4.7 Growth of merchandise trade
See Table 4.7 hereAbout the data
Definitions
Data sources
Statistics on international merchandise trade are based on transactions recorded by customs services. By international agreement these data are reported to the United Nations Statistical Office, which maintains a commodity trade database known as COMTRADE. The United Nations Conference on Trade and Development (UNCTAD) compiles a variety of international trade statistics, including price and volume indexes, based on the COMTRADE data. The World Bank supplements data from UNCTAD with data from the International Monetary Fund (IMF) and, to ensure that its information is the most recent available, with data taken directly from the COMTRADE database.
Merchandise trade includes all goods that add to or subtract from an economy’s material resources. Currency in circulation, titles of ownership, and securities are excluded, but monetary gold is included.
Trade statistics are collected on the basis of the customs area of a country, which in most cases coincides with its geographic area. Goods under foreign aid programs are included, but goods destined for extraterritorial agencies (such as embassies) are not.
There are many difficulties in collecting and tabulating trade statistics. In principle, all transactions should be reported twice, once by the exporting country and once by the importing country. But timely and accurate reports are often lacking, particularly for developing countries. As a result, it is often necessary to estimate the trade of developing countries from the trade reported by their partners. This approach captures trade with high-income countries, but may miss trade between developing countries, particularly in Africa. In some cases national authorities may suppress or misrepresent data on certain trade flows (such as military equipment, oil, or the exports of a dominant producer) because of economic or political concerns. In other cases reported trade data may be distorted by deliberate under- or overinvoicing to effect capital transfers or avoid taxes. And in some regions smuggling and black market trading result in unreported trade flows. For these and other reasons trade values based on customs data differ from those calculated through the balance of payments accounts.
The growth rates here are calculated from 1987 base year volume indexes. They may differ from those derived from national sources because national price indexes may use base years and weighting procedures that differ from those used by UNCTAD or the IMF.
Terms of trade
The terms of trade measure the relative prices of a country’s exports and imports. There are a number of ways to calculate terms of trade. The most common is the net barter, or commodity, terms of trade, constructed as the ratio of the export price index to the import price index. When the net barter terms of trade increase, a country’s exports are becoming more valuable or its imports cheaper.
The income terms of trade provide another measure of the relative purchasing power of exports. When the prices of a country’s exports rise relative to the prices of its imports, its residents can purchase more goods at a given level of domestic production. The U.N. System of National Accounts specifies that real GDP should be adjusted to reflect this trading gain or loss caused by changes in the terms of trade. (GDP adjusted for terms of trade effects is known as gross domestic income.) The World Bank measures trading gains or losses as the income terms of trade, or capacity to import. The capacity to import is calculated by deflating the export value index by the import price index. Because the terms of trade indexes are usually calculated using item- or category-level average unit values rather than actual prices (which may be difficult to collect), they are subject to significant variation and error, depending on the composition of trade from one reporting period to the next.
Definitions
• Growth rates of export and import volumes are calculated from 1987 constant U.S. dollar price series. The World Bank uses the price indexes produced by UNCTAD for low- and middle-income economies and those in the IMF’s International Financial Statistics for high-income economies.
• Average annual growth rates of export and import values are calculated from current U.S. dollar price series.
• Net barter terms of trade are the ratio of the 1987 (base year) export price index to the corresponding import price index.
• Income terms of trade are the ratio of the 1987 (base year) export value index to the corresponding import price index.
The main source of current trade values is the UNCTAD trade database, supplemented by data from the IMF’s International Financial Statistics and the United Nations Commodity Trade (COMTRADE) database and by World Bank estimates. UNCTAD publishes its trade data in its annual Handbook of International Trade and Development Statistics. The United Nations publishes trade data in its International Trade Statistics Yearbook.