Crisis-Resilience of Services Trade” World
Bank Policy Research Working Paper 4917.
Casson (2007), “Research Project to Map the Match between UK Exports and
Demand in Fast-Growing Markets. Study of Trade in Services and Outward
Foreign Direct Investment. Final Report to UK Trade and Investment”
http://www.ukti.gov.uk/pt_pt/uktihome/localisation/108280.html?null
Curran, Louise & Zignago, Soledad (2009), “Evolution of EU and its Member
States’ Competitiveness in International Trade”. CEPII Working Paper 200911
Eaton, Jonathon, Lima-Fieler, Ana Cecilia & Santacreu, Ana Maria (2007),
“Mapping the Match between UK Exports and Demand in Emerging Markets.
Final Report for the Asia Task Force”.
http://www.ukti.gov.uk/pt_pt/uktihome/localisation/108280.html?null
Greenaway, David, Kneller, Richard and Zhang, Xufei (2007),“ Exchange
Rates and Exports: Evidence from Manufacturing Firms in the UK” GEP
Research Paper 07-13 University of Nottingham.
Price Waterhouse Coopers – PWC (2006), “The World in 2050: Beyond the
BRICS: A Broader Look at Emerging Market Growth Prospects”
OMB (2010), “2010 UKTI International Business Strategies, Barriers and
Awareness Survey”. Available at URL:
http://www.ukti.gov.uk/uktihome/aboutukti/item/115739.html
20
Trade and Investment Analytical Papers
This paper is part of a series of analytical papers, produced by the joint
BIS/DFID Trade Policy Unit, which support the Trade and Investment White
Paper and the Trade and Investment Challenge. The full list of papers that will
be available are:
Provisional timetable
1. Global context: how has world trade and investment
developed? What's next?
2. Economic openness and economic prosperity
February 2011
February 2011
3. UK trade performance over the past years
February 2011
4. The UK and the Single Market
February 2011
5. Protectionism
February 2011
6. Sources of Growth
February 2011
7. Trade and Regional Integration in Africa
March 2011
8. Comparative advantage of the UK
March 2011
9. Trade promotion
March 2011
10. Food Security
April 2011
11. Trade facilitation
April 2011
12. Asia
April 2011
13. Trade finance
May 2011
14. Bilaterals/ plurilaterals - how can we make them better
for the world trading system?
15. Trade and the environment
May 2011
June 2011
16. Investment, including the impact of foreign ownership
June 2011
17. Regulatory cooperation
July 2011
18. Anti-dumping
July 2011
21
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URN 11/720
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