International trade in goods by invoicing currency


Data extracted in May-June 2017. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: November 2019
Figure 1: Extra-EU trade by invoicing currency, EU-28, 2016
(% of total)
Source: Eurostat (ext_lt_invcur)
Figure 2: Extra-EU exports by invoicing currency, 2016
(% of total)
Source: Eurostat (ext_lt_invcur)
Figure 3: Extra-EU imports by invoicing currency, 2016
(% of total)
Source: Eurostat (ext_lt_invcur)

Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

Economic theory suggests those currencies that are ‘liquid’ (in other words, the ones which have the highest volume of trade) have low transaction costs and are therefore more likely to be chosen as a preferred (and efficient) means for exchanging goods. Choices over invoicing currencies have the potential to impact on a country’s trade balance as a result of exchange rate movements. Note that the start of Globalisation patterns in EU trade and investment (chapter 1) provides further information on the development of global commodity prices and exchange rate fluctuations.

In a globalised world, there are a number of factors that may determine the invoicing currency that is used in any trade transaction, the choice may reflect particular standards within specific sectors, for example, the price of oil and petroleum products is almost always denominated in dollar terms, or alternatively it could be related to historical trading relationships between a pair of countries. From an enterprise perspective, the choice is not neutral insofar as traders are exposed to exchange rate risks; indeed, both sides of the trading relationship are usually affected by opposing risks. Importers usually want to limit the share of foreign currency invoicing in order to reduce their risk, whereas an exporter may wish to unilaterally determine the currency of payment so as to maximise export earnings. Some exporters with particular large export markets prefer to limit the price volatility of their goods abroad by opting to use the invoicing currency of their trading partner, in so doing they have greater control over the price of their goods relative to competitors in the foreign market.

When enterprises are forced to invoice in a foreign currency they may try to reduce their risk through the use of different financial products, for example, trading credits or hedging instruments; these facilities tend to be more widely available for large enterprises. It may be particularly important to hedge against exchange rate movements in those industries characterised by lengthy production chains (for example, the manufacture of a ship or an aircraft) or in those cases where a large volume of trade is conducted on futures markets. As such, within the context of globalisation, large multinational enterprises may have a greater opportunity to benefit from the flexibility of managing their exchange rate exposure through transfer pricing and operational hedging.

In 2016, more than half of all goods imported into the EU-28 were invoiced in US dollars

In 2016, a majority (55.4 %) of the goods originating from non-member countries that were imported into the EU-28 were invoiced in US dollars, while just over one third (34.4%) were invoiced in euros.

As noted above, some primary products that are widely traded on global markets tend to be invoiced exclusively in a single currency, the most well-known examples being the price of oil or gold. Given the EU-28 imports large quantities of crude oil, it is perhaps unsurprising to find that 85.5 % of the EU-28’s imports of petroleum, petroleum products and related materials were invoiced in US dollars, compared with just 13.7 % in euro terms. By contrast, for primary goods other than petroleum, the share of imports invoiced in euro (45.5 %) and in US dollars (45.6 %) was almost identical.

The picture was reversed for exports, as almost half (49.3 %) of goods that left the EU-28 that were destined for non-member countries were invoiced in euros, while just less than one third (32.9 %) were invoiced in US dollars. The share of EU-28 exported goods denominated in euro terms was systematically higher than the share of imports denominated in euro terms for each of the three product groups shown in Figure 1. The euro was the preferred currency for exporters of primary goods excluding petroleum (54.0 % of the EU-28’s exports were denominated in euros) and manufactured goods (50.0 %).

A similar pattern was observed concerning the share of EU-28 trade that was denominated in the national currencies of EU Member States not belonging to the euro area (Bulgaria, the Czech Republic, Denmark, Croatia, Hungary, Poland, Romania, Sweden and the United Kingdom), as 8.0 % of the EU-28’s exports were denominated in these currencies compared with 4.9 % of the EU-28’s imports.

In 2016, a majority of the exports to non-member countries made by 17 of the EU Member States were invoiced in euro terms …

Figure 2 presents similar information for the individual EU Member States, it focuses on the share of extra-EU exports by invoicing currency. In 2016, a majority of the Member States (19 out of 28) invoiced the highest share of their exports to non-member countries in euro terms, with all but two of these reporting that more than half of their exports (in value terms) were denominated in euro. The largest shares were recorded in Slovakia (80.9%) and Slovenia (79.1%), while more than two thirds of the goods exported by Italy (70.8%), Latvia (69.2 %) and Austria (68.6%) to non-member countries were invoiced in euro.

Unsurprisingly, those EU Member States that were not members of the euro area tended to record much lower shares of their exports to non-member countries being invoiced in euro terms: this was particularly the case for the largest of these, the United Kingdom, where just 3.2 % of such goods were euro denominated. It is also interesting to note that a very low share of Irish exports to non-member countries were invoiced in euro (8.5 %), with almost three quarters (71.5 %) of Irish exports to non-member countries invoiced in US dollar terms, likely reflecting, at least to some degree, the high levels of inward investment made by American enterprises in the Irish economy. By contrast, a high proportion of Croatian exports (66.6 %) and imports (49.1 %) were euro-denominated; perhaps reflecting the widespread use of the euro alongside the kuna in Croatia.

… while 20 of the EU Member States reported that more than half of their imports from non-member countries were denominated in US dollars

In 2016, the US dollar was the predominant invoicing currency among EU Member States concerning extra-EU imports (see Figure 3): in 22 of the 28 EU Member States, the US dollar was the most popular invoicing currency and in all but two of these more than half of all imports from non-member countries were denominated in US dollars. The highest share (75.4 %) was recorded in Greece, while more than two thirds of the goods imported into Cyprus (69.1 %) and the United Kingdom (67.5 %) were invoiced in US dollars.

Of the six EU Member States where the euro was the most popular currency for invoicing extra-EU goods that were imported in 2016, there were four which reported more than half of their imports were invoiced in euro terms. The highest share was recorded in Slovenia (68.0 %), followed by Latvia (65.1 %) and Slovakia (64.6 %), while the share in Austria was 55.2 %. At the other end of the range, euro invoicing accounted for less than a quarter of all goods imported from non-member countries into the United Kingdom (4.6%), Sweden (14.2%), Greece (23.7 %) and Denmark (23.8 %); the relatively high exposure of Greece to the maritime transportation sector may explain, at least to some degree, why it has a high share of transactions denominated in dollar terms.

See also

Further Eurostat information

Main tables

International trade in goods - long-term indicators

Database

International trade in goods - aggregated data
International trade in goods - long-term indicators
EU trade by Member State, partner and product group

Dedicated section

Methodology / Metadata

Source data for tables, figures and maps (MS Excel)

External links