Spain-FOREIGN ECONOMIC RELATIONS

Spain has had a long legacy of tariff protectionism and economic isolationism, and until the 1960s it remained outside the West European and international economic mainstreams. Spain's effort in the late 1980s to accelerate its integration into the EC customs and economic structures resulted in a drastic accommodation to international and West European trading standards.

When Spain embarked on a period of economic modernization in the 1960s, its foreign trade, as a percentage of overall economic activity, was below the average for other major West European countries. Exports and imports amounted to about 16.5 percent of the Spanish GDP in 1960. During the 1960s, Spain's foreign trade increased at an annual rate of about 15 percent; in the 1970s, it grew at an even higher rate. After the oil price increases of the 1970s slowed the world economy, Spanish trade expanded less rapidly. By 1984, after a period of sluggish growth, foreign trade made up about 25 percent of the country's GDP. According to the Economist, in 1987 Spanish imports and exports, respectively, accounted for 16.8 and 11.7 percent of the nation's GDP. These figures indicated an increasing linkage with the world economy, but even in the 1980s foreign trade played a smaller role in Spain's economy than it did in most other European countries.

Spain has not had a positive trade balance since 1960, when exports of US$725 million exceeded imports by US$4 million. In 1961 imports were about one-third larger than exports--a quantitative relationship that, for the most part, has held steady ever since then, despite enormous increases in Spanish exports. In the mid-1980s, Spain's trade deficits ranged from just over US$4 billion in 1984 and in 1985 to US$13 billion in 1987, when merchandise imports amounted to US$49.1 billion, and exports, to US$34.2 billion. A booming economy with strong domestic demand was responsible for a surge of imports in 1987-- an increase of 25 percent, compared to 1986.

Spain's chronic trade deficits were often offset by large earnings from the tourist industry and by remittances from Spaniards working abroad. The revenue from these two sources often allowed invisible receipts to exceed the trade deficit, the result being a surplus in the nation's current account balance. In 1983 Spain's current account balance registered a deficit of US$2.7 billion, but this was followed by surpluses during the next four years. In 1985 the surplus amounted to US$2.8 billion, and in 1986 it was US$4.2 billion. The surplus for 1987 was only US$184 million but, as capital goods made up much of that year's imports, economists were not alarmed.

Although famous for its production of citrus fruits, olives, and wine, about three-quarters of Spain's exports consisted of manufactured products in the mid-1980s (see table 10, Appendix). In 1986 and in 1987, manufactured goods made up 74.4 and 72.4 percent of the country's exports, respectively, while foodstuffs accounted for 16.1 and 17.6 percent, respectively. In these two years, raw materials made up about 4 percent of Spain's exports, and fuel products, about 6 percent. Merchandise imports generally exceeded merchandise exports by about one-third. In the 1980s, manufactured goods constituted about two-thirds of all imports, fuels as much as one-fifth, and other raw materials and foods about one-tenth each.

Data as of December 1988