ECONOMY

Greece will face stiff competition from EU newcomers

Greek exports, already very low in value, are set to face intense competition by the 10 European Union newcomers in the near future, according to a study published yesterday by the Center for Export Studies and Research (KEEM), the think-tank of the Panhellenic Exporters’ Association. According to Yiannis Chalikias, associate professor at Athens University of Economics and Business and the author of the study, Greece had faced little competition from these countries so far. According to international trade data from the period 1997-2001, only 2.3 percent of Greek exports to other member states of the Organization for Economic Cooperation and Development (OECD) faced competition from the mainly Eastern European newcomers. Among these, the most competitive was Poland, mostly in industrial and farm products, followed at some distance by Hungary, the Czech Republic and Slovakia. The author says that, as the economies and exports of these countries grow, they will pose a greater threat to Greece, apparently because their products can command competitive prices. These economies are strongly export-oriented ones: On average, exports are equal to 37 percent of their total gross domestic product (GDP), against 28 percent for the other 15 EU members. The importance of exports varies from 4.1 percent of GDP (in Cyprus) to 70.6 percent of GDP in Estonia. Cyprus, however, is a case apart and the only EU newcomer where exports are even less important than in Greece. Greece’s exports account for less than 10 percent of GDP, while in Poland, the second least export-oriented newcomer after Cyprus, they account for over 20 percent. Even before their accession, the exports of EU newcomers were growing at a healthy annual pace – between 4 and 8.4 percent – between 1997 and 2001, with the exception of Cyprus, where they fell by an average of 3.2 percent. Free access to EU markets and the presence of highly skilled labor in export industries makes it highly likely that export growth will accelerate. An analysis of the newcomers’ exports shows that Poland and Hungary compete with Greece for farm products, the Czech Republic and Poland in raw materials, and the latter two plus Hungary in industrial products. There are also sectors where foreign investment in a particular country is so heavy that Greece will never be able to compete with it even should it, belatedly, try, such as with Slovakia and the automobile industry.