EU Science Hub

New study finds no major obstacles to the use of the euro in international trade

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Feb 23 2016

A JRC study shows that there are no systemic barriers to using the euro in international trade. However, for historic reasons some sectors, such as oil or aviation, traditionally invoice in US dollars.

The Eurogroup, on 16th February 2015, agreed that international trade invoicing and settlement currencies are important issues affecting firms in the euro area. They invited the European Commission to look for possible obstacles to using the euro in international trade. Against this background and at the request of the Directorate-General for Economic and Financial Affairs, the JRC prepared the report “Invoicing currencies in international trade – drivers and obstacles to the use of the euro”. It deepens understanding of the micro aspects of the use of the euro in international trade pricing, invoicing and settlement.

Based on a comprehensive review of economic literature and a quantitative and qualitative firm-level survey, it investigates trade practices and the importance of legal, regulatory, accounting and international payment infrastructure restrictions to using the euro. The survey concentrates on five corporate sectors: aircraft, energy, financial services, electrical and mechanical engineering.

The quantitative survey, covering mostly medium-sized companies, was conducted through the Commission's Eurobarometer survey framework. More than 17 000 companies were contacted with a total of 400 responses, predominantly in the engineering sectors. The survey covered companies involved in international trade with partners outside the eurozone in Italy, France and Germany. It also covered companies in the UK in the sector of financial services, engaged in trade with partners in the Eurozone or with partners outside the EU. In addition, the JRC interviewed a number of large companies and industry associations in each of the industry sectors.

The results of the survey suggest that the euro is widely used in international trade: almost 80% of the surveyed euro-zone companies invoice 76-100% of their extra-euro area exports in euro. Two thirds (67%) said they did not use any other currency for export invoicing than the euro. These survey results are broadly in line with estimates of the use of the euro from other data sources. The use of currencies other than the euro is reportedly in most cases the result of factors such as client preference and the dominant role of the US dollar as a vehicle currency in global finance.

While there may be some obstacles at the micro-level that cause some companies to reduce their use of the euro, there is no evidence of widespread concerns in any of the sectors. In the aircraft and aerospace industry the US dollar is the established dominant currency in the sector due to the global nature of the aircraft and aerospace market, the US dollar-based revenue structure of clients, historical reasons and the important linkages of the aircraft industry with the oil market. Typically, global commodity and energy markets are traditionally dollar dominated.

The report concludes that sound macroeconomic policies and further strengthening of the Economic and Monetary Union are among the key factors that could encourage the use of the euro in international transactions.