Trade

   Owing to the Anglo-Portuguese Alliance, England (Great Britain after 1707) was, until the 1920s, Portugal's main trading partner. The Methuen Treaty (1703) stipulated that Portuguese wines and English woolens would be exempt from custom duties. The imperial nationalist economic ideas of the Estado Novo directed Portuguese trade toward its Africa colonies of Angola, Mozambique, and Guinea- Bissau. The historical importance of the British export market to Portuguese trade necessitated Portugal becoming a charter member of the European Free Trade Area (EFTA) in 1959.

   When Britain joined the European Economic Community (EEC) in 1973, Portugal had to follow, with a trade agreement with the European Union (EU). Negotiations between Portugal and the EU produced an accord that stipulated mutual tariff reductions, until their disappearance in mid-1977 on industrial products, while EU member states were allowed to restrict some Portuguese textiles and paper and cork products. Tariffs were also reduced for Portuguese tinned tomatoes and fish, as well as for port wine. Since gaining full membership in the EU in 1986. Portugal's trade has shifted strongly toward continental EU member states. In the 1990s, EEC/EU member states purchased nearly 75 percent of Portugal's exports and supplied nearly 70 percent of its imports. Within the EEC/EU, Britain, Germany, France, and Spain are Portugal's a main trading partners. Portuguese trade with its former colonies fell sharply after the Revolution of 25 April 1974, as Portugal turned away from Africa and toward Europe.

   In 2007, Portugal's major commodity exports have been textiles, clothing, footwear, machinery, transportation equipment, paper and cork products, wine, tomato paste, chemicals, and plastic products. Portugal's comparative advantage lies in its low hourly costs for skilled labor, which are about 20 percent lower than other EU member states. Manufactured goods account for about 75 percent of merchandise imports; food and beverages about 10 percent; and raw materials (mainly petroleum) about 15 percent.