PORTUGUESE EXPORT MARKET SHARES: AN ANALYSIS BY SELECTED GEOGRAPHICAL AND PRODUCT MARKETS*

Abstract

Portuguese export market shares have been showing a disappointing behaviour recently, with substantial reductions in the last two years. This fact is often considered as a signal of deteriorating external competitiveness and as a hinder to growth in a small open economy like Portugal, thus contributing to the real growth divergence against the euro area observed since 2002. Besides being determined by a country’s capacity to compete effectively with other supply sources, market share growth depends also on other factors, like a country’s geographical and sectoral specialization and its ability to adapt its exports to demand changes. This article analyses the evolution of Portuguese export shares in a sample of selected product and geographical markets, taking into account the impact of product and geographical composition on the aggregate behaviour of export shares. For this purpose, the percentage change of the aggregate Portuguese export market share is decomposed into three main additive and analytically interpretable terms: a market share effect, taking into account the effective changes of share in each product/geographical market, and two additional terms that analyse how the geographical and product composition of Portuguese exports affected developments in the overall market share. Eight countries and twelve products are considered as the relevant market in the period from 1999 to 2005, representing together more than 70 per cent of total Portuguese manufacturing exports. Our analysis is basically a modified version of the traditional constant market share analysis, as it also allows to isolate the effective changes of export share in each individual market from the effects related with the product and geographical structure of exports. Applications of constant market share analysis to Portuguese exports can be found in Manteu and Abreu (1993) and Cabral (2004), and ECB (2005) shows an analysis of this type for euro area exports. The information of our sample, covering the selected 96 individual markets, helps to understand if losses of market share were a generalised phenomenon or if they can be attributed to some specific product or geographical destination. Additionally, the use of this detailed dataset, not only for Portugal but also for all other countries, permits to detect the ones that compete the most with Portuguese exports in each individual market of our sample. This kind of analysis is related to Esteves and Reis (2005) where the computation of the Portuguese effective exchange rate index with a triple-weights scheme for exports with a product breakdown for each country allowed the identification of some of the main competitors of Portuguese exports in 2004. In our sample of 96 individual markets, Portuguese exports show a considerable cumulative loss of total market share in the 2000-2005 period, 16.2 per cent. This decline of Portuguese total export share stems essentially from effective market share losses in specific markets (product-country), with a con