How Important Is the European Economic and Monetary Union in the Foreign Trade with the EU-27 Countries? Empirical Evidence from Spain

Article excerpt

1. Introduction

The internationalisation process experienced by the Spanish economy during the last years represents one of the main structural changes that have enabled a very brief transition from a slow-growth model, with a very high level of protection and intervention, to a fast-growth model, open to international competition. Such internationalisation process has evolved in clear parallelism with the growing integration in the European Community, being trade activity its main growth factor for the whole of productive sectors.

A number of relevant events have occurred in the consolidation of the integration process from Spain's entry in the European Communities. The first one would be agreed and ratified between 1992 and 1993 with the entry into force of the Maastricht Treaty, by virtue of which not only the European Union (EU) is officially created, but also the free circulation of persons, services, goods and capitals is definitely fostered among the 12 states that formed part of the EU at the time (Germany, Belgium, Denmark, Spain, France, Greece, Holland, Ireland, Italy, Luxembourg, Portugal and United Kingdom). Therefore, this Treaty represents a crucial step in the economic integration process by creating a large internal market free from barriers, to which three new members are incorporated later (Austria, Finland and Sweden), in January 1995, forming together the so-called EU-15.

The second pillar in the integration process took place on January 1st 1999, with the creation of the European Monetary Union (EMU). That involved the institutionalisation of a central authority responsible for defining and implementing a common monetary and exchange policy, as well as managing the new community currency; the Euro, although the unification did not become effective until 2002, when the Euro started to circulate as single legal currency in 12 of the 15 EU member countries (3). At present, four other countries are sharing the common currency, what forms a Monetary Union with 16 European countries (4). With the definitive implementation of the Euro, the commercial relations among partners have been consolidated, apart from eliminating the transaction costs linked to the exchange rate fluctuations.

Until 2004, the strengthening of the European Community focused on the consolidation of the economic and monetary integration process among the 15 Western European member countries. But another essential event happens that year with the incorporation of new members to the EU. On May 1st 2004, 10 new countries enter the EU (Czech Republic, Cyprus, Slovakia, Slovenia, Estonia, Hungary, Latvia, Lithuania, Malta and Poland, the EU-10), which have different economic, politic and social roots, as well as a very heterogeneous profile compared to the traditional EU-15, forming together the EU-25. The enlargement process continues with the incorporation of Bulgaria and Rumania (EU-2) on January 1st 2007, framing the current EU of 27 member states (EU-27).

The chronology of these events linked to the European integration process offer an important potential as a driving force of the Community's bilateral trade. That explains the beginning of the period of study in 1993, with the Maastricht Treaty entry into force, and its end in 2007, the last year with public available data and when the joint effects of the above-mentioned events are already evidenced in commercial relations among member states (5). In this context, our work aims to contribute to the literature by filling a gap in the study of the international trade of Spain during that period: the empirical modelling of the exports from the big Spanish region of Castilla y Leon to the rest of the EU-27 countries.

The three specific objectives of this paper are as follows: First, to analyze the factors that have influenced the volume of exports from this region to the rest of the Community countries during the last years. Second, to find out if the economic and monetary events linked to the European unification process have affected that export flow. …

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