Times Fail On Euro

Busy week finishing grading and reading some terrific master's thesis papers. But back to business of commentary and Christmas preparations.

In Saturday's NYTimes, Floyd Norris, who usually knows better took a strange path in discussing the Euro and its impact on trade among the EU16 countries. His analysis? That the strength of the Euro disadvantages countries like Italy and France while it has worked in the favor of Germany and the Netherlands. And his measure? Market share.

This reminds me of the old text, "Lies, Damned Lies and Statistics". You can make numbers appear to reinforce any view you have, but I have never seen an anlysis concerned with the market share of export activity. Market share is an effective measure (along with many others) of a firm's performance. But a country and specifically their exports?

First, the "strength" of the Euro relative to other currencies makes it easier for Euro zone countries to import products. All other things being equal. The problem is that they are not. Wage rates are a big determining factor in costs, markets determine prices. Prices determine the competitiveness of products and have an impact on exports, as do the level of income abroad. You can't buy other people's exports unless you have income of your own. Not surprisingly the countries with the biggest increases in exports are the lower wage countries such as Slovakia and Slovenia. Though France and Italy did fine as the world emerges from the crisis. The exception is Germany; high wages and high exports. But Germany is always an exception to any discussion of international trade. Instead of fixating on currency we should examine aspects of their industrial policy which may teach us something about competitiveness for the US economy.