Trade data:Where to find itHow to use it?

Olivier CadotPRMTR & University of Lausanne

Constructing the basic snapshot of a country’s trade

What should be in there:

• Sectoral composition • Geographical composition • Overall openness• Basic trends (growth in value and market share)

http://siteresources.worldbank.org/INTRANETTRADE/Resources/Pubs/Guide_To_Trade_Data_Analysis.pdf

Where to find it: Trade Flow Databases

Provider Name Content Location Access policy Comments

UNSD COMTRADEBilateral trade flows, by product, 1988 to current

year - 1http://wits.worldbank.org Free HS, SITC

CEPII BACIBilateral trade flows, by product, 1995 to current

year - 2http://www.cepii.fr Free

Reconciles exporter and

importer data for values and

unit values

CHELEM-ITBilateral trade flows between predefined country

and product groupings, 1967-current year - 2http://www.cepii.fr Free

Ad-hoc classification plus SIC

and GTAP

ITC Trade Map COMTRADE plus gadgets www.trademap.org

USITC Trade dataweb U.S. bilateral exports and imports, 1989 to current yearhttp://dataweb.usitc.gov FreeHS, SITC, NAICS (successor to

SIC)

DOTS Bilateral trade flows, aggregate, ddp

BOP

World

Bank

Trade,

production and

protection

Imports, exports, tariffs, production, wages etc. by

SIC 3 digits sector, 1976-2004google it Free Not updtated after 2004

IMF

The Harmonized system (HS)

• 4 harmonized levels: sections (HS1, 21), chapters (HS2, 99), Headings (HS4, 1’024), and subheadings (HS6, 5’000)

• More disaggregated levels (HS8, HS10) not harmonized and often not available to the public

• Frequent revisions• HS categories have unequal importance

in trade

How goods are classified

Other classifications

SITC: The main competitor to HS

• 5 levels: sections (1 digit, 10), divisions (2 digits, 67), groups (3 digits, 262); subgroups (4 digits, 1’023); basic headings (5 digits, 2’970 lines)

• Fewer revisions than HS• Concordance with HS relatively easy

Other useful classifications

• BEC (Broad Economic Categories):• Rauch: Product differentiation index• Input-output Categories

BEC and WTO classifications

• Both map HS codes into 3 categories: capital, intermediate or consumer goods for BEC, raw, semi-finished or finished for WTO

• Always check that the classifications make sense

Rauch’s classification

• Maps SITC4 into 3 categories: homogenous, référence-priced, or differentiated (all other)

• Two classifications: « conservative » or « liberal »--little difference between the two (conservative has 347 differentiated goods out of 642 vs. 361 in the liberal)

Number of records

Number of reporters

0

20000

40000

60000

80000

100000

120000

140000

160

165

170

175

180

185

190

195

200

2000 2001 2002 2003 2004 2005 2006 2007 2008

EBOPS Services Countries Records

1 Transportation (Passenger – Freight – Other) 191 32,497

2 Travel (Business – Personal – Other) 192 28,806

3 Communications services (Postal - telecom) 174 15,212

4 Construction services (Abroad – in the economy) 136 10,735

5 Insurance services (Life – freight – reinsurance) 176 12,930

6 Financial services 148 14,163

7 Computer and information services 145 12,407

8 Royalties and license fees 155 10,888

9 Other business services (Merchanting – Professional…_) 175 22,293

10 Personal, cultural, and recreational services 132 10,927

11 Government services 181 14,214

Mode 4

Compensation of employees 47 1,505

Workers' remittances 44 2,690

Migrants' transfers 24 314

Direct investment 43 1,391

Coverage of the UN Database

A portfolio approach: Using raw data to build a basic « trade performance diagnosis »

The golden rule: mirroring, but…

• There are large discrepancies between trade flows recorded at origin and destination

• Exports are typically badly monitored by customs (no revenue)• However under-billing/smuggling seem to be substantial• And there is a trade-off when looking at trade flows from industrial countries to

developing ones (export data from more reliable industrial-country customs vs. Import data from less reliable developing-country customs)

• So… call of judgement, but in general mirroring produces more stable/plausible results

Where to find it: A few sources of ready-made indicators

Provider Name Content Location Access policy Comments

growth (real & nominal) Free

composition (goods vs. services) Free

Openness (X+M)/GDP Free

Balance Free

Share of world trade (level and growth) Free

Diversification Free

World BankWITS Extensive/intensive margins Free

Trade complementarity indices Free

Trade intensity indices Free

Revealed comparative advantage Free

Free

World Bank Import demand elasticities at HS6/country level DECRG Free For one year only (2004)

CEPII Distances Distances between countries (for gravity)

World

BankWTI

May be discontinued/merged

into World Bank's global data

platform

Export portfolio quality: growth orientation

23

45

67

Log

of W

orld

Gro

wth

of P

rod

ucts

(2

00

0-0

8)

-2 -1 0 1 2

Log of Share of Total Exports (%)

Pakistan's Growth Orientation of Products in 2008

44

.55

5.5

66

.5

Log

of Im

port

Gro

wth

of C

oun

trie

s (

20

00

-08

)

-2 -1 0 1 2 3

Log of Destination's Share in Exports (%)

Growth Orientation of Pakistan's Destinations, 2008

• Take every export product, calculate its share in country’s exports for a given (recent) year, call it x, and put it in logs

• Take the growth rate of world imports of that product over a 10-year window around the year of interest (or before that year if it is the last available), call it y

• Plot y against log x and draw the regression line; good if slopes upward (large export items are also the fastest growing in world trade), bad if it slopes downward

• Do the same thing with export destinations taking the growth of their aggregate imports

Putting concepts to work: Basic decomposition of export growth

Intensive margin: higher volumes of existing products & destinations

Export growthExtensive margin

New products

New destinations

Sustainability margin: Survival of new products/destinations

Largest contributors to export growth (across countries and time)• Intensive margin• New-destination margin

General pattern: diversification followed by reconcentration (at high levels of income)—this must be used to benchmark national export diversification

34

56

7

Theil

index

0

1000

2000

3000

4000

5000

num

ber

of export

ed p

roduct

s

0 20000 40000 60000GDP per capita PPP (constant 2005 international $)

Active lines - quadratic Active lines - non parametric

Theil index - non parametric Theil index - quadratic

# active export lines

Theil index

Along the path of income growth, countries

• First diversify (up to $25’000 PPP per capita GDP)• Then re-concentrate

IRL

ESP

GRC

GBR23

45

15000 20000 25000 30000 35000 40000GDP per capita, PPP (constant 2005 international $)

and this is true even for individual country trajectories :

Intensive and extensive margins

Hummels-Klenow’s original formulation (product-wise)

Let Ki be the set of products exported by country i, 𝑋𝑘𝑖 the dollar value of i’s exports of product k to the

world, and 𝑋𝑘𝑊 the dollar value of world exports of product k.

The (static) intensive margin is defined by HK as

𝐼𝑀𝑖 = 𝑋𝑘

𝑖𝐾𝑖

𝑋𝑘𝑊

𝐾𝑖

In words, the numerator is i’s exports and the denominator is world exports of products that are in i’s

export portfolio.

The extensive margin (also static) is

𝑋𝑀𝑖 = 𝑋𝑘

𝑊𝐾𝑖

𝑋𝑘𝑊

𝐾𝑊

Interpreting the intensive and extensive margins

Pakistan

India

Vietnam

Indonesia

Pakistan

India

Vietnam

Indonesia

.2.4

.6.8

11

.2

Inte

nsiv

e M

arg

in

85 90 95 100

Extensive Margin

1998 2008

Intensive and Extensive Margin in Products, 1998-08

Your market share in your export portfolio

Weight of your export portfolio in world trade

Big fish in a small pond

Small fish in a big pond

Interpreting the intensive and extensive margins: caveats

Costa Rica

Pakistan

Costa Rica

Pakistan

.1.1

2.1

4.1

6.1

8.2

Inte

nsiv

e M

arg

in

84 86 88 90 92 94

Extensive Margin

1993 2003

Intensive and Extensive Margin in Products, 1993-03

Your market share in your export portfolio

Weight of your export portfolio in world trade

Big fish in a small pond

Small fish in a big pond

Extension to geographical markets

Let Di be the set of destination markets where i exports (anything from one to 5’000 products—it

doesn’t matter), XiD the dollar value of i’s total exports to destination d, and XWd the dollar value of world

exports to destination d (i.e. d’s total imports). All these dollar values are aggregated over all goods.

Intensive margin

𝐼𝑀𝑖 = 𝑋𝑖𝑑𝐷𝑖

𝑋𝑊𝑑𝐷𝑖

Extensive margin

𝑋𝑀𝑖 = 𝑋𝑊𝑑𝐷𝑖

𝑋𝑊𝑑𝐷𝑊

Interpreting the intensive and extensive margins: destination markets

Pakistan

India

Vietnam

Indonesia

Pakistan

India

Vietnam

Indonesia

.2.4

.6.8

11

.2

Inte

nsiv

e M

arg

in

97.5 98 98.5 99 99.5 100

Extensive Margin

1998 2008

Intensive and Extensive Margin in Markets, 1998-08

Your market share in your destinationportfolio

Weight of your destination portfolio in world trade

Big fish in a small pond

Small fish in a

big pond

-2-1

01

2

lp1

5 10 15 20ldiffimport

Agri-food product: A product-risk index and a portfolio risk-return snapshot-2

-10

12

lp1

5 10 15 20ldiffimport

Indonesia India

Step 1: construct a product-level risk index using the EU’s alert database

Log SPS risk coefficient

Log Demand growth

Better portfolio Better

portfolio

Log SPS risk coefficient

Log Demand growth

Hidden protectionism

(also control for initial export volume)

Count of alerts 2000-2008

Step 2: construct a risk-return profile for national agri-food export portfolios

Key ingredients

• Agglomeration effects/spillovers/scale effects• Latent comparative advantage in the targeted sector

Good 1

Good 2

E1

PPF

World price line

Good 1

Good 2

E1

E2PPF

World price line

Zone of increasingreturns/agglomeration in the production of good 2

Targeted by IP

When does it make sense to « do industrial policy »? (Harrison Rodriguez-Clare 2009)

Identifying latent comparative advantage: matching national factor endowments withthe factor intensities of traded goods

Endowments and factor intensities

Let ki = Ki/Li be country i’s stock of capital per worker, and let Hi be a proxy for its stock of human capital,

namely the average level of education of its workforce in years. These are national factor endowments.

Let Ji be the set of goods that country i exports. Let

𝜔𝑗𝑖 =

𝑋𝑗𝑖

𝑋𝑗𝑖

𝐽 𝑖

be Balassa’s Revealed Comparative Advantage (RCA) for country i and product j. Let also Ij be the set of

countries that export good j. Good j’s revealed intensity in capital is

𝜅𝑗 = 𝜔𝑗𝑖𝐾𝑖

𝐼𝑗

Similarly,

ℎ𝑗 = 𝜔𝑗𝑖𝐻𝑖

𝐼𝑗

is product j’s revealed intensity in human capital.

A glance at the endowment data…

… and the « revealed factor intensities »

Industrial countries (past $25’000 at PPP) reconcentrate their exports…

…by closing export lines that are out of tune with their endowments.

24

68

10

12

0 50000 100000 150000 200000

Product intensities Country endowments

Capital

Human capital

Intensive margin

New-productsmargin

Deathmargin

• Large volume of churning: This year’s new-product margin is next year’s death margin• Low survival of export spells at product (HS6) level: median 2 years• This is why the extensive margin contributes little to growth (low survival)

Basic decomposition of export change

Baseline exports

𝑋0 = 𝑋𝑘0𝐾0

Terminal exports

𝑋1 = 𝑋𝑘1𝐾1

Decomposition of the change in total volume

∆𝑋 = ∆𝑋

𝐾0∩𝐾1

+ 𝑋𝑘𝐾1\𝐾0

− 𝑋𝑘𝐾0\𝐾1

Costa Rica: intensive, new-products, and death margins

New products 2003-5Deaths 2003-5

Baseline export portfolio: 1991-3 Export portfolio 2003-5

02

46

810

12

Re

vea

led

Hu

man

Cap

ital I

nte

nsity

Inde

x

0 50000 100000 150000 200000Revealed Physical Capital Intensity Index

02

46

810

12

Re

vea

led

Hu

man

Cap

ital I

nte

nsity

Inde

x

0 50000 100000 150000 200000Revealed Physical Capital Intensity Index

02

46

810

12

Re

vea

led

Hu

man

Cap

ital I

nte

nsity

Inde

x

0 50000 100000 150000 200000Revealed Physical Capital Intensity Index

02

46

810

12

Re

vea

led

Hu

man

Cap

ital I

nte

nsity

Inde

x

0 50000 100000 150000 200000Revealed Physical Capital Intensity Index