Austria's Trade Power: A Global Force?

Austria is a wealthy, mid-sized, export-oriented market with a highly developed social market economy. It is one of the fourteen richest countries in the world in terms of GDP per capita, ranking fifth in the European Union. Austria's economy is closely integrated with other EU member countries, particularly Germany, which has historically been its main trading partner. Austria's three largest sources of imports are Germany, China, and Italy, while its top export destinations are Germany, Italy, and the United States. The country has a strong focus on international trade and investment, with expanding economic ties to emerging markets in central and eastern Europe. Austria's power generation mix is already predominantly green, with 77% of its electricity coming from renewable sources, and it has ambitious goals to transition entirely to renewable energy by 2030.

Austria's main trading partner

Austria's other major trading partners include the United States, Italy, Switzerland, Poland, Slovakia, Belgium, France, Hungary, the Czech Republic, the United Kingdom, mainland China, Slovenia, Romania, the Netherlands, Spain, and Turkey. Together, these countries accounted for 88.3% of Austrian exports in 2023.

Austria's economy is highly dependent on international trade, with nearly four-fifths (79.4%) of its exports going to fellow European countries, 8.9% to North America, and 8.8% to Asia. Trade with other EU countries accounts for almost 66% of Austrian imports and exports.

Austria has a strong bilateral economic relationship with the United States, which is the seventh-largest source of goods imports for Austria and the most important export destination outside of Europe. In 2022, US exports to Austria were $6.4 billion, while imports from Austria were $19.4 billion. Major exports from Austria to the US include vehicles and engines, machines and parts, pharmaceuticals, and beverages.

The impact of EU membership on trade

Austria's membership in the European Union has had a significant impact on its trade policies and economic growth. The country joined the EU on 1 January 1995, marking a pivotal moment in its integration journey. As a member of the EU, Austria has gained access to the European Single Market, which has boosted its economy and reduced its dependence on Germany, its largest trading partner.

One of the most notable impacts of EU membership on Austria's trade is the significant increase in exports. Since joining the EU, Austria's exports have tripled, and the country has also benefited from the creation of approximately 13,000 to 18,500 new jobs per year. This growth in exports can be attributed to the opportunities presented by the EU's growing internal market and the reduction of economic barriers within the bloc.

Austria's trade relations have diversified beyond its traditional focus on Germany. While Germany remains a key partner, accounting for around 32% of imports and 28% of exports, Austria has expanded its trade ties with other EU member states. Approximately 70% of Austria's foreign trade is now conducted with other EU countries, making the internal market a significant source of savings and efficiency for Austrian businesses.

In addition to the economic benefits, Austria's EU membership has empowered the country to advocate for its concerns and interests within the EU decision-making structures. Austrian representatives actively participate in the European Council, the Council, and its preparatory bodies. The country also has directly elected members in the European Parliament and representatives in other EU institutions, ensuring that Austrian perspectives are considered in EU policies and regulations.

Furthermore, Austria's membership in the EU has attracted foreign investors who recognise the country's strategic position within the single market and its proximity to aspiring EU economies. This influx of foreign investment has contributed to the country's economic development and further integrated Austria into global value chains. Overall, EU membership has had a positive impact on Austria's trade, enhancing its economic growth, creating job opportunities, and solidifying its position within the European and global markets.

Austria's exports and imports

Cars are Austria's top export product, with $7.72 billion worth of exports in 2022. This is followed by packaged medicaments ($7.25 billion) and vaccines, blood, antisera, toxins, and cultures ($6.76 billion). Austria is also a significant exporter of electricity ($5.38 billion) and motor vehicles, parts, and accessories ($4.97 billion). The country is the world's largest exporter of flavoured water, with exports totalling $3.58 billion in 2022.

Austria's imports are equally diverse, with cars, refined petroleum, gold, broadcasting equipment, and electricity among the top imported products. In 2022, Austria's total imports were valued at $216 billion, with Germany, Italy, Czech Republic, Switzerland, and the Netherlands being the top five import sources.

Cars are also the top import product for Austria, with imports totalling $8.75 billion in 2022. This is followed by refined petroleum ($8.25 billion) and gold ($7.27 billion). Broadcasting equipment and electricity are also significant imports, valued at $5.83 billion and $5.67 billion, respectively. Notably, Austria was the world's largest importer of slag dross, importing $116 million worth in 2022.

The country's trade is heavily influenced by its membership in the European Union, with trade with other EU countries accounting for almost 66% of Austrian imports and exports. Germany has historically been Austria's main trading partner, but EU membership has helped reduce this economic dependence and fostered closer ties with other European economies.

The US-Austria economic relationship

Austria has a strong economic relationship with the US, with the two countries sharing many common values and perspectives, including a commitment to human rights and the rule of law. The US and Austria have enjoyed diplomatic relations for over 220 years, with the US playing a key role in Austria's post-World War II reconstruction.

The US and Austria have a robust and long-standing bilateral economic relationship, with the US being Austria's second-largest export destination after Germany. In 2022, US exports of goods and services to Austria were $6.4 billion, while imports from Austria were $19.4 billion. Most US exports to Austria are pharmaceutical products, organic chemicals, medical and optical products, machines and parts, and electric machinery. Services account for around 20% of the export total, led by financial services. Austria's major exports to the US are vehicles and engines, machines and parts, pharmaceuticals, and beverages.

Foreign direct investment is a driving force in the bilateral economic relationship, with Austria being one of the fastest-growing sources of US foreign direct investment, and the US ranking as Austria's fourth-largest investor source country. According to the US Department of Commerce, the US direct investment position in Austria was $4.1 billion in 2022, while the direct investment position from Austria in the US was $20 billion.

Austria is a desirable, affluent market for US-made products in Europe, with no significant trade barriers. The trade and investment relationship between the two countries supports thousands of new jobs in both nations. Additionally, Austria is a member of several international organizations, including the UN, OSCE, and the World Trade Organization, which offer further export opportunities for US companies of all sizes.

Austria's renewable energy sector

Hydropower has a long history in Austria, dating back to the beginning of the 20th century when it was used for sawmills, mills, and forging hammers. Today, Austria's leading electricity company operates around 130 hydropower plants, including storage power plants in the Austrian Alps and run-of-river power plants on major rivers. The country's mountainous terrain in the Alps provides an abundant source of hydropower resources, with a range of small and large hydropower plants.

Wind power is the second largest source of renewable electricity in Austria, contributing around 15% of the total installed capacity as of November 2021. The wind power sector employs around 11% of the workforce in the renewable energy industry and generated almost €1 billion in revenue in 2016.

Solar energy is also a prominent source of renewable energy in Austria, accounting for 10.5% of the total installed power plant capacity. In 2016, solar energy contributed 3% of the final energy consumption, with a combined energy production of 3,439 GWh. The solar thermal and solar photovoltaics sectors employed around 13.8% of the workforce in the renewable energy industry and generated a combined revenue of nearly €900 million in 2016.

Bioenergy plays a crucial role in the renewable heating sector, producing 58% of renewable heat consumed in Austria. It is the third largest source of electricity production and the only source of biofuels for the transport sector. The solid biomass sector employs about 50% of the renewable energy workforce, while all other bioenergy sectors employ 3.4%. The revenue generated by the biofuel sector was approximately €2.8 billion in 2016, contributing 38% of the total revenue in the renewable sector.

Geothermal power has a smaller presence in Austria, with a potential of about 2,000 MW thermal power and 7 MW electric power. It is mainly used for thermal baths, and only a quarter of deep drillings between 1977 and 2004 were used for electricity generation.

Austria has set ambitious goals for its renewable energy sector, aiming for 100% renewable electricity by 2030 and decarbonization of the energy system by 2050. The country has committed to achieving carbon neutrality by 2040, 10 years ahead of the European Union's goal. To achieve these targets, Austria plans to increase the generation of electricity from renewable sources, improve energy efficiency, and enhance decarbonization efforts across all energy sectors.

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