External trade

The euro area economy is relatively open, particularly when compared with other major economies, including the United States, China and Japan. Moreover, the trade openness of the euro area has increased noticeably since 1998, particularly as a result of growing trade with new EU Member States and China. In 2011, extra euro area exports and imports of goods accounted for 37% of euro area GDP, up from 25% in 1999. Yet, the euro area is far less open than the economies of the individual euro area countries.

Trade in goods accounts for about 80% of euro area imports and exports. Comparing the sectoral composition of extra-euro area exports and imports, imports tend to have a larger share of energy and raw materials, while exports tend to be more heavily focused on processed goods. This reflects the international division of labour and the scarcity of raw materials in the euro area.

Geographical composition of euro area trade in goods

The top 20 trade partners of the euro area account for 80% of overall euro area trade. China, the United States and the United Kingdom have been the three largest trade partners of the euro area since the introduction of the euro, At the same time, trade with new EU Member States and emerging economies has increased noticeably over the past decade.

Effective exchange rates

Nominal EER: a geometric weighted average of the bilateral exchange rates of the euro against the currencies of a selection of trading partners.
Real EER: takes into account developments in relative prices between the euro area and its trading partners. They are calculated on the basis of consumer price indices, producer price indices, GDP deflators and unit labour cost indices - the latter for the total economy as well as for the manufacturing sector. It provides a measure of international cost and price competitiveness of the euro area.

Computation: nominal and real EER indices are currently computed against:

• a narrow group of 12 partner countries (EER-12),
• a group of 20 partner countries (EER-20), comprising the EER-12 plus China and the seven non-euro area EU Member States not included in the EER-12,
• a broad group of 40 partner countries (EER-40), comprising the EER-20 plus 20 additional relevant trading partners (see table below for the complete list).

The EERs are constructed using moving weights, calculated on the basis of shares in euro area external trade in manufactured goods. The scheme combines information on exports and imports and accounts for so-called third-market effects, i.e. competition faced by euro area products in a partner country from products of a third country. The weighting schemes for the EERs are calculated on the basis of trade data referring to four periods: averages of 1995-1997 are used in the construction of the series up to 1997; data from 1998-2000, 2001-2003 and 2004-2006 are used in the corresponding periods and weights based on data for 2007-2009 are used in the calculation of the series from 2007 to the current period (see Box 1 in March 2012 ECB Monthly Bulletin). Developments in the EER-20 set of indices are regularly commented in the ECB Monthly Bulletin.

For more detailed information on the calculation of the effective exchange rates and the evolution of the trade weights over time, see the Statistics section:  Background on the daily nominal effective exchange rate of the euro.