EU MEMBER STATE IMPORTS IN UNCERTAIN TIMES

Abstract

This thesis analyses import reallocations and diversifications across the member states (MS) of the EU, against the background of recent increases in economic and geopolitical uncertainty, for potential patterns or heterogeneity. The main period of analysis is 2021-2023 during which shocks decreased the trust of firms and governments in their supply chains. This thesis conducts similar analyses over the same timeframe as Arjona et al. (2024), who conduct analyses on aggregated EU-level data. This comparison follows two main goals: Painting a more granular picture of recent EU import reallocation and diversification efforts and displaying that analyses of EU trade relations as a whole are a simplification of those of 27 MS, as heterogeneity in results is expected. The expectation of differing results across MS is grounded in heterogeneous economic structures and previous findings on differences in trade relations across MS. A further aim of this study is to link potential import reallocation and diversification efforts more closely to theory on trade effects of economic and geopolitical uncertainty. Partly confirming results by Arjona et al. (2024), this study finds that most MS recently reallocate their imports from non-agreement partner countries towards agreement partners, and simultaneously diversify their imports. Furthermore, it finds additional evidence for these observed trends neither being a continuation nor mere reversal of previous ones by analysing results for 2017-2021. A substantial diversion from average import diversification and/or reallocation trends is visible for certain individual countries such as Hungary, and Slovenia, as well as for one group of MS – those bordering Russia. This provides evidence for analyses of MS trade being a valuable addition to analyses of changes in EU trade relations, to display which developments across MS induce them.