4.2.3. Economic specialisation

In this section we will be analysing the economic specialisation of the Basque Country based on foreign trade data. The data have been divided into 19 industries, which have in turn been grouped based on their technological level, economic use of the goods, level of growth, and technical and economic characteristics.

The Basque Country specialises mainly in four branches: Motor vehicles, Metallurgy and metal products, Machinery and equipment, and Petroleum Refining

As shown in Table 12, Basque exports have a significant degree of concentration in just four industries: motor vehicles (26%), metalworking and metal products (23%), machinery and equipment (15%), and petroleum refining (8%). The specialisation indexes for these four industries are also high. The resulting risks are significant, given the considerable link between the first three, which largely form part of the same value chains, and the fact that the fourth is highly subject to energy price volatility and the foreign oil supply. Be that as it may, it should be noted that between 2008 and 2017, the degree of export concentration dropped markedly, primarily due to the declining share of metalworking and metal products exports. Additionally, as we will see below, the severity of this concentration is less because in these four sectors with the largest share of exports, the Basque Country has strongly positive comparative advantage rates.

Table 12. Analysis of export specialisation.
Tabla 12 Análisis de especialización de las exportaciones
Source: Eurostat, United Nations, Comtrade Database and Directorate-General for Taxation. Compiled by authors.

The Basque Country primarily exports medium-tech products, those with medium demand growth, intermediate goods and consumer durables, and from economies of scale-intensive industries. In contrast, it has hardly any high-tech exports or high demand growth exports, nor from the science and technology-intensive industries. Of the three major manufacturing industries which are classified as high-tech, the Basque Country’s greatest weaknesses are in pharmaceuticals, following by electronics and IT, with aeronautics having relatively fewer weaknesses. In addition, the Basque Country’s percentage of consumer goods exports is very low, making it more sensitive to the economic cycle.

Some of the branches in which the Basque Country has a sub-speciality are closely linked to the strategic priorities and territories of opportunity of the Basque RIS3

As regards specialisation, in addition to the four industries discussed, there are several industries that are also notable for having a positive specialisation: non-metal industry and wood, paper and printing, and if we drop down to the sub-industry level, railway equipment. It should also be noted that the industries in which the Basque Country is underspecialised include some closely linked with the strategic priorities and areas of opportunity included in the BasqueRIS3: pharmaceuticals (biosciences/health strategy), computer and electronic products and electrical materials and equipment (advanced manufacturing/Industry 4.0 strategy), and food (area of opportunity of the same name).

The groups of activity in which the Basque Country specialises strongly coincide with those that have the most exports. Also noteworthy is the significant underspecialisation in science and technology-intensive, high-tech and high demand growth activities (that is, those which open up more windows of opportunity and are less affected by competition from emerging countries), as well as the underspecialisation in consumer goods industries (which, as indicated above, makes the Basque economy more sensitive to the economic cycle).

Analysis of the relative balance of trade confirms that the four industries in which the Basque Country has the most exports and which have a specialisation index above 100% also have a large positive relative balance of trade. Therefore, from the perspective of competitiveness, they have considerable strengths. As regards the specialisation indexes, analysis of the relative balance of trade indicates that some industries in which the Basque Country does not have a significant specialisation (or was even underspecialised) have positive trade balances. This is the case of electrical materials and equipment (highly important for Industry 4.0) and rubber and plastics. And from the perspective of groups of activity we see the same tendency: in addition to confirming the strengths showed by the specialisation index analysis, capital goods and differentiation-intensive goods (which should in theory be classified as attractive) and natural resource-intensive goods (in which, also theoretically, there is greater vulnerability) also have a positive balance of trade.

As the analysts indicate, development does not only consist of how much the product grows, but also how the composition of what is produced changes. In the previous section, we analysed how much Basque exports have grown, in comparison with those of other territories. Here we offer a brief analysis of how the export structure has changed, based on the rate of structural change for exports. During the 2008–2017 period, there were two clear phases of Basque exports. Between 2008 and 2013, the structure of Basque exports changed less than in other areas, and what change did occur was reactive in nature (sector adjustment in response to the drop in demand). Between 2013 and 2017, in contrast, the structure of Basque exports changed more than that of the other economies. Behind this, it is possible to observe both reactive (recovery of markets lost during the previous phase) and proactive (development of new activities and markets) behaviours.

In general, if we look at the change over the entire period in the Basque Country, we see growth in consumer durables and, to a lesser extent, in capital goods, and linked to these, medium-to-high-tech and medium-to-high demand growth goods. While on the whole this is positive, the significant underspecialisation in high-tech and high demand growth, and science and technology-intensive industries remains uncorrected. There has also been a downswing in differentiation-intensive industries. Metalworking and metal products is the industry that lost the most exports, whereas motor vehicles made the most progress (despite a decline during the 2008–2013 period).

Box 1 Trends in export clusters

An alternative way to analyse export specialisation is by grouping exports into clusters, following the methodology which groups economic activities based on patterns of co-location of employment, input–output links and links between occupations (see Delgado et al., 2016). This gives us 51 clusters that group together different activities, which can also be used to classify exports by means of a conversion table.

Graph 13 shows trends in Basque export clusters for the years 2016 and 2017. Given that the figures for global exports for 2017 are not yet complete (lacking the exports for China), Basque exports are given as a share of exports from Europe as a whole.

Graph 13. Map of export clusters.
Graph 13. Map of export clusters.
Source: Agencia Tributaria (Inland Revenue) and United Nations, Comtrade. Compiled by authors.

These clusters can be grouped based on the typology developed by Orkestra, which classifies clusters according to their importance (share of Basque exports, represented by the size of the circle), their competitive position (share of exports from Europe, position on the vertical axis) and dynamism (increase in the share of exports, position on the horizontal axis). The combination of these three characteristics yields the typology laid out in Table 13. Due to their importance in Basque exports, these clusters and the economic activities that lay behind them, special attention should be paid so as to implement appropriate policies for their development.

Table 13. Export cluster typology for the Basque Country.
Table 13.</a> Export cluster typology for the Basque Country.
Source: CNMC, Eurostat, SETSI. Compiled by authors.
  1. Delgado, M., Porter, M.E., y Stern, S. (2016). “Defining clusters of related industries”, Journal of Economic Geography, v.16, pp. 1–38