posts_gdocs: 1scFKpuRQ13hmruDYgL3f-nMKNVbjW8YtM-u6mxqLa9k

This table contains the GDocs posts. A lot of interesting data is the content column which is a json blob containing, among other things, the archieml as parsed json. For easy searching etc, a markdown copy of the content is available in the markdown column. If you want to query all posts (both wordpress and gdocs), use the posts_unified table or the posts_unified_with_content view.

Data license: CC-BY

This data as json

id	slug	type	content	published	createdAt	publishedAt	updatedAt	publicationContext	revisionId	breadcrumbs	markdown	title
1scFKpuRQ13hmruDYgL3f-nMKNVbjW8YtM-u6mxqLa9k	trade-and-globalization	linear-topic-page	{ "toc": [ { "slug": "trade-has-changed-the-world-economy", "text": "Trade has changed the world economy", "title": "Trade has changed the world economy", "supertitle": "", "isSubheading": false }, { "slug": "trade-has-grown-remarkably-over-the-last-century", "text": "Trade has grown remarkably over the last century", "title": "Trade has grown remarkably over the last century", "supertitle": "", "isSubheading": true }, { "slug": "the-increase-in-trade-has-even-outpaced-economic-growth", "text": "The increase in trade has even outpaced economic growth", "title": "The increase in trade has even outpaced economic growth", "supertitle": "", "isSubheading": true }, { "slug": "trade-expanded-in-two-waves", "text": "Trade expanded in two waves", "title": "Trade expanded in two waves", "supertitle": "", "isSubheading": true }, { "slug": "trade-and-trade-partners-by-country", "text": "Trade and trade partners by country", "title": "Trade and trade partners by country", "supertitle": "", "isSubheading": true }, { "slug": "trade-around-the-world-today", "text": "Trade around the world today", "title": "Trade around the world today", "supertitle": "", "isSubheading": false }, { "slug": "how-much-do-countries-trade", "text": "How much do countries trade?", "title": "How much do countries trade?", "supertitle": "", "isSubheading": true }, { "slug": "what-do-countries-trade", "text": "What do countries trade?", "title": "What do countries trade?", "supertitle": "", "isSubheading": true }, { "slug": "how-are-trade-partnerships-changing", "text": "How are trade partnerships changing?", "title": "How are trade partnerships changing?", "supertitle": "", "isSubheading": true }, { "slug": "trade-generates-efficiency-gains", "text": "Trade generates efficiency gains", "title": "Trade generates efficiency gains", "supertitle": "", "isSubheading": false }, { "slug": "the-raw-correlation-between-trade-and-growth", "text": "The raw correlation between trade and growth", "title": "The raw correlation between trade and growth", "supertitle": "", "isSubheading": true }, { "slug": "evidence-from-cross-country-differences-in-trade-growth-and-productivity", "text": "Evidence from cross-country differences in trade, growth, and productivity", "title": "Evidence from cross-country differences in trade, growth, and productivity", "supertitle": "", "isSubheading": true }, { "slug": "evidence-from-changes-in-labor-productivity-at-the-firm-level", "text": "Evidence from changes in labor productivity at the firm level", "title": "Evidence from changes in labor productivity at the firm level", "supertitle": "", "isSubheading": true }, { "slug": "trade-does-not-only-increase-efficiency-gains", "text": "Trade does not only increase efficiency gains", "title": "Trade does not only increase efficiency gains", "supertitle": "", "isSubheading": true }, { "slug": "trade-has-distributional-consequences", "text": "Trade has distributional consequences", "title": "Trade has distributional consequences", "supertitle": "", "isSubheading": false }, { "slug": "the-conceptual-link-between-trade-and-household-welfare", "text": "The conceptual link between trade and household welfare", "title": "The conceptual link between trade and household welfare", "supertitle": "", "isSubheading": true }, { "slug": "the-link-between-trade-jobs-and-wages", "text": "The link between trade, jobs and wages", "title": "The link between trade, jobs and wages", "supertitle": "", "isSubheading": true }, { "slug": "the-link-between-trade-and-the-cost-of-living", "text": "The link between trade and the cost of living", "title": "The link between trade and the cost of living", "supertitle": "", "isSubheading": true }, { "slug": "implications-of-trade-s-distributional-effects", "text": "Implications of trade\u2019s distributional effects", "title": "Implications of trade\u2019s distributional effects", "supertitle": "", "isSubheading": true }, { "slug": "explaining-trade-patterns-theory-and-evidence", "text": "Explaining trade patterns: Theory and Evidence", "title": "Explaining trade patterns: Theory and Evidence", "supertitle": "", "isSubheading": false }, { "slug": "comparative-advantage", "text": "Comparative advantage", "title": "Comparative advantage", "supertitle": "", "isSubheading": true }, { "slug": "trade-diminishes-with-distance", "text": "Trade diminishes with distance", "title": "Trade diminishes with distance", "supertitle": "", "isSubheading": true }, { "slug": "institutions", "text": "Institutions", "title": "Institutions", "supertitle": "", "isSubheading": true }, { "slug": "increasing-returns-to-scale", "text": "Increasing returns to scale", "title": "Increasing returns to scale", "supertitle": "", "isSubheading": true }, { "slug": "measurement-and-data-quality", "text": "Measurement and data quality", "title": "Measurement and data quality", "supertitle": "", "isSubheading": false }, { "slug": "what-data-is-available", "text": "What data is available?", "title": "What data is available?", "supertitle": "", "isSubheading": true }, { "slug": "how-large-are-the-discrepancies-between-sources", "text": "How large are the discrepancies between sources?", "title": "How large are the discrepancies between sources?", "supertitle": "", "isSubheading": true }, { "slug": "why-doesn-t-the-data-add-up", "text": "Why doesn't the data add up?", "title": "Why doesn't the data add up?", "supertitle": "", "isSubheading": true }, { "slug": "a-checklist-for-comparing-sources", "text": "A checklist for comparing sources", "title": "A checklist for comparing sources", "supertitle": "", "isSubheading": true }, { "slug": "all-charts", "text": "Interactive charts on Trade and Globalization", "title": "Interactive charts on Trade and Globalization", "isSubheading": false }, { "slug": "article-endnotes", "text": "Endnotes", "title": "Endnotes", "isSubheading": false }, { "slug": "article-citation", "text": "Citation", "title": "Citation", "isSubheading": false }, { "slug": "article-licence", "text": "Licence", "title": "Licence", "isSubheading": false } ], "body": [ { "type": "text", "value": [ { "text": "On this topic page, you can find data, visualizations, and research on historical and current patterns of international trade, as well as discussions of their origins and effects.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Other research and writing on trade and globalization on Our World in Data:", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "list", "items": [ { "type": "text", "value": [ { "url": "https://ourworldindata.org/is-globalization-an-engine-of-economic-development", "children": [ { "text": "Is globalization an engine of economic development?", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] }, { "type": "text", "value": [ { "url": "https://ourworldindata.org/trade-and-income-inequality", "children": [ { "text": "Is trade a major driver of income inequality?", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] } ], "parseErrors": [] }, { "text": [ { "text": "Related topics", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "url": "https://docs.google.com/document/d/1gVSV2gqzPSTMI80gmHEgbaKeWalj6daqe519RtZaJ7I/edit", "type": "prominent-link", "parseErrors": [] }, { "url": "https://docs.google.com/document/d/1yzOrFd6uWvrAl2oFB3S67oOSbhgL1ffPHxjAqS7i-4w/edit", "type": "prominent-link", "parseErrors": [] }, { "url": "https://ourworldindata.org/migration", "type": "prominent-link", "title": "Migration", "description": "See all our data, visualizations, and writing on migration.", "parseErrors": [] }, { "type": "text", "value": [ { "children": [ { "url": "#all-charts", "children": [ { "text": "See all interactive charts on Trade and Globalization \u2193", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "spanType": "span-bold" } ], "parseErrors": [] }, { "text": [ { "text": "Trade has changed the world economy", "spanType": "span-simple-text" } ], "type": "heading", "level": 1, "parseErrors": [] }, { "text": [ { "text": "Trade has grown remarkably over the last century", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "One of the most important developments of the last century has been the integration of national economies into a global economic system. This process of integration, often called globalization, has resulted in a remarkable growth in trade between countries.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The chart here shows the growth of world exports over more than the last two centuries. These estimates are in constant prices (i.e. have been adjusted to account for inflation) and are indexed at 1913 values.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The chart shows an extraordinary growth in international trade over the last couple of centuries: Exports today are more than 40 times larger than in 1913.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "You can switch to a logarithmic scale under \u2018Settings\u2019. This will help you see that, over the long run, growth has roughly followed an exponential path.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/world-trade-exports-constant-prices", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "The increase in trade has even outpaced economic growth", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The chart above shows how much more trade we have today relative to a century ago. But what about trade relative to total economic output?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Over the last couple of centuries the world economy has experienced ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia", "children": [ { "text": "sustained positive economic growth", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", so looking at changes in trade relative to GDP offers another interesting perspective.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The next chart plots the value of traded goods relative to GDP (i.e. the value of merchandise trade as a share of global economic output).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Up to 1870, the sum of worldwide exports accounted for less than 10% of global output. Today, the value of exported goods around the world is around 25%. This shows that over the last hundred years, the growth in trade has even outpaced rapid economic growth.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=OWID_WRL", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "Trade expanded in two waves", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "text": [ { "text": "The first\u00a0\"wave of globalization\" started in the 19th century, the second one after WW2", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The following visualization presents a compilation of available trade estimates, showing the evolution of world exports and imports as a share of ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/gdp-data/", "children": [ { "text": "global economic output", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This metric (the ratio of total trade, exports plus imports, to global GDP) is known as the \u201copenness index\u201d. The higher the index, the higher the influence of trade transactions on global economic activity.", "spanType": "span-simple-text" }, { "url": "#note-1", "children": [ { "children": [ { "text": "1", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As we can see, until 1800 there was a long period characterized by persistently low international trade \u2013 globally the index never exceeded 10% before 1800. This then changed over the course of the 19th century, when technological advances triggered a period of marked growth in world trade \u2013 the so-called \u201cfirst wave of globalization\u201d.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This first wave came to an end with the beginning of World War I, when the decline of liberalism and the rise of nationalism led to a slump in international trade. In the chart we see a large drop in the interwar period.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "After World War II trade started growing again. This new \u2013 and ongoing \u2013 wave of globalization has seen international trade grow faster than ever before. Today the sum of exports and imports across nations amounts to more than 50% of the value of total global output.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/globalization-over-5-centuries", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "Before the first wave of globalization, trade was driven mostly by colonialism", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Over the early modern period, transoceanic flows of goods between empires and colonies accounted for an important part of international trade. The following visualizations provide a comparison of intercontinental trade, in per capita terms, for different countries.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As we can see, intercontinental trade was very dynamic, with volumes varying considerably across time and from empire to empire.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Leonor Freire Costa, Nuno Palma, and Jaime Reis, who compiled and published the original data shown here, argue that trade, also in this period, had a substantial positive impact on the economy.", "spanType": "span-simple-text" }, { "url": "#note-2", "children": [ { "children": [ { "text": "2", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/intercontinental-trade-per-capita-1500-1800", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "The first wave of globalization was marked by the rise and collapse of intra-European trade", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The following visualization shows a detailed overview of Western European exports by destination. Figures correspond to export-to-GDP ratios (i.e. the sum of the value of exports from all Western European countries, divided by the total GDP in this region). You can use \u201cSettings\u201d to switch to a relative view and see the proportional contribution of each region to total Western European exports.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This chart shows that growth in Western European trade throughout the 19th century was largely driven by trade within the region: In the period 1830-1900 intra-European exports went from 1% of GDP to 10% of GDP, and this meant that the relative weight of intra-European exports doubled over the period. However, this process of European integration then collapsed sharply in the interwar period.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "After the Second World War trade within Europe rebounded, and from the 1990s onwards exceeded the highest levels of the first wave of globalization. In addition, Western Europe then started to increasingly trade with Asia, the Americas, and to a smaller extent Africa and Oceania.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/merchandise-exports-by-continent?facet=none&country=~Western+Europe", "type": "chart", "parseErrors": [] }, { "type": "text", "value": [ { "text": "The next graph, using data from Broadberry and O'Rourke (2010)", "spanType": "span-simple-text" }, { "url": "#note-3", "children": [ { "children": [ { "text": "3", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" }, { "text": ", shows another perspective on the integration of the global economy and plots the evolution of three indicators measuring integration across\u00a0different markets \u2013 specifically goods, labor, and capital markets.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The indicators in this chart are indexed, so they show changes relative to the levels of integration observed in 1900. This gives us another perspective on how quickly global integration collapsed with the two World Wars.", "spanType": "span-simple-text" }, { "url": "#note-4", "children": [ { "children": [ { "text": "4", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "alt": "Migration, Financial integration, and Trade openness from 1880\u20131996", "size": "wide", "type": "image", "caption": [ { "text": "Migration, financial integration and trade openness, World,\u00a01880-1996 (indexed to 1900 = 100) \u2013\u00a0Cambridge Economic History Vol. 2", "spanType": "span-simple-text" }, { "url": "#note-5", "children": [ { "children": [ { "text": "5", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "filename": "broadberry-migration.png", "hasOutline": false, "parseErrors": [] }, { "text": [ { "text": "The second wave of globalization was enabled by technology", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The worldwide expansion of trade after the Second World War was largely possible because of reductions in transaction costs stemming from technological advances, such as the development of commercial civil aviation, the improvement of productivity in the merchant marines, and the democratization of the telephone as the main mode of communication. The visualization shows how, at the global level, costs across these three variables have been going down since 1930.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/real-transport-and-communication-costs", "type": "chart", "parseErrors": [] }, { "type": "text", "value": [ { "text": "Reductions in transaction costs impacted not only the volumes of trade but also the types of exchanges that were possible and profitable.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The first wave of globalization was characterized by inter-industry trade. This means that countries exported goods that were very different from what they imported \u2013 England exchanged machines for Australian wool and Indian tea. As transaction costs went down, this changed. In the second wave of globalization, we are seeing a rise in ", "spanType": "span-simple-text" }, { "children": [ { "text": "intra", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": "-industry trade (i.e. the exchange of broadly similar goods and services is becoming more and more common). France, for example, now both imports and exports machines to and from Germany.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The following visualization, from the ", "spanType": "span-simple-text" }, { "url": "https://documents1.worldbank.org/curated/en/730971468139804495/pdf/437380REVISED01BLIC1097808213760720.pdf", "children": [ { "text": "UN World Development Report (2009)", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", plots the fraction of total world trade that is accounted for by intra-industry trade, by type of goods. As we can see, intra-industry trade has been going up for primary, intermediate, and final goods.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This pattern of trade is important because the scope for specialization increases if countries are able to exchange intermediate goods (e.g. auto parts) for related final goods (e.g. cars).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "alt": "GrubelLloyd_WDR09", "size": "wide", "type": "image", "caption": [ { "text": "Share of intraindustry trade by type of goods \u2013 Figure 6.1 in ", "spanType": "span-simple-text" }, { "url": "https://documents1.worldbank.org/curated/en/730971468139804495/pdf/437380REVISED01BLIC1097808213760720.pdf", "children": [ { "text": "UN World Development Report (2009)", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "filename": "intraindustry-trade-unwde.png", "hasOutline": false, "parseErrors": [] }, { "text": [ { "text": "Trade and trade partners by country", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Above, we examined the broad global trends over the last two centuries. Let's now examine country-level trends over this long and dynamic period.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This chart plots estimates of the value of trade in goods, relative to total economic activity (i.e. export-to-GDP ratios).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "These historical estimates obviously come with a large margin of error (in the ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/trade-and-globalization#measurement-and-data-quality", "children": [ { "text": "measurement section below", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " we discuss the data limitations); yet they offer an interesting perspective.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "You can edit the countries and regions selected. Each country tells a different story.", "spanType": "span-simple-text" }, { "url": "#note-6", "children": [ { "children": [ { "text": "6", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii", "type": "chart", "parseErrors": [] }, { "type": "text", "value": [ { "text": "In the next chart we plot, country by country, the regional breakdown of exports. India is shown by default, but you can edit the countries and regions shown.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "When switching to displaying relative values under \u2018Settings\u2019, we see the proportional contribution of purchases from each region. For example, we see that more than a third of Indian exports went to Asian countries in recent decades.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This gives us an interesting perspective on the changing nature of trade partnerships. In India, we see the rising importance of trade with Africa\u2014a pattern that we ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/trade-and-globalization#south-south-trade-is-becoming-increasingly-important", "children": [ { "text": "discuss in more detail below", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/merchandise-exports-by-continent?facet=none&country=~IND", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "Trade around the world today", "spanType": "span-simple-text" } ], "type": "heading", "level": 1, "parseErrors": [] }, { "text": [ { "text": "How much do countries trade?", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "text": [ { "text": "Trade openness around the world", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The metric trade as a share of GDP gives us an idea of global integration by capturing all incoming and outgoing transactions of a country.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The charts shows that countries differ a lot in the extent to which they engage in trade. Trade, for example, is much less important to the US economy than for other rich countries.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "If you press the play button on the map, you can see changes over time. This reveals that, despite the great variation between countries, there is a common trend: over the last couple of decades trade openness has gone up in most countries.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/trade-as-share-of-gdp", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "Exports and imports in real dollars", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Expressing the value of trade as a share of GDP tells us the importance of trade in relation to the size of economic activity. Let's now take a look at trade in monetary terms \u2013 this tells us the importance of trade in absolute, rather than relative terms.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The chart shows the value of exports (goods plus services) in dollars, country by country.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The main takeaway here is that the trend towards more trade is more pronounced than in the charts showing shares of GDP. This is not surprising: most countries today ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/app/uploads/2013/05/Scatter-1960-vs-2014-GDP.png", "children": [ { "text": "produce more than a couple of decades ago", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", and at the same time they trade more of what they produce.", "spanType": "span-simple-text" }, { "url": "#note-7", "children": [ { "children": [ { "text": "7", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/exports-of-goods-and-services-constant-2010-us", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "What do countries trade?", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "text": [ { "text": "Trade in goods vs. trade in services", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Trade transactions include goods (tangible products that are physically shipped across borders by road, rail, water, or air) and services (intangible commodities, such as tourism, financial services, and legal advice).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Many traded services make merchandise trade easier or cheaper\u2014for example, shipping services, or insurance and financial services.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Trade in goods has ", "spanType": "span-simple-text" }, { "url": "https://www.caitlingreen.org/2017/03/a-very-long-way-from-home.html", "children": [ { "text": "been happening for millennia", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", while trade in services is a relatively recent phenomenon.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In some countries services are today an important driver of trade: in the UK services account for around half of all exports; and in the Bahamas, almost all exports are services.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In other countries, such as Nigeria and Venezuela, services account for a small share of total exports.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Globally, trade in goods accounts for the majority of trade transactions. But as this chart shows, the share of services in total global exports has slightly increased in recent decades.", "spanType": "span-simple-text" }, { "url": "#note-8", "children": [ { "children": [ { "text": "8", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/share-of-services-in-total-exports?country=BMU+BRA+NGA+GBR+USA+VEN+OWID_WRL+BHS", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "How are trade partnerships changing?", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "text": [ { "text": "Bilateral trade is becoming increasingly common", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "If we consider all pairs of countries that engage in trade around the world, we find that in the majority of cases, there is a bilateral relationship today: most countries that export goods to a country also import goods from the same country.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The interactive visualization shows this.", "spanType": "span-simple-text" }, { "url": "#note-9", "children": [ { "children": [ { "text": "9", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" }, { "text": " In the chart, all possible country pairs are partitioned into three categories: the top portion represents the fraction of country pairs that do not trade with one another; the middle portion represents those that trade in both directions (they export to one another); and the bottom portion represents those that trade in one direction only (one country imports from, but does not export to, the other country).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As we can see, bilateral trade is becoming increasingly common (the middle portion has grown substantially). However, many countries still do not trade with each other at all.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/distribution-of-bilateral-and-unilateral-trade-partnerships", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "South-South trade is becoming increasingly important", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The next visualization here shows the share of world merchandise trade that corresponds to exchanges between today's rich countries and the rest of the world.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The 'rich countries' in this chart are: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the United States. 'Non-rich countries' are all the other countries in the world.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As we can see, up until the Second World War, the majority of trade transactions involved exchanges between this small group of rich countries. But this has changed quickly over the last couple of decades, and today, trade between non-rich countries is just as important as trade between rich countries.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In the past two decades, China has been a key driver of this dynamic: the ", "spanType": "span-simple-text" }, { "url": "https://hdr.undp.org/content/human-development-report-2013", "children": [ { "text": "UN Human Development Report (2013)", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " estimates that between 1992 and 2011, China's trade with Sub-Saharan Africa rose from $1 billion to more than $140 billion.", "spanType": "span-simple-text" }, { "url": "#note-10", "children": [ { "children": [ { "text": "10", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/share-of-world-merchandise-trade-by-type-of-trade-percent", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "The majority of preferential trade agreements are between emerging economies", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The last few decades have not only seen an increase in the volume of international trade, but also an increase in the number of preferential trade agreements through which exchanges take place. A preferential trade agreement is a trade pact that reduces tariffs between the participating countries for certain products.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The visualization here shows the evolution of the cumulative number of preferential trade agreements in force worldwide, according to the World Trade Organization (WTO). These numbers include notified and non-notified preferential agreements (the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO) and are disaggregated by country groups.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This figure shows the increasingly important role of trade between developing countries (South-South trade), vis-a-vis trade between developed and developing countries (North-South trade). In the late 1970s, North-South agreements accounted for more than half of all agreements \u2013 in 2010, they accounted for about one-quarter. Today, the majority of preferential trade agreements are between developing economies.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "size": "wide", "type": "image", "caption": [ { "text": "Number of preferential trade agreements in force by country group, 1950-2010 \u2013 Figure B1 in ", "spanType": "span-simple-text" }, { "url": "https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report11_e.pdf", "children": [ { "text": "WTO Trade Report (2011)", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "filename": "PTAs_WTO2011.png", "hasOutline": false, "parseErrors": [] }, { "text": [ { "text": "Trading patterns have been changing quickly in middle-income countries", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "An important change in the composition of exported goods in these countries has accompanied the increase in trade among emerging economies over the last half century.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The next visualization plots the share of food exports in each country's total exported merchandise. These figures, produced by the World Bank, correspond to the Standard International Trade Classification, in which 'food' includes, among other goods, live animals, beverages, tobacco, coffee, oils, and fats.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Two points stand out. First, the relative importance of food exports has substantially decreased in most countries since the 1960s (although globally, it has gone up slightly more recently). Second, this decrease has been largest in middle-income countries, particularly in Latin America.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Regarding levels, as one would expect, in high-income countries, food still accounts for a much smaller share of merchandise exports than in most low- and middle-income-countries.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/share-food-exports?country=COL~BRA~RUS~ITA~FRA~OWID_WRL", "type": "chart", "parseErrors": [] }, { "text": [ { "text": "Trade generates efficiency gains", "spanType": "span-simple-text" } ], "type": "heading", "level": 1, "parseErrors": [] }, { "text": [ { "text": "The raw correlation between trade and growth", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Over the last couple of centuries, the world economy has experienced ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia", "children": [ { "text": "sustained positive economic growth", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", and over the same period, this process of economic growth has been accompanied by ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=~OWID_WRL", "children": [ { "text": "even faster growth in global trade", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In a similar way, if we look at country-level data from the last half century we find that there is also a correlation between economic growth and trade: countries with higher rates of GDP growth also tend to have higher rates of growth in trade as a share of output. This basic correlation is shown in the chart here, where we plot the average annual change in real GDP per capita, against growth in trade (average annual change in value of exports as a share of GDP).", "spanType": "span-simple-text" }, { "url": "#note-11", "children": [ { "children": [ { "text": "11", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/growth-of-income-and-trade", "type": "chart", "parseErrors": [] }, { "type": "text", "value": [ { "text": "Is this statistical association between economic output and trade causal?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Among the potential growth-enhancing factors that may come from greater global economic integration are: competition (firms that fail to adopt new technologies and cut costs are more likely to fail and be replaced by more dynamic firms); economies of scale (firms that can export to the world face larger demand, and under the right conditions, they can operate at larger scales where the price per unit of product is lower); learning and innovation (firms that trade gain more experience and exposure to develop and adopt technologies and industry standards from foreign competitors).", "spanType": "span-simple-text" }, { "url": "#note-12", "children": [ { "children": [ { "text": "12", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Are these mechanisms supported by the data? Let's take a look at the available empirical evidence.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Evidence from cross-country differences in trade, growth, and productivity", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "When it comes to academic studies estimating the impact of trade on GDP growth, the most cited paper is Frankel and Romer (1999).", "spanType": "span-simple-text" }, { "url": "#note-13", "children": [ { "children": [ { "text": "13", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In this study, Frankel and Romer used geography as a proxy for trade to estimate the impact of trade on growth. This is a classic example of the so-called ", "spanType": "span-simple-text" }, { "url": "https://en.wikipedia.org/wiki/Instrumental_variables_estimation", "children": [ { "text": "instrumental variables approach", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". The idea is that a country's geography is fixed, and mainly affects national income through trade. So if we observe that a country's distance from other countries is a powerful predictor of economic growth (after accounting for other characteristics), then the conclusion is drawn that it must be because ", "spanType": "span-simple-text" }, { "children": [ { "text": "trade", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " has an effect on economic growth. Following this logic, Frankel and Romer find evidence of a strong impact of trade on economic growth.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Other papers have applied the same approach to richer cross-country data, and they have found similar results. A key example is Alcal\u00e1 and Ciccone (2004).", "spanType": "span-simple-text" }, { "url": "#note-14", "children": [ { "children": [ { "text": "14", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This body of evidence suggests trade is indeed one of the factors driving national average incomes (GDP per capita) and macroeconomic productivity (GDP per worker) over the long run.", "spanType": "span-simple-text" }, { "url": "#note-15", "children": [ { "children": [ { "text": "15", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "text": [ { "text": "Evidence from changes in labor productivity at the firm level", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "If trade is causally linked to economic growth, we would expect that trade liberalization episodes also lead to firms becoming more productive in the medium and even short run. There is evidence suggesting this is often the case.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Pavcnik (2002) examined the effects of liberalized trade on plant productivity in the case of Chile, during the late 1970s and early 1980s. She found a positive impact on firm productivity in the import-competing sector. She also found evidence of aggregate productivity improvements from the reshuffling of resources and output from less to more efficient producers.", "spanType": "span-simple-text" }, { "url": "#note-16", "children": [ { "children": [ { "text": "16", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Bloom, Draca, and Van Reenen (2016) examined the impact of rising Chinese import competition on European firms over the period 1996-2007 and obtained similar results. They found that innovation increased more in those firms most affected by Chinese imports. They also found evidence of efficiency gains through two related channels: innovation increased and new existing technologies were adopted within firms, and aggregate productivity also increased because employment was reallocated towards more technologically advanced firms.", "spanType": "span-simple-text" }, { "url": "#note-17", "children": [ { "children": [ { "text": "17", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "text": [ { "text": "Trade does not only increase efficiency gains", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Overall, the available evidence suggests that trade liberalization does improve economic efficiency. This evidence comes from different political and economic contexts and includes both micro and macro measures of efficiency.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This result is important because it shows that there are gains from trade. But of course, efficiency is not the only relevant consideration here. As we discuss in a ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/trade-and-income-inequality", "children": [ { "text": "companion article", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", the efficiency gains from trade are not generally equally shared by everyone. The evidence from the impact of trade on firm productivity confirms this: \"reshuffling workers from less to more efficient producers\" means closing down some jobs in some places. Because distributional concerns are real it is important to promote public policies \u2013 such as unemployment benefits and other safety-net programs \u2013 that help redistribute the gains from trade.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Trade has distributional consequences", "spanType": "span-simple-text" } ], "type": "heading", "level": 1, "parseErrors": [] }, { "text": [ { "text": "The conceptual link between trade and household welfare", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "When a country opens up to trade, the demand and supply of goods and services in the economy shift. As a consequence, local markets respond, and prices change. This has an impact on households, both as consumers and as wage earners.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The implication is that trade has an impact on everyone. It's not the case that the effects are restricted to workers from industries in the trade sector; or to consumers who buy imported goods. The effects of trade extend to everyone because markets are interlinked, so imports and exports have knock-on effects on all prices in the economy, including those in non-traded sectors.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Economists usually distinguish between \"general equilibrium consumption effects\" (i.e. changes in consumption that arise from the fact that trade affects the prices of non-traded goods relative to traded goods) and \"general equilibrium income effects\" (i.e. changes in wages that arise from the fact that trade has an impact on the demand for specific types of workers, who could be employed in both the traded and non-traded sectors).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Considering all these complex interrelations, it's not surprising that economic theories predict that not everyone will benefit from international trade in the same way. The distribution of the gains from trade depends on what different groups of people consume, and which types of jobs they have, or could have.", "spanType": "span-simple-text" }, { "url": "#note-18", "children": [ { "children": [ { "text": "18", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "text": [ { "text": "The link between trade, jobs and wages", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "text": [ { "text": "Evidence from Chinese imports and their impact on factory workers in the US", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The most famous study looking at this question is Autor, Dorn and Hanson (2013): \"The China syndrome: Local labor market effects of import competition in the United States\".", "spanType": "span-simple-text" }, { "url": "#note-19", "children": [ { "children": [ { "text": "19", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In this paper, Autor and coauthors examined how local labor markets changed in the parts of the country most exposed to Chinese competition. They found that rising exposure increased unemployment, lowered labor force participation, and reduced wages. Additionally, they found that claims for unemployment and healthcare benefits also increased in more trade-exposed labor markets.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The visualization here is one of the key charts from their paper. It's a scatter plot of cross-regional exposure to rising imports, against changes in employment. Each dot is a small region (a 'commuting zone' to be precise). The vertical position of the dots represents the percent change in manufacturing employment for the working-age population, and the horizontal position represents the predicted exposure to rising imports (exposure varies across regions depending on the local weight of different industries).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The trend line in this chart shows a negative relationship: more exposure goes along with less employment. There are large deviations from the trend (there are some low-exposure regions with big negative changes in employment); but the paper provides more sophisticated regressions and robustness checks, and finds that this relationship is statistically significant.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "size": "wide", "type": "image", "caption": [ { "text": "Exposure to rising Chinese imports and changes in employment across local labor markets in the US (1999-2007) \u2013 Autor, Dorn, and Hanson (2013)", "spanType": "span-simple-text" } ], "filename": "Autor-et-al-Fig-2b-01.png", "hasOutline": false, "parseErrors": [] }, { "type": "text", "value": [ { "text": "This result is important because it shows that the labor market adjustments were large. Many workers and communities were affected over a long period of time.", "spanType": "span-simple-text" }, { "url": "#note-20", "children": [ { "children": [ { "text": "20", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "But it's also important to keep in mind that Autor and colleagues are only giving us a partial perspective on the total effect of trade on employment. In particular, comparing changes in employment at the regional level misses the fact that firms operate in multiple regions and industries at the same time. Indeed, Ildik\u00f3 Magyari found evidence suggesting the Chinese trade shock provided incentives for US firms to diversify and reorganize production.", "spanType": "span-simple-text" }, { "url": "#note-21", "children": [ { "children": [ { "text": "21", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "So companies that outsourced jobs to China often ended up closing some lines of business, but at the same time expanded other lines elsewhere in the US. This means that job losses in some regions subsidized new jobs in other parts of the country.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "On the whole, Magyari finds that although Chinese imports may have reduced employment within some establishments, these losses were more than offset by gains in employment within the same firms in other places. This is no consolation to people who lost their jobs. But it is necessary to add this perspective to the simplistic story of \"trade with China is bad for US workers\".", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Evidence from the expansion of trade in India and the impact on poverty reductions", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Another important paper in this field is Topalova (2010): \"Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India\".", "spanType": "span-simple-text" }, { "url": "#note-22", "children": [ { "children": [ { "text": "22", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In this paper, Topalova examines the impact of trade liberalization on poverty across different regions in India, using the sudden and extensive change in India's trade policy in 1991. She finds that rural regions that were more exposed to liberalization experienced a slower decline in poverty and lower consumption growth.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Analyzing the mechanisms underlying this effect, Topalova finds that liberalization had a stronger negative impact among the least geographically mobile at the bottom of the income distribution and in places where labor laws deterred workers from reallocating across sectors.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The evidence from India shows that (i) discussions that only look at \"winners\" in poor countries and \"losers\" in rich countries miss the point that the gains from trade are unequally distributed within both sets of countries; and (ii) context-specific factors, like worker mobility across sectors and geographic regions, are crucial to understand the impact of trade on incomes.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Evidence from other studies", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "list", "items": [ { "type": "text", "value": [ { "text": "Donaldson (2018) uses archival data from colonial India to estimate the impact of India\u2019s vast railroad network. He finds railroads increased trade, and in doing so they increased real incomes (and reduced income volatility).", "spanType": "span-simple-text" }, { "url": "#note-23", "children": [ { "children": [ { "text": "23", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Porto (2006) looks at the distributional effects of ", "spanType": "span-simple-text" }, { "url": "https://en.wikipedia.org/wiki/Mercosur", "children": [ { "text": "Mercosur", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " on Argentine families, and finds this regional trade agreement led to benefits across the entire income distribution. He finds the effect was progressive: poor households gained more than middle-income households because prior to the reform, trade protection benefitted the rich disproportionately.", "spanType": "span-simple-text" }, { "url": "#note-24", "children": [ { "children": [ { "text": "24", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Trefler (2004) looks at the Canada-US Free Trade Agreement and finds there was a group who bore \"adjustment costs\" (displaced workers and struggling plants) and a group who enjoyed \"long-run gains\" (consumers and efficient plants). ", "spanType": "span-simple-text" }, { "url": "#note-25", "children": [ { "children": [ { "text": "25", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] } ], "parseErrors": [] }, { "text": [ { "text": "The link between trade and the cost of living", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The fact that trade negatively affects labor market opportunities for specific groups of people does not necessarily imply that trade has a negative aggregate effect on household welfare. This is because, while trade affects wages and employment, it also affects the prices of consumption goods. So households are affected both as consumers and as wage earners.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Most studies focus on the earnings channel and try to approximate the impact of trade on welfare by looking at how much wages can buy, using as a reference the changing prices of a fixed basket of goods.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This approach is problematic because it fails to consider welfare gains from increased product variety, and obscures complicated distributional issues such as the fact that poor and rich individuals consume different baskets so they benefit differently from changes in relative prices.", "spanType": "span-simple-text" }, { "url": "#note-26", "children": [ { "children": [ { "text": "26", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Ideally, studies looking at the impact of trade on household welfare should rely on fine-grained data on prices, consumption, and earnings. This is the approach followed in Atkin, Faber, and Gonzalez-Navarro (2018): \"Retail globalization and household welfare: Evidence from Mexico\".", "spanType": "span-simple-text" }, { "url": "#note-27", "children": [ { "children": [ { "text": "27", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Atkin and coauthors use a uniquely rich dataset from Mexico, and find that the arrival of global retail chains led to reductions in the incomes of traditional retail sector workers, but had little impact on average municipality-level incomes or employment; and led to lower costs of living for both rich and poor households.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The chart here shows the estimated distribution of total welfare gains across the household income distribution (the light-gray lines correspond to confidence intervals). These are proportional gains expressed as a percent of initial household income.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As we can see, there is a net positive welfare effect across all income groups; but these improvements in welfare are regressive, in the sense that richer households gain proportionally more (about 7.5 percent gain compared to 5 percent).", "spanType": "span-simple-text" }, { "url": "#note-28", "children": [ { "children": [ { "text": "28", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Evidence from other countries confirms this is not an isolated case \u2013 the expenditure channel really seems to be an important and understudied source of household welfare. Giuseppe Berlingieri, Holger Breinlich, Swati Dhingra, for example, investigated the consumer benefits from trade agreements implemented by the EU between 1993 and 2013; and they found that these trade agreements increased the quality of available products, which translated into a cumulative reduction in consumer prices equivalent to savings of \u20ac24 billion per year for EU consumers.", "spanType": "span-simple-text" }, { "url": "#note-29", "children": [ { "children": [ { "text": "29", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "size": "wide", "type": "image", "caption": [ { "text": "Distribution of total household welfare gains from the arrival of foreign retail chains in Mexico \u2013 Atkin, Faber, and Gonzalez-Navarro (2018)", "spanType": "span-simple-text" } ], "filename": "Atkin-et-al-2018-lower-opacity.png", "hasOutline": false, "parseErrors": [] }, { "text": [ { "text": "Implications of trade\u2019s distributional effects", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The available evidence shows that, for some groups of people, trade has a negative effect on wages and employment opportunities; at the same time, it has a large positive effect via lower consumer prices and increased product availability.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Two points are worth emphasizing.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "For some households, the net effect is positive. But for some households that's not the case. In particular, workers who lose their jobs can be affected for extended periods of time, so the positive effect via lower prices is not enough to compensate them for the reduction in earnings.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "On the whole, if we aggregate changes in welfare across households, the net effect is usually positive. But this is hardly a consolation for the worse off.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "This highlights a complex reality: There are ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/trade-and-econ-growth", "children": [ { "text": "aggregate gains from trade", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", but there are also real distributional concerns. Even if ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/trade-and-income-inequality", "children": [ { "text": "trade is not a major driver of income inequalities", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", it's important to keep in mind that public policies, such as unemployment benefits and other safety-net programs, can and should help redistribute the gains from trade.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Explaining trade patterns: Theory and Evidence", "spanType": "span-simple-text" } ], "type": "heading", "level": 1, "parseErrors": [] }, { "text": [ { "text": "Comparative advantage", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "text": [ { "text": "Theory: What is 'comparative advantage' and why does it matter to understand trade?", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "In economic theory, the 'economic cost' \u2013 or the 'opportunity cost' \u2013 of producing a good is the value of everything you need to give up in order to produce that good.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Economic costs include physical inputs (the value of the stuff you use to produce the good), plus forgone opportunities (when you allocate scarce resources to a task, you give up alternative uses of those resources).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "A country or a person is said to have a 'comparative advantage' if it can produce something at a lower opportunity cost than its trade partners.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The forgone opportunities of production are key to understanding this concept. It is precisely this that distinguishes absolute advantage from comparative advantage.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "To see the difference between comparative and absolute advantage, consider a commercial aviation pilot and a baker. Suppose the pilot is an excellent chef, and she can bake just as well, or even better than the baker. In this case, the pilot has an absolute advantage in both tasks. Yet the baker probably has a comparative advantage in baking, because the opportunity cost of baking is much higher for the pilot.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The freely available economics textbook ", "spanType": "span-simple-text" }, { "url": "https://core-econ.org/the-economy/book/text/18.html", "children": [ { "text": "The Economy: Economics for a Changing World", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " explains this as follows: ", "spanType": "span-simple-text" }, { "children": [ { "text": "\"A person or country has comparative advantage in the production of a particular good, if the cost of producing an additional unit of that good relative to the cost of producing another good is lower than another person or country\u2019s cost to produce the same two goods.\"", "spanType": "span-simple-text" } ], "spanType": "span-italic" } ], "parseErrors": [] }, { "type": "text", "value": [], "parseErrors": [] }, { "type": "text", "value": [ { "text": "At the individual level, comparative advantage explains why you might want to delegate tasks to someone else, even if you can do those tasks better and faster than them. This may sound counterintuitive, but it is not: If you are good at many things, it means that investing time in one task has a high opportunity cost, because you are not doing the other amazing things you could be doing with your time and resources. So, at least from an efficiency point of view, you should specialize on what you are best at, and delegate the rest.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The same logic applies to countries. Broadly speaking, the principle of comparative advantage postulates that all nations can gain from trade if each specializes in producing what they are relatively more efficient at producing, and imports the rest: \u201cdo what you do best, import the rest\u201d.", "spanType": "span-simple-text" }, { "url": "#note-30", "children": [ { "children": [ { "text": "30", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In countries with a relative abundance of certain factors of production, the theory of comparative advantage predicts that they will export goods that rely heavily upon those factors: a country typically has a comparative advantage in those goods that use its abundant resources. Colombia exports bananas to Europe because it has comparatively abundant tropical weather.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Is there empirical support for comparative-advantage theories of trade?", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The empirical evidence suggests that the principle of comparative advantage does help explain trade patterns. Bernhofen and Brown (2004)", "spanType": "span-simple-text" }, { "url": "#note-31", "children": [ { "children": [ { "text": "31", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" }, { "text": ", for instance, provide evidence using the experience of Japan. Specifically, they exploit Japan\u2019s dramatic nineteenth-century move from a state of near complete isolation to wide trade openness.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The graph here shows the price changes of the key tradable goods after the opening up to trade. It presents a scatter diagram of the net exports in 1869 graphed in relation to the change in prices from 1851\u201353 to 1869. As we can see, this is consistent with the theory: after opening to trade, the relative prices of major exports such as silk increased (Japan exported what was cheap for them to produce and which was valuable abroad), while the relative price of imports such as sugar declined (they imported what was relatively more difficult for them to produce, but was cheap abroad).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "size": "wide", "type": "image", "caption": [ { "text": "Net exports and price changes for 1869, Japan \u2013 Figure 4 in Bernhofen and Brown (2014)", "spanType": "span-simple-text" }, { "url": "#note-31", "children": [ { "children": [ { "text": "31", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "filename": "Japan_BernhoffenBrown2014.png", "hasOutline": false, "parseErrors": [] }, { "text": [ { "text": "Trade diminishes with distance", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The resistance that geography imposes on trade has long been studied in the empirical economics literature \u2013 and the main conclusion is that trade intensity is strongly linked to geographic distance.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The visualization, from Eaton and Kortum (2002), graphs 'normalized import shares' against distance.", "spanType": "span-simple-text" }, { "url": "#note-32", "children": [ { "children": [ { "text": "32", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" }, { "text": " Each dot represents a country pair from a set of 19 OECD countries, and both the vertical and horizontal axes are expressed on logarithmic scales.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The 'normalized import shares' in the vertical axis provide a measure of how much each country imports from different partners (see the paper for details on how this is calculated and normalized), while the distance in the horizontal axis corresponds to the distance between central cities in each country (see the paper and references therein for details on the list of cities). As we can see, there is a strong negative relationship. Trade diminishes with distance. Through econometric modeling, the paper shows that this relationship is not just a correlation driven by other factors: their findings suggest that distance imposes a significant barrier to trade.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "size": "wide", "type": "image", "caption": [ { "text": "Import share and distance between country pairs, OECD, 1990 \u2013 Figure 1 in Eaton and Kortum (2002)", "spanType": "span-simple-text" }, { "url": "#note-32", "children": [ { "children": [ { "text": "32", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "filename": "eaton-kortum-distance-and-geography.png", "hasOutline": false, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The fact that trade diminishes with distance is also corroborated by data on trade intensity within countries. The visualization here shows, through a series of maps, the geographic distribution of French firms that export to France's neighboring countries. The colors reflect the percentage of firms that export to each specific country.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As we can see, the share of firms exporting to each of the corresponding neighbors is the largest close to the border. The authors also show in the paper that this pattern holds for the value of individual-firm exports \u2013 trade value decreases with distance to the border.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "size": "wide", "type": "image", "caption": [ { "text": "Percentage of firms which export in France, by importing country, 1992 \u2013 Figure 2 in Crozet and Koenig (2010)", "spanType": "span-simple-text" }, { "url": "#note-33", "children": [ { "children": [ { "text": "33", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "filename": "France_Trade_Borders_2010.jpg", "hasOutline": false, "parseErrors": [] }, { "text": [ { "text": "Institutions", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Conducting international trade requires both financial and non-financial institutions to support transactions. Some of these institutions are fairly obvious (e.g. law enforcement); but some are less obvious. For example, the evidence shows that producers in exporting countries often need credit in order to engage in trade.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The scatter plot, from Manova (2013), shows the correlation between levels in private credit (specifically exporters\u2019 private credit as a share of GDP) and exports (average log bilateral exports across destinations and sectors).", "spanType": "span-simple-text" }, { "url": "#note-34", "children": [ { "children": [ { "text": "34", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" }, { "text": " As can be seen, financially developed economies \u2013 those with more dynamic private credit markets \u2013 typically outperform exporters with less evolved financial institutions.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Other studies have shown that country-specific institutions, like the knowledge of foreign languages, for instance, are also important to promote foreign relative to domestic trade.", "spanType": "span-simple-text" }, { "url": "#note-35", "children": [ { "children": [ { "text": "35", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "size": "wide", "type": "image", "caption": [ { "text": "Cross-country correlation between private credit and exports \u2013 Figure 2 in Manova (2013)", "spanType": "span-simple-text" }, { "url": "#note-34", "children": [ { "children": [ { "text": "34", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "filename": "manova-bilateral-exports-final.png", "hasOutline": false, "parseErrors": [] }, { "text": [ { "text": "Increasing returns to scale", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The concept of comparative advantage predicts that if all countries had identical endowments and institutions, there would be little incentive for specialization because the opportunity cost of producing any good would be the same in every country.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "So you may wonder: why is it then the case that in the last few years, we have seen such rapid growth in intra-industry trade between rich countries?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The increase in intra-industry between rich countries seems paradoxical under the light of comparative advantage because in recent decades we have seen convergence in key factors, such as ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/global-rise-of-education", "children": [ { "text": "human capital", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", across these countries.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The solution to the paradox is actually not very complicated: Comparative advantage is one, but not the only force driving incentives to specialization and trade.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Several economists, most notably Paul Krugman, have developed theories of trade in which trade is not due to differences between countries, but instead due to \"increasing returns to scale\" \u2013 an economic term used to denote a technology in which producing extra units of a good becomes cheaper if you operate at a larger scale.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The idea is that specialization allows countries to reap greater economies of scale (i.e. to reduce production costs by focusing on producing large quantities of specific products), so trade can be a good idea even if the countries do not differ in endowments, including culture and institutions.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "These models of trade, often referred to as \u201cNew Trade Theory\u201d, are helpful in explaining why in the last few years we have seen such rapid growth in two-way exchanges of goods within industries between developed nations.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In a much-cited paper, Evenett and Keller (2002) show that both factor endowments and increasing returns help explain production and trade patterns around the world.", "spanType": "span-simple-text" }, { "url": "#note-36", "children": [ { "children": [ { "text": "36", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "You can learn more about New Trade Theory, and the empirical support behind it, in ", "spanType": "span-simple-text" }, { "url": "https://www.nobelprize.org/uploads/2018/06/krugman_lecture.pdf", "children": [ { "text": "Paul Krugman's Nobel lecture", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Measurement and data quality", "spanType": "span-simple-text" } ], "type": "heading", "level": 1, "parseErrors": [] }, { "type": "text", "value": [ { "text": "There are dozens of official sources of data on international trade, and if you compare these different sources, you will find that they do not agree with one another. Even if you focus on what seems to be the same indicator for the same year in the same country, discrepancies are large.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Such differences between sources can also be found in rich countries where statistical agencies tend to follow international reporting guidelines more closely.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "There are also large bilateral discrepancies within sources: the value of goods that country A exports to country B can be more than the value of goods that country B imports from country A.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Here we explain how international trade data is collected and processed, and why there are such large discrepancies.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "What data is available?", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "The data hubs from several large international organizations publish and maintain extensive cross-country datasets on international trade. Here's a list of the most important ones:", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "list", "items": [ { "type": "text", "value": [ { "url": "https://data.worldbank.org/topic/trade", "children": [ { "text": "World Bank Open Data", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] }, { "type": "text", "value": [ { "url": "http://data.imf.org/?sk=9D6028D4-F14A-464C-A2F2-59B2CD424B85&sId=1515614720959", "children": [ { "text": "IMF Data", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] }, { "type": "text", "value": [ { "url": "https://stats.wto.org/", "children": [ { "text": "WTO Statistics", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] }, { "type": "text", "value": [ { "url": "https://comtrade.un.org", "children": [ { "text": "UN Comtrade", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] }, { "type": "text", "value": [ { "url": "https://wits.worldbank.org/Default.aspx?lang=en", "children": [ { "text": "UNCTAD World Integrated Trade Solutions", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] }, { "type": "text", "value": [ { "url": "https://ec.europa.eu/eurostat/web/international-trade-in-goods/information-data#Aggregated%20data", "children": [ { "text": "Eurostat", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] }, { "type": "text", "value": [ { "url": "https://stats.oecd.org/Index.aspx?DataSetCode=BIMTS_CPA", "children": [ { "text": "OECD.Stat", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In addition to these sources, there are also many other academic projects that publish data on international trade. These projects tend to rely on data from one or more of the sources above, and they typically process and merge series in order to improve coverage and consistency. Three important sources are:", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "list", "items": [ { "type": "text", "value": [ { "text": "The ", "spanType": "span-simple-text" }, { "url": "http://correlatesofwar.org", "children": [ { "text": "Correlates of War Project", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" }, { "url": "#note-37", "children": [ { "children": [ { "text": "37", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The ", "spanType": "span-simple-text" }, { "url": "http://www.princeton.edu/~reddings/data/NBER/NBER-world-trade.html", "children": [ { "text": "NBER-United Nations Trade Dataset Project", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The ", "spanType": "span-simple-text" }, { "url": "http://www.cepii.fr/cepii/en/bdd_modele/presentation.asp?id=32", "children": [ { "text": "CEPII Bilateral Trade and Gravity Data Project", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" }, { "url": "#note-38", "children": [ { "children": [ { "text": "38", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] } ], "parseErrors": [] }, { "text": [ { "text": "How large are the discrepancies between sources?", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "In the visualization here, we compare the data published by several of the sources listed above, country by country, from 1955 to today.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "For each country, we exclude trade in services, and we focus only on estimates of the total value of exported goods, expressed as shares of GDP.", "spanType": "span-simple-text" }, { "url": "#note-39", "children": [ { "children": [ { "text": "39", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "As this chart clearly shows, different data sources often tell very different stories. If you change the country or region shown you will see that this is true, to varying degrees, across all countries and years.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/various-sources-of-the-total-value-of-exports-as-a-share-of-gdp?country=CHN", "type": "chart", "parseErrors": [] }, { "type": "text", "value": [ { "text": "Constructing this chart was demanding. It required downloading trade data from many different sources, collecting the relevant series, and then standardizing them so that the units of measure and the geographical territories were consistent.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "All series, except the two long-run series from CEPII and NBER-UN, were produced from data published by the sources in current US dollars and then converted to GDP shares using a unique source (World Bank).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "So, if all series are in the same units (share of national GDP) and they measure the same thing (value of goods exported from one country to the rest of the world), what explains the differences?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Let's dig deeper to understand what's going on.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "Why doesn't the data add up?", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "text": [ { "text": "Differences in guidelines used by countries to record and report trade data", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Broadly speaking, there are two main approaches used to estimate international merchandise trade:", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "list", "items": [ { "type": "text", "value": [ { "text": "The first approach relies on estimating trade from ", "spanType": "span-simple-text" }, { "children": [ { "text": "customs records", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": ", often complementing or correcting figures with data from enterprise surveys and administrative records associated with taxation. The main manual providing guidelines for this approach is the ", "spanType": "span-simple-text" }, { "url": "https://unstats.un.org/unsd/trade/eg-imts/IMTS%202010%20(English).pdf", "children": [ { "text": "International Merchandise Trade Statistics Manual", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " (IMTS).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The second approach relies on estimating trade from ", "spanType": "span-simple-text" }, { "children": [ { "text": "macroeconomic data", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": ", typically ", "spanType": "span-simple-text" }, { "children": [ { "text": "National Accounts", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": ". The main manual providing guidelines for this approach is the ", "spanType": "span-simple-text" }, { "url": "https://www.imf.org/external/pubs/ft/bop/2007/bopman6.htm", "children": [ { "text": "Balance of Payments and International Investment Position Manual", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " (BPM6), which was drafted in parallel with the 2008 ", "spanType": "span-simple-text" }, { "url": "https://unstats.un.org/unsd/nationalaccount/docs/sna2008.pdf", "children": [ { "text": "System of National Accounts of the United Nations", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " (SNA 2008). The idea behind this approach is to record changes in economic ownership.", "spanType": "span-simple-text" }, { "url": "#note-40", "children": [ { "children": [ { "text": "40", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Under these two approaches, it is common to distinguish between 'traded merchandise' and 'traded goods'. The distinction is often made because goods simply being transported through a country (i.e., goods in transit) are not considered to change a country's stock of material resources and are hence often excluded from the more narrow concept of 'merchandise trade'.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Also, adding to the complexity, countries often rely on measurement protocols developed alongside approaches and concepts that are not perfectly compatible to begin with. In Europe, for example, countries use the ", "spanType": "span-simple-text" }, { "url": "http://ec.europa.eu/eurostat/web/products-manuals-and-guidelines/-/KS-02-17-333", "children": [ { "text": "'Compilers guide on European statistics on international trade in goods'.", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] }, { "text": [ { "text": "Measurement error and other inconsistencies", "spanType": "span-simple-text" } ], "type": "heading", "level": 3, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Even when two sources rely on the same broad accounting approach, discrepancies arise because countries fail to adhere perfectly to the protocols.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "In theory, for example, the exports of country A to country B should mirror the imports of country B from country A. But in practice this is rarely the case because of differences in valuation. According to the BPM6, imports, and exports should be recorded in the balance of payments accounts on a '", "spanType": "span-simple-text" }, { "children": [ { "text": "free on board", "spanType": "span-simple-text" } ], "spanType": "span-italic" }, { "text": " (FOB) basis', which means using prices that include all charges up to placing the goods on board a ship at the port of departure. Yet many countries stick to FOB values only for exports, and use CIF values for imports (CIF stands for 'Cost, Insurance and Freight', and includes the costs of transportation).", "spanType": "span-simple-text" }, { "url": "#note-41", "children": [ { "children": [ { "text": "41", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The chart here gives you an idea of how large import-export asymmetries are. Shown are the differences between the value of goods that each country reports exporting to the US, and the value of goods that the US reports importing from the same countries. For example, for China, the figure in the chart corresponds to the \u201cValue of merchandise imports in the US from China\u201d minus the \u201cValue of merchandise exports from China to the US\u201d.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The differences in the chart here, which are both positive and negative, suggest that there is more going on than differences in FOB vs. CIF values. If all asymmetries were coming from FOB-CIF differences, then we should only see positive values in the chart (recall that, unlike FOB values, CIF values include the cost of transportation, so CIF values are larger).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "url": "https://ourworldindata.org/grapher/difference-in-the-value-of-goods-exported-to-and-imported-by-the-us", "type": "chart", "parseErrors": [] }, { "type": "text", "value": [ { "text": "What else may be going on here?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Another common source of measurement error relates to the inconsistent attribution of trade partners. An example is failure to follow the guidelines on how to treat goods passing through intermediary countries for processing or merchanting purposes. As global production chains become more complex, countries find it increasingly difficult to unambiguously establish the origin and final destination of merchandise, even when rules are established in the manuals.", "spanType": "span-simple-text" }, { "url": "#note-42", "children": [ { "children": [ { "text": "42", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "And there are still more potential sources of discrepancies. For example differences in customs and tax regimes, and differences between \"general\" and \"special\" trade systems (i.e. differences between statistical territories and actual country borders, which do not often coincide because of things like 'custom free zones').", "spanType": "span-simple-text" }, { "url": "#note-43", "children": [ { "children": [ { "text": "43", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Even when two sources have identical trade estimates, inconsistencies in published data can arise from differences in exchange rates. If a dataset reports cross-country trade data in US dollars, estimates will vary depending on the exchange rates used. Different exchange rates will lead to conflicting estimates, even if figures in local currency units are consistent.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "text": [ { "text": "A checklist for comparing sources", "spanType": "span-simple-text" } ], "type": "heading", "level": 2, "parseErrors": [] }, { "type": "text", "value": [ { "text": "Asymmetries in international trade statistics are large and arise for a variety of reasons. These include conceptual inconsistencies across measurement standards and inconsistencies in the way countries apply agreed-upon protocols. Here's a checklist of issues to keep in mind when comparing sources.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "list", "items": [ { "type": "text", "value": [ { "text": "Differences in underlying records: is trade measured from National Accounts data rather than directly from custom or tax records?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Differences in import and export valuations: are transactions valued at FOB or CIF prices?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Inconsistent attribution of trade partners: how is the origin and final destination of merchandise established?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Difference between 'goods' and 'merchandise': how are re-importing, re-exporting, and intermediary merchanting transactions recorded?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Exchange rates: how are values converted from local currency units to the currency that allows international comparisons (most often the US-$)?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Differences between 'general' and 'special' trade system: how is trade recorded for custom-free zones?", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Other issues: Time of recording, confidentiality policies, product classification, deliberate mis-invoicing for illicit purposes.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Many organizations producing trade data have long recognized these factors. Indeed, international organizations often incorporate corrections in an attempt to improve data quality.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The OECD's ", "spanType": "span-simple-text" }, { "url": "https://stats.oecd.org/Index.aspx?DataSetCode=BIMTS_CPA", "children": [ { "text": "Balanced International Merchandise Trade Statistics", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", for example, uses its own approach to correct and reconcile international merchandise trade statistics.", "spanType": "span-simple-text" }, { "url": "#note-44", "children": [ { "children": [ { "text": "44", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "The corrections applied in the OECD's 'balanced' series make this the best source for cross-country comparisons. However, this dataset has low coverage across countries, and it only goes back to 2011. This is an important obstacle since the complex adjustments introduced by the OECD imply we can't easily improve coverage by appending data from other sources. At Our World in Data we have chosen to rely on CEPII as the main source for exploring long-run changes in international trade, but we also rely on World Bank and OECD data for up-to-date cross-country comparisons.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "There are two key lessons from all of this. The first lesson is that, for most users of trade data out there, there is no obvious way of choosing between sources. And the second lesson is that, because of statistical glitches, researchers and policymakers should always take analyses of trade data with a pinch of salt. For example, in a recent ", "spanType": "span-simple-text" }, { "url": "http://www.gfintegrity.org/report/illicit-financial-flows-from-developing-countries-2004-2013/", "children": [ { "text": "high-profile report", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", researchers attributed mismatches in bilateral trade data to illicit financial flows through trade mis-invoicing (or trade-based money laundering). As we show here, this interpretation of the data is not appropriate, since mismatches in the data can, and often do arise from measurement inconsistencies rather than malfeasance.", "spanType": "span-simple-text" }, { "url": "#note-45", "children": [ { "children": [ { "text": "45", "spanType": "span-simple-text" } ], "spanType": "span-superscript" } ], "spanType": "span-ref" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Hopefully, the discussion and checklist above can help researchers better interpret and choose between conflicting data sources.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "top": [], "type": "all-charts", "heading": "Interactive charts on Trade and Globalization", "parseErrors": [] } ], "refs": { "errors": [], "definitions": { "0c6f0c95b79f4a74d3c1f4d57eeda2d057273093": { "id": "0c6f0c95b79f4a74d3c1f4d57eeda2d057273093", "index": 11, "content": [ { "type": "text", "value": [ { "text": "The textbook ", "spanType": "span-simple-text" }, { "url": "https://core-econ.org/the-economy/book/text/18.html", "children": [ { "text": "The Economy: Economics for a Changing World", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " explains this in more detail.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "1ac0445bad4eaf58109902761d70e9b26a066020": { "id": "1ac0445bad4eaf58109902761d70e9b26a066020", "index": 42, "content": [ { "type": "text", "value": [ { "text": "For more details about general and special trade see the ", "spanType": "span-simple-text" }, { "url": "https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Glossary:General_and_special_trade_systems", "children": [ { "text": "Eurostat glossary", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "1d21eeb1db3efcc7df1568d44aaa90a7fdd4de2c": { "id": "1d21eeb1db3efcc7df1568d44aaa90a7fdd4de2c", "index": 13, "content": [ { "type": "text", "value": [ { "text": "Alcal\u00e1, F., & Ciccone, A. (2004). ", "spanType": "span-simple-text" }, { "url": "https://www.jstor.org/stable/pdf/25098695.pdf", "children": [ { "text": "Trade and productivity", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". The Quarterly Journal of Economics, 119(2), 613-646.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "1e0a4ad38b370016865ff79cc05866ce78b82775": { "id": "1e0a4ad38b370016865ff79cc05866ce78b82775", "index": 27, "content": [ { "type": "text", "value": [ { "text": "In the paper, Atkin and coauthors explore the reasons for this and find that the regressive nature of the distribution is mainly due to richer households placing higher weight on the product variety and shopping amenities on offer at these new foreign stores.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "1eb35a0fa6466cb6bb88e502ef19502fb290b32f": { "id": "1eb35a0fa6466cb6bb88e502ef19502fb290b32f", "index": 22, "content": [ { "type": "text", "value": [ { "text": "Donaldson, D. (2018). ", "spanType": "span-simple-text" }, { "url": "http://eprints.lse.ac.uk/38368/1/ARCWP41-Donaldson.pdf", "children": [ { "text": "Railroads of the Raj: Estimating the impact of transportation infrastructure", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". American Economic Review, 108(4-5), 899-934.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "2892e54eefcc7797729b5f7d3c3d079a64639764": { "id": "2892e54eefcc7797729b5f7d3c3d079a64639764", "index": 33, "content": [ { "type": "text", "value": [ { "text": "Manova, Kalina. \"Credit constraints, heterogeneous firms, and international trade.\" The Review of Economic Studies 80.2 (2013): 711-744.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "2f3312dd92bfc82142ba7ebe3bdf80a2b06016e5": { "id": "2f3312dd92bfc82142ba7ebe3bdf80a2b06016e5", "index": 24, "content": [ { "type": "text", "value": [ { "text": "Trefler, D. (2004). ", "spanType": "span-simple-text" }, { "url": "https://www.aeaweb.org/articles?id=10.1257/0002828042002633", "children": [ { "text": "The long and short of the Canada-US free trade agreement", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". American Economic Review, 94(4), 870-895.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "3c542c5da06ad021fa8dfa4aaaa623d6835cba35": { "id": "3c542c5da06ad021fa8dfa4aaaa623d6835cba35", "index": 9, "content": [ { "type": "text", "value": [ { "text": "We also have the same data, but as ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/share-of-world-merchandise-trade-by-type-of-trade", "children": [ { "text": "a stacked-area chart", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "3db283d0effc6f9098c63f7f39bbcb9bf18bc9a0": { "id": "3db283d0effc6f9098c63f7f39bbcb9bf18bc9a0", "index": 26, "content": [ { "type": "text", "value": [ { "text": "Atkin, David, Benjamin Faber, and Marco Gonzalez-Navarro. \"Retail globalization and household welfare: Evidence from Mexico.\" Journal of Political Economy 126.1 (2018): 1-73.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "4007ed6c67d1fd2298015dbcce3bb80343930bf6": { "id": "4007ed6c67d1fd2298015dbcce3bb80343930bf6", "index": 12, "content": [ { "type": "text", "value": [ { "text": "Frankel, J. A., & Romer, D. H. (1999). ", "spanType": "span-simple-text" }, { "url": "https://www.aeaweb.org/articles?id=10.1257/aer.89.3.379", "children": [ { "text": "Does trade cause growth?", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " American Economic Review, 89(3), 379-399.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "47e712ad82926594085de7b1fdfed0aaa9e91340": { "id": "47e712ad82926594085de7b1fdfed0aaa9e91340", "index": 23, "content": [ { "type": "text", "value": [ { "text": "Porto, G (2006). Using Survey Data to Assess the Distributional Effects of Trade Policy. Journal of International Economics 70 (2006) 140\u2013160.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "4bf8a075397711359aacd767771bbf8cdf4bbc61": { "id": "4bf8a075397711359aacd767771bbf8cdf4bbc61", "index": 41, "content": [ { "type": "text", "value": [ { "text": "Precisely because of the difficulty that arises when trying to establish the origin and final destination of merchandise, some sources distinguish between national and dyadic (i.e. 'directed') trade estimates.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "52d90237271cc6f46ee1abbb2e948e59d0772af4": { "id": "52d90237271cc6f46ee1abbb2e948e59d0772af4", "index": 5, "content": [ { "type": "text", "value": [ { "text": "We also have the", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/merchandise-imports-gdp-cepii", "children": [ { "text": " same chart but showing imports", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "65c4f99814a493fae8c5d96dc0570f4c0929f1c9": { "id": "65c4f99814a493fae8c5d96dc0570f4c0929f1c9", "index": 7, "content": [ { "type": "text", "value": [ { "url": "https://ourworldindata.org/grapher/service-exports-and-imports-gdp", "children": [ { "text": "This interactive chart", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " shows trade in services as a share of GDP across countries and regions.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "69393bb344b8170cefafe286c6fe2915068bc5f5": { "id": "69393bb344b8170cefafe286c6fe2915068bc5f5", "index": 1, "content": [ { "type": "text", "value": [ { "text": "Leonor Freire Costa, Nuno Palma, and Jaime Reis (2015) \u2013 The great escape? The contribution of the empire to Portugal's economic growth, 1500\u20131800 Leonor Freire Costa Nuno Palma Jaime Reis European Review of Economic History, Volume 19, Issue 1, 1 February 2015, Pages 1\u201322, https://doi.org/10.1093/ereh/heu019", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "75aaa3b827fde7e760780df5e4a6a8c321a5c90f": { "id": "75aaa3b827fde7e760780df5e4a6a8c321a5c90f", "index": 31, "content": [ { "type": "text", "value": [ { "text": "Eaton, J., & Kortum, S. (2002). Technology, geography, and trade. Econometrica, 70(5), 1741-1779.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "76600fbd7e564654381befaa7b6ef4afe38c6194": { "id": "76600fbd7e564654381befaa7b6ef4afe38c6194", "index": 0, "content": [ { "type": "text", "value": [ { "text": "The openness index, when calculated for the world as a whole, includes double-counting of transactions: When country A sells goods to country B, this shows up in the data both as an import (B imports from A) and as an export (A sells to B).", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Indeed, if you compare the chart showing the ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/globalization-over-5-centuries-km", "children": [ { "text": "global trade openness index", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " and the chart showing ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=OWID_WRL", "children": [ { "text": "global merchandise exports as a share of GDP", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", you find that the former is almost twice as large as the latter.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "Why is the global openness index not exactly twice the value reported in the chart plotting global merchandise exports? There a three reasons.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "First, the global openness index uses different sources. Second, the global openness index includes trade in goods and services, while merchandise exports include goods but not services. And third, the amount that country A reports exporting to country B does not usually match the amount that B reports importing from A.", "spanType": "span-simple-text" } ], "parseErrors": [] }, { "type": "text", "value": [ { "text": "We explore this in more detail in ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/trade-and-globalization#measurement-and-data-quality", "children": [ { "text": "our measurement section", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "7ddd057c6b9a182806350b70f1d48e492e66024f": { "id": "7ddd057c6b9a182806350b70f1d48e492e66024f", "index": 2, "content": [ { "type": "text", "value": [ { "text": "Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "8077162ab76808d15fe834a871cf1b79a251bd64": { "id": "8077162ab76808d15fe834a871cf1b79a251bd64", "index": 37, "content": [ { "type": "text", "value": [ { "text": "Further information on CEPII's methodology can be found in ", "spanType": "span-simple-text" }, { "url": "http://www.cepii.fr/PDF_PUB/wp/2016/wp2016-14.pdf", "children": [ { "text": "their working paper", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "914132290c63413dd642c4d362cfd9aa5d988858": { "id": "914132290c63413dd642c4d362cfd9aa5d988858", "index": 29, "content": [ { "type": "text", "value": [ { "children": [ { "text": "Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam: \"Name me one proposition in all of the social sciences which is both true and non-trivial.\" It was several years later than he thought of the correct response: comparative advantage. \"That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.\"", "spanType": "span-simple-text" } ], "spanType": "span-italic" } ], "parseErrors": [] }, { "type": "text", "value": [], "parseErrors": [] }, { "type": "text", "value": [ { "text": "(NB. This is an excerpt from https://www.wto.org/english/res_e/reser_e/cadv_e.htm)", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "96e4ab4b13e7e45dd280185718a11410119f00f5": { "id": "96e4ab4b13e7e45dd280185718a11410119f00f5", "index": 32, "content": [ { "type": "text", "value": [ { "text": "Crozet, M., & Koenig, P. (2010). Structural Gravity Equations with Intensive and Extensive Margins. The Canadian Journal of Economics / Revue Canadienne D'Economique, 43(1), 41-62. Retrieved from http://www.jstor.org/stable/40389555", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "9bffeda9d923bb029127f74cdfd4ea487ff58832": { "id": "9bffeda9d923bb029127f74cdfd4ea487ff58832", "index": 19, "content": [ { "type": "text", "value": [ { "text": "It's important to mention here that the economist Jonathan Rothwell wrote a ", "spanType": "span-simple-text" }, { "url": "https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2920188", "children": [ { "text": "paper", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " suggesting these findings are the result of a statistical illusion. Rothwell's critique received some ", "spanType": "span-simple-text" }, { "url": "https://www.wsj.com/articles/the-truth-about-the-china-trade-shock-1491168339", "children": [ { "text": "attention from the media", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", but Autor and coauthors provided a ", "spanType": "span-simple-text" }, { "url": "https://chinashock.info/wp-content/uploads/2016/06/ADH-Response-to-Rothwell.pdf", "children": [ { "text": "reply", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", which I think successfully refutes this claim.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "9cc41b6cf6e4ca45b28877557c8e1af1caff5c2b": { "id": "9cc41b6cf6e4ca45b28877557c8e1af1caff5c2b", "index": 15, "content": [ { "type": "text", "value": [ { "text": "Pavcnik, N. (2002). ", "spanType": "span-simple-text" }, { "url": "https://www.jstor.org/stable/pdf/2695960.pdf", "children": [ { "text": "Trade liberalization, exit, and productivity improvements: Evidence from Chilean plants", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". The Review of Economic Studies, 69(1), 245-276.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "9d7525bf752d0b59404230e0ba68895525c634c7": { "id": "9d7525bf752d0b59404230e0ba68895525c634c7", "index": 14, "content": [ { "type": "text", "value": [ { "text": "There are many papers that try to answer this specific question with macro data. For an overview of papers and methods see: Durlauf, S. N., Johnson, P. A., & Temple, J. R. (2005). Growth econometrics. Handbook of economic growth, 1, 555-677.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "9f1841e1fd93ed993bcfc7d23755d26f352f6dae": { "id": "9f1841e1fd93ed993bcfc7d23755d26f352f6dae", "index": 6, "content": [ { "type": "text", "value": [ { "text": "We also have the ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/imports-of-goods-and-services-constant-2010-us", "children": [ { "text": "same chart, but showing imports", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "b543c38f2ae38cf5226bb346f6e5c974d41230c5": { "id": "b543c38f2ae38cf5226bb346f6e5c974d41230c5", "index": 4, "content": [ { "type": "text", "value": [ { "text": "Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press. The graph depicts the \u201cevolution of three indicators measuring integration in commodity, labor, and capital markets over the long run. Commodity market integration is measured by computing the ratio of exports to GDP. Labor market integration is measured by dividing the migratory turnover by population. Financial integration is measured using Feldstein\u2013Horioka estimators of current account disconnectedness.\u201d", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "c150ba7c7a005562f9e9dc70a86d273eb844d703": { "id": "c150ba7c7a005562f9e9dc70a86d273eb844d703", "index": 3, "content": [ { "type": "text", "value": [ { "text": "Integration in the goods markets is measured here through the 'trade openness index', which is defined by the sum of exports and imports as a share of GDP. ", "spanType": "span-simple-text" }, { "url": "https://ourworldindata.org/grapher/trade-openness-in-europe?country=FRA+DEU+ITA+ESP+SWE+GBR", "children": [ { "text": "In our interactive chart", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " you can explore trends in trade openness over this period for a selection of European countries.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "c4030df18a7e84507ace48be9fc816f8ccbc62ee": { "id": "c4030df18a7e84507ace48be9fc816f8ccbc62ee", "index": 35, "content": [ { "type": "text", "value": [ { "text": "Evenett, S. J., & Keller, W. (2002). ", "spanType": "span-simple-text" }, { "url": "https://www.researchgate.net/publication/4729534_On_Theories_Explaining_the_Success_of_the_Gravity_Equation", "children": [ { "text": "On theories explaining the success of the gravity equation", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". Journal of Political Economy, 110(2), 281-316.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "d24089251472716a3f50de372989e0ec009ac73e": { "id": "d24089251472716a3f50de372989e0ec009ac73e", "index": 21, "content": [ { "type": "text", "value": [ { "text": "Topalova, P. (2010). ", "spanType": "span-simple-text" }, { "url": "https://www.aeaweb.org/articles?id=10.1257/app.2.4.1", "children": [ { "text": "Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". American Economic Journal: Applied Economics, 2(4), 1-41.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "d3fa0bb68da20d625a567567171202ad6e12c512": { "id": "d3fa0bb68da20d625a567567171202ad6e12c512", "index": 10, "content": [ { "type": "text", "value": [ { "text": "There are different ways of capturing this correlation. I focus here on all countries with data over the period 1945-2014. You can find a similar chart using different data sources and time periods in Ventura, J. (2005). A global view of economic growth. Handbook of economic growth, 1, 1419-1497. Online ", "spanType": "span-simple-text" }, { "url": "https://repositori.upf.edu/bitstream/handle/10230/1248/849.pdf?sequence=1", "children": [ { "text": "here", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "d48543993e3185cf5ae81bc81779c339e96b7d2d": { "id": "d48543993e3185cf5ae81bc81779c339e96b7d2d", "index": 40, "content": [ { "type": "text", "value": [ { "text": "This issue is actually also a source of disagreement between National Accounts data and customs data. You can read more about it in this report: ", "spanType": "span-simple-text" }, { "url": "https://web.archive.org/web/20221115005121/https://www.imf.org/external/pubs/ft/bop/2012/12-30.pdf", "children": [ { "text": "Harrison, Anne (2013) FOB/CIF Issue in Merchandise Trade/Transport of Goods in BPM6 and the 2008 SNA, Twenty-Fifth Meeting of the IMF Committee on Balance of Payments Statistics, Washington, D.C", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "d85bdbbaa3b805a965d3eac160b7cc09fcb76d30": { "id": "d85bdbbaa3b805a965d3eac160b7cc09fcb76d30", "index": 17, "content": [ { "type": "text", "value": [ { "text": "You can read more about these economic concepts, and the related predictions from economic theory, in Chapter 18 of the textbook ", "spanType": "span-simple-text" }, { "url": "https://core-econ.org/the-economy/book/text/18.html", "children": [ { "text": "The Economy: Economics for a Changing World", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "db335036a3a254ba8dd38b184cf33c1942e72818": { "id": "db335036a3a254ba8dd38b184cf33c1942e72818", "index": 44, "content": [ { "type": "text", "value": [ { "text": "For more details on this see Forstater, M. (2018) ", "spanType": "span-simple-text" }, { "url": "https://www.cgdev.org/publication/illicit-financial-flows-trade-misinvoicing-and-multinational-tax-avoidance", "children": [ { "text": "Illicit Financial Flows, Trade Misinvoicing, and Multinational Tax Avoidance: The Same or Different?", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ", CGD Policy Paper 123.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "ddf308fc7f17ee0efa0913851917c536c5916d96": { "id": "ddf308fc7f17ee0efa0913851917c536c5916d96", "index": 28, "content": [ { "type": "text", "value": [ { "text": "Berlingieri, G., Breinlich, H., & Dhingra, S. (2018). The Impact of Trade Agreements on Consumer Welfare\u2014Evidence from the EU Common External Trade Policy. Journal of the European Economic Association.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "e5fca460d06d7eedf009d77e28bcc0e64ec3bfa2": { "id": "e5fca460d06d7eedf009d77e28bcc0e64ec3bfa2", "index": 38, "content": [ { "type": "text", "value": [ { "text": "The chart includes series labeled by the sources as 'merchandise trade' and 'goods trade'. As we explain below, part of the asymmetries in trade data comes from the fact that, although 'merchandise' and 'goods' are equivalent in the dictionary, these two terms often measure related but different things.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "e6f9fb6ec6ee7a0cd970fb183a7ad2e2dee2c053": { "id": "e6f9fb6ec6ee7a0cd970fb183a7ad2e2dee2c053", "index": 18, "content": [ { "type": "text", "value": [ { "text": "David, H., Dorn, D., & Hanson, G. H. (2013). ", "spanType": "span-simple-text" }, { "url": "https://www.aeaweb.org/articles?id=10.1257/aer.103.6.2121", "children": [ { "text": "The China syndrome: Local labor market effects of import competition in the United States", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". American Economic Review, 103(6), 2121-68.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "e709bfa6f51748845d0b836492415ce924397143": { "id": "e709bfa6f51748845d0b836492415ce924397143", "index": 8, "content": [ { "type": "text", "value": [ { "text": "This chart was inspired by a chart from Helpman, E., Melitz, M., & Rubinstein, Y. (2007). Estimating trade flows: Trading partners and trading volumes (No. w12927). National Bureau of Economic Research.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "e834b0b3fdd4ac3bcff756498cfc2af694d6cec8": { "id": "e834b0b3fdd4ac3bcff756498cfc2af694d6cec8", "index": 34, "content": [ { "type": "text", "value": [ { "text": "Melitz, J. (2008). Language and foreign trade. European Economic Review, 52(4), 667-699.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "f12637956bbf72f83a9c7e0f7c016023dae58367": { "id": "f12637956bbf72f83a9c7e0f7c016023dae58367", "index": 43, "content": [ { "type": "text", "value": [ { "text": "The OECD approach consists of four steps, which they describe as follows: \"First, data are collected and organized, and imports are converted to FOB prices to match the valuation of exports. Secondly, data are adjusted for several specific large problems known to drive asymmetries. Presently these include \u201cmodular\u201d adjustments for unallocated and confidential trade; for exports by Hong Kong, China; for Swiss non-monetary gold; and for clear-cut cases of product misclassifications. The list of modules is expected to grow over time. In the third step, adjusted data are balanced using a \u201cSymmetry Index\u201d that weights exports and imports. As the final step, the data are also converted to Classification of Products by Activity (CPA) products to better align with National Accounts statistics, such as in national Supply-Use tables.\" You can read more about it ", "spanType": "span-simple-text" }, { "url": "https://oecdecoscope.blog/2017/12/22/statistical-insights-merchandise-trade-statistics-without-asymmetries/", "children": [ { "text": "here", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". In addition to the OECD, other sources also use corrections. The IMF's DOTS dataset, for example, uses a 6 percent rule for converting import valuations (in CIF) into export values (in FOB). More information can be found in ", "spanType": "span-simple-text" }, { "url": "https://web.archive.org/web/20220208150732/https://www.elibrary.imf.org/view/journals/001/2018/016/001.2018.issue-016-en.xml", "children": [ { "text": "the IMF's (2018) working paper on 'New Estimates for Direction of Trade Statistics'.", "spanType": "span-simple-text" } ], "spanType": "span-link" } ], "parseErrors": [] } ], "parseErrors": [] }, "f22d0dbbf5f0fcd77e6d6919396e4c18cc92c5cb": { "id": "f22d0dbbf5f0fcd77e6d6919396e4c18cc92c5cb", "index": 16, "content": [ { "type": "text", "value": [ { "text": "Bloom, N., Draca, M., & Van Reenen, J. (2016). Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity. The Review of Economic Studies, 83(1), 87-117. Available online ", "spanType": "span-simple-text" }, { "url": "https://web.archive.org/web/20170810215533/http://bfi.uchicago.edu/sites/default/files/research/Van%20Reenen_Trade%20Induced%20Technical%20Change.pdf", "children": [ { "text": "here", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "f6de5b7ea6a9825366c680b2d71fe2eda84ac38e": { "id": "f6de5b7ea6a9825366c680b2d71fe2eda84ac38e", "index": 30, "content": [ { "type": "text", "value": [ { "text": "Bernhofen, D., & Brown, J. (2004). A Direct Test of the Theory of Comparative Advantage: The Case of Japan. Journal of Political Economy, 112(1), 48-67. doi:1. Retrieved from http://www.jstor.org/stable/10.1086/379944 doi:1", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "f7e7b5ce0ac7f6995afb3455efe8d6a4c617ef74": { "id": "f7e7b5ce0ac7f6995afb3455efe8d6a4c617ef74", "index": 25, "content": [ { "type": "text", "value": [ { "text": "See: (i) Feenstra, R. C., & Weinstein, D. E. (2017). ", "spanType": "span-simple-text" }, { "url": "http://www.nber.org/papers/w15749", "children": [ { "text": "Globalization, markups, and US welfare", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". Journal of Political Economy, 125(4), 1040-1074. (ii) Fajgelbaum, P. D., & Khandelwal, A. K. (2016). ", "spanType": "span-simple-text" }, { "url": "http://www.econ.ucla.edu/pfajgelbaum/mugft_qje.pdf", "children": [ { "text": "Measuring the unequal gains from trade", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". The Quarterly Journal of Economics, 131(3), 1113-1180.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "fb048779f0a2100d1fdf2f5ff6f3f6db29231851": { "id": "fb048779f0a2100d1fdf2f5ff6f3f6db29231851", "index": 36, "content": [ { "type": "text", "value": [ { "text": "For more information on how the COW trade datasets were constructed see: (i) Barbieri, Katherine, and Omar M. G. Omar Keshk. 2016. Correlates of War Project Trade Data Set Codebook, Version 4.0. Available at ", "spanType": "span-simple-text" }, { "url": "http://correlatesofwar.org", "children": [ { "text": "http://correlatesofwar.org", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " and (ii) Barbieri, Katherine, Omar M. G. Keshk, and Brian Pollins. 2009. ", "spanType": "span-simple-text" }, { "url": "https://www.researchgate.net/publication/49518195_Trading_Data_Evaluating_Our_Assumptions_and_Coding_Rules", "children": [ { "text": "TRADING DATA: Evaluating our Assumptions and Coding Rules.", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": " Conflict Management and Peace Science, 26(5): 471\u2013491.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "fc4388eef523c3aaef74a8f8be1156ea2ae80dbd": { "id": "fc4388eef523c3aaef74a8f8be1156ea2ae80dbd", "index": 20, "content": [ { "type": "text", "value": [ { "text": "Magyari, I. (2017). ", "spanType": "span-simple-text" }, { "url": "http://www.columbia.edu/~im2348/JMP_Magyari.pdf", "children": [ { "text": "Firm Reorganization, Chinese Imports, and US Manufacturing Employment", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ". US Census Bureau, Center for Economic Studies.", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] }, "fd71cbbf3f749a164b6cc1d144efbf4ab5b89b2e": { "id": "fd71cbbf3f749a164b6cc1d144efbf4ab5b89b2e", "index": 39, "content": [ { "type": "text", "value": [ { "text": "For example, if there is no change in ownership (e.g. a firm exports goods to its factory in another country for processing, and then re-imports the processed goods) the manual says that statistical agencies should only record the net difference in value. You can find more details about this in an ", "spanType": "span-simple-text" }, { "url": "https://www.oecd.org/sdd/na/new-standards-for-compiling-national-accounts-SNA2008-OECDSB20.pdf", "children": [ { "text": "OECD Statistics Briefing", "spanType": "span-simple-text" } ], "spanType": "span-link" }, { "text": ".", "spanType": "span-simple-text" } ], "parseErrors": [] } ], "parseErrors": [] } } }, "type": "linear-topic-page", "title": "Trade and Globalization", "authors": [ "Esteban Ortiz-Ospina", "Diana Beltekian", "Max Roser" ], "excerpt": "How did international trade and globalization change over time? What do they look like today? And what are their impacts?", "dateline": "This page was first published in 2014 and last revised in April 2024.", "subtitle": "How did international trade and globalization change over time? What is the structure today? And what is its impact?", "sidebar-toc": true, "featured-image": "trade-and-globalization-thumbnail.png" }	1	2023-11-10 14:14:22	2018-10-01 13:16:00	2023-12-28 16:31:11	unlisted	ALBJ4LsGp4SIu0H1hMBgOXPX9ibpXTIO6RJp8E5ZFfYpN7ifBNqm98E52KjnwFAV0OBHLo7XBIo0k4ypPchYBw		In this topic page we analyze available data and research on international trade patterns, including the determinants and consequences of globalization over the last couple of decades. Here is an overview of the main points we cover below. Related topics: * [Is trade a major driver of income inequality?](https://ourworldindata.org/trade-and-income-inequality) – a brief discussion of the link between globalization and income inequality. * [Is globalization an engine of economic development?](https://ourworldindata.org/is-globalization-an-engine-of-economic-development) – an overview of the main arguments linking globalization and economic development. [See all interactive charts on Trade and Globalization ↓](#all-charts) --- # Trade has changed the world economy --- ## Trade has grown remarkably over the last century The integration of national economies into a global economic system has been one of the most important developments of the last century. This process of integration, often called Globalization, has materialized in a remarkable growth in trade between countries. The chart here shows the value of world exports over the period 1800-2014. These estimates are in constant prices (i.e. have been adjusted to account for inflation) and are indexed at 1913 values. This chart shows an extraordinary growth in international trade over the last couple of centuries: Exports today are more than 40 times larger than in 1913. You can click on the option marked 'Linear', on top of the vertical axis, to change into a logarithmic scale. This will help you see that, over the long run, growth has roughly followed an exponential path. <Chart url="https://ourworldindata.org/grapher/world-trade-exports-constant-prices"/> ### Trade has grown more than proportionately with GDP The chart above shows how much more trade we have today relative to a century ago. But what about trade relative to total economic output? Over the last couple of centuries the world economy has experienced [sustained positive economic growth](https://ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia), so looking at changes in trade relative to GDP offers another interesting perspective. The next chart plots the value of trade in goods relative to GDP (i.e. the value of merchandise trade as a share of global economic output). Up to 1870, the sum of worldwide exports accounted for less than 10% of global output. Today, the value of exported goods around the world is close to 25%. This shows that over the last hundred years of economic growth, there has been more than proportional growth in global trade. _(NB. In this chart you can add countries by choosing the option on the bottom left; or you can compare countries around the world by clicking on 'Map' on the chart.)_ <Chart url="https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=OWID_WRL"/> ### Today trade is a fundamental part of economic activity everywhere In today's global economic system, countries exchange not only final products, but also intermediate inputs. This creates an intricate network of economic interactions that cover the whole world. The interactive data visualization, created by the [London-based data visualisation studio Kiln](https://www.kiln.digital/) and the [UCL Energy Institute](http://www.bartlett.ucl.ac.uk/energy), gives us an insight into the complex nature of trade. It plots the position of cargo ships across the oceans. <Chart url="https://www.shipmap.org/"/> --- # Trade generates efficiency gains --- ## The raw correlation between trade and growth Over the last couple of centuries the world economy has experienced [sustained positive economic growth](https://ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia), and over the same period, this process of economic growth has been accompanied by [even faster growth in global trade](https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=~OWID_WRL). In a similar way, if we look at country-level data from the last half century we find that there is also a correlation between economic growth and trade: countries with higher rates of GDP growth also tend to have higher rates of growth in trade as a share of output. This basic correlation is shown in the chart here, where we plot average annual change in real GDP per capita, against growth in trade (average annual change in value of exports as a share of GDP).1 Is this statistical association between economic output and trade causal? Among the potential growth-enhancing factors that may come from greater global economic integration are: Competition (firms that fail to adopt new technologies and cut costs are more likely to fail and to be replaced by more dynamic firms); Economies of scale (firms that can export to the world face larger demand, and under the right conditions, they can operate at larger scales where the price per unit of product is lower); Learning and innovation (firms that trade gain more experience and exposure to develop and adopt technologies and industry standards from foreign competitors).2 Are these mechanisms supported by the data? Let's take a look at the available empirical evidence. <Chart url="https://ourworldindata.org/grapher/growth-of-income-and-trade"/> ## Causality: Evidence from cross-country differences in trade, growth and productivity When it comes to academic studies estimating the impact of trade on GDP growth, the most cited paper is Frankel and Romer (1999).3 In this study, Frankel and Romer used geography as a proxy for trade, in order to estimate the impact of trade on growth. This is a classic example of the so-called [instrumental variable approach](https://en.wikipedia.org/wiki/Instrumental_variables_estimation). The idea is that a country's geography is fixed, and mainly affects national income through trade. So if we observe that a country's distance from other countries is a powerful predictor of economic growth (after accounting for other characteristics), then the conclusion is drawn that it must be because _trade_ has an effect on economic growth. Following this logic, Frankel and Romer find evidence of a strong impact of trade on economic growth. Other papers have applied the same approach to richer cross-country data, and they have found similar results. A key example is Alcalá and Ciccone (2004).4 This body of evidence suggests trade is indeed one of the factors driving national average incomes (GDP per capita) and macroeconomic productivity (GDP per worker) over the long run.5 ## Causality: Evidence from changes in labor productivity at the firm level If trade is causally linked to economic growth, we would expect that trade liberalization episodes also lead to firms becoming more productive in the medium, and even short run. There is evidence suggesting this is often the case. Pavcnik (2002) examined the effects of liberalized trade on plant productivity in the case of Chile, during the late 1970s and early 1980s. She found a positive impact on firm productivity in the import-competing sector. And she also found evidence of aggregate productivity improvements from the reshuffling of resources and output from less to more efficient producers. 6 Bloom, Draca and Van Reenen (2016) examined the impact of rising Chinese import competition on European firms over the period 1996-2007, and obtained similar results. They found that innovation increased more in those firms most affected by Chinese imports. And they found evidence of efficiency gains through two related channels: innovation increased and new existing technologies were adopted within firms; and aggregate productivity also increased because employment was reallocated towards more technologically advanced firms.7 ## Wrapping up: Trade does generate efficiency gains On the whole, the available evidence suggests trade liberalization does improve economic efficiency. This evidence comes from different political and economic contexts, and includes both micro and macro measures of efficiency. This result is important, because it shows that there are gains from trade. But of course efficiency is not the only relevant consideration here. As we discuss in a [companion blog post](https://ourworldindata.org/trade-and-income-inequality), the efficiency gains from trade are not generally equally shared by everyone. The evidence from the impact of trade on firm productivity confirms this: "reshuffling workers from less to more efficient producers" means closing down some jobs in some places. Because distributional concerns are real it is important to promote public policies – such as unemployment benefits and other safety-net programs – that help redistribute the gains from trade. --- # Trade has distributional consequences --- ## The conceptual link between trade and household welfare When a country opens up to trade, the demand and supply of goods and services in the economy shift. As a consequence, local markets respond, and prices change. This has an impact on households, both as consumers and as wage earners. The implication is that trade has an impact on everyone. It's not the case that the effects are restricted to workers from industries in the trade sector; or to consumers who buy imported goods. The effect of trade extends to everyone because markets are interlinked, so imports and exports have knock-on effects on all prices in the economy, including those in non-traded sectors. Economists usually distinguish between "general equilibrium consumption effects" (i.e. changes in consumption that arise from the fact that trade affects the prices of non-traded goods relative to traded goods) and "general equilibrium income effects" (i.e. changes in wages that arise from the fact that trade has an impact on the demand for specific types of workers, who could be employed in both the traded and non-traded sectors). Considering all these complex interrelations, it's not surprising that economic theories predict that not everyone will benefit from international trade in the same way. The distribution of the gains from trade depends on what different groups of people consume, and which types of jobs they have, or could have. _(NB. You can read more about these economic concepts, and the related predictions from economic theory, in Chapter 18 of the textbook __[The Economy: Economics for a Changing World](https://core-econ.org/the-economy/book/text/18.html)__.)_ ## The link between trade, jobs and wages ### Evidence from Chinese imports and their impact on factory workers in the US The most famous study looking at this question is Autor, Dorn and Hanson (2013): "The China syndrome: Local labor market effects of import competition in the United States".8 In this paper, Autor and coauthors looked at how local labor markets changed in the parts of the country most exposed to Chinese competition, and they found that rising exposure increased unemployment, lowered labor force participation, and reduced wages. Additionally, they found that claims for unemployment and healthcare benefits also increased in more trade-exposed labor markets. The visualization here is one of the key charts from their paper. It's a scatter plot of cross-regional exposure to rising imports, against changes in employment. Each dot is a small region (a 'commuting zone' to be precise). The vertical position of the dots represents the percent change in manufacturing employment for working age population; and the horizontal position represents the predicted exposure to rising imports (exposure varies across regions depending on the local weight of different industries). The trend line in this chart shows a negative relationship: more exposure goes together with less employment. There are large deviations from the trend (there are some low-exposure regions with big negative changes in employment); but the paper provides more sophisticated regressions and robustness checks, and finds that this relationship is statistically significant. <Image filename="Autor-et-al-Fig-2b-01.png"/> This result is important because it shows that the labor market adjustments were large. Many workers and communities were affected over a long period of time.9 But it's also important to keep in mind that Autor and colleagues are only giving us a partial perspective on the total effect of trade on employment. In particular, comparing changes in employment at the regional level misses the fact that firms operate in multiple regions and industries at the same time. Indeed, [Ildikó Magyari recently found evidence](http://www.columbia.edu/~im2348/JMP_Magyari.pdf) suggesting the Chinese trade shock provided incentives for US firms to diversify and reorganize production.10 So companies that outsourced jobs to China often ended up closing some lines of business, but at the same time expanded other lines elsewhere in the US. This means that job losses in some regions subsidized new jobs in other parts of the country. On the whole, Magyari finds that although Chinese imports may have reduced employment within some establishments, these losses were more than offset by gains in employment within the same firms in other places. This is no consolation to people who lost their job. But it is necessary to add this perspective to the simplistic story of "trade with China is bad for US workers". ### Evidence from the expansion of trade in India and the impact on poverty reductions Another important paper in this field is Topalova (2010): "Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India".11 In this paper Topalova looks at the impact of trade liberalization on poverty across different regions in India, using the sudden and extensive [change](https://ourworldindata.org/grapher/trade-as-share-of-gdp?country=IND) in India's trade policy in 1991. She finds that rural regions that were more exposed to liberalization, experienced a slower decline in poverty, and had lower consumption growth. In the analysis of the mechanisms underlying this effect, Topalova finds that liberalization had a stronger negative impact among the least geographically mobile at the bottom of the income distribution, and in places where labor laws deterred workers from reallocating across sectors. The evidence from India shows that (i) discussions that only look at "winners" in poor countries and "losers" in rich countries miss the point that the gains from trade are unequally distributed within both sets of countries; and (ii) context-specific factors, like worker mobility across sectors and geographic regions, are crucial to understand the impact of trade on incomes. ### Evidence from other studies * Donaldson (2018) uses archival data from colonial India to estimate the impact of India’s vast railroad network. He finds railroads increased trade, and in doing so they increased real incomes (and reduced income volatility).12 * Porto (2006) looks at the distributional effects of [Mercosur](https://en.wikipedia.org/wiki/Mercosur) on Argentine families, and finds this regional trade agreement led to benefits across the entire income distribution. He finds the effect was progressive: poor households gained more than middle-income households, because prior to the reform, trade protection benefitted the rich disproportionately.13 * Trefler (2004) looks at the Canada-US Free Trade Agreement and finds there was a group who bore "adjustment costs" (displaced workers and struggling plants) and a group who enjoyed "long-run gains" (consumers and efficient plants). 14 ## The link between trade and the cost of living The fact that trade negatively affects labor market opportunities for specific groups of people does not necessarily imply that trade has a negative aggregate effect on household welfare. This is because, while trade affects wages and employment, it also affects the prices of consumption goods. So households are affected both as consumers and as wage earners. Most studies focus on the earnings channel, and try to approximate the impact of trade on welfare by looking at how much wages can buy, using as reference the changing prices of a fixed basket of goods. This approach is problematic because it fails to consider [welfare gains from increased product variety](http://www.nber.org/papers/w15749), and obscures complicated distributional issues such as the fact that poor and rich individuals consume different baskets so [they benefit differently from changes in relative prices](http://www.econ.ucla.edu/pfajgelbaum/mugft_qje.pdf).15 Ideally, studies looking at the impact of trade on household welfare should rely on fine-grained data on prices, consumption and earnings. This is the approach followed in Atkin, Faber, and Gonzalez-Navarro (2018): "Retail globalization and household welfare: Evidence from Mexico".16 Atkin and coauthors use a uniquely rich dataset from Mexico, and find that the arrival of global retail chains led to reductions in the incomes of traditional retail sector workers, but had little impact on average municipality-level incomes or employment; and led to lower costs of living for both rich and poor households. The chart here shows the estimated distribution of total welfare gains across the household income distribution (the light-gray lines correspond to confidence intervals). These are proportional gains, and are expressed as percent of initial household income. As we can see, there is a net positive welfare effect across all income groups; but these improvements in welfare are regressive, in the sense that richer households gain proportionally more (about 7.5 percent gain compared to 5 percent).17 Evidence from other countries confirms this is not an isolated case – the expenditure channel really seems to be an important and understudied source of household welfare. Giuseppe Berlingieri, Holger Breinlich, Swati Dhingra, for example, investigate the consumer benefits from trade agreements implemented by the EU between 1993 and 2013; and they find that these trade agreements increased the quality of available products, which translated into a cumulative reduction in consumer prices equivalent to savings of €24 billion per year for EU consumers.18 <Image filename="Atkin-et-al-2018-lower-opacity.png"/> ## Wrapping up: Net welfare effects and implications The available evidence shows that, for some groups of people, trade has a negative effect on wages and employment opportunities; and at the same time it has a large positive effect via lower consumer prices and increased availability of products. Two points are worth emphasising. For some households, the net effect is positive. But for some households that's not the case. In particular, workers who lose their job can be affected for extended periods of time, so the positive effect via lower prices is not enough to compensate them for the reduction in earnings. On the whole, if we aggregate changes in welfare across households, the net effect is usually positive. But this is hardly a consolation for those who are worse off. This highlights a complex reality: There are [aggregate gains from trade](https://ourworldindata.org/trade-and-econ-growth), but there are also real distributional concerns. Even if [trade is not a major driver of income inequalities](https://ourworldindata.org/trade-and-income-inequality), it's important to keep in mind that public policies, such as unemployment benefits and other safety-net programs, can and should help redistribute the gains from trade. --- # Trade from a historical perspective --- ## The "two waves of globalization" ### The first "wave of globalization" started in the 19th century, the second one after WW2 The following visualization presents a compilation of available trade estimates, showing the evolution of world exports and imports as a share of [global economic output](https://ourworldindata.org/gdp-data/). This metric (the ratio of total trade, exports plus imports, to global GDP) is known as the 'openness index'. The higher the index, the higher the influence of trade transactions on global economic activity.19 As we can see, until 1800 there was a long period characterized by persistently low international trade – globally the index never exceeded 10% before 1800. This then changed over the course of the 19th century, when technological advances triggered a period of marked growth in world trade – the so-called 'first wave of globalization'. The first wave of globalization came to an end with the beginning of the First World War, when the decline of liberalism and the rise of nationalism led to a slump in international trade. In the chart we see a large drop in the interwar period. After the Second World War trade started growing again. This new – and ongoing – wave of globalization has seen international trade grow faster than ever before. Today the sum of exports and imports across nations amounts to more than 50% of the value of total global output. _(NB. Klasing and Milionis (2014), which is one of the sources in the chart, published an additional set of estimates under an alternative specification. Similarly, for the period 1960-2015, the World Bank's World Development Indicators published an alternative set of estimates, which are similar but not identical to those included from the Penn World Tables (9.1). You find all these alternative overlapping sources in __[this comparison chart](http://ourworldindata.org/grapher/globalization-over-5-centuries)__.)_ <Chart url="https://ourworldindata.org/grapher/globalization-over-5-centuries-km"/> ### Before the first wave of globalization, trade was driven mostly by colonialism Over the early modern period, transoceanic flows of goods between empires and colonies accounted for an important part of international trade. The following visualizations provides a comparison of intercontinental trade, in per capita terms, for different countries. As we can see, intercontinental trade was very dynamic, with volumes varying considerably across time and from empire to empire. Leonor Freire Costa, Nuno Palma, and Jaime Reis, who compiled and published the original data shown here, argue that trade, also in this period, had a substantial positive impact on the economy.20 <Chart url="https://ourworldindata.org/grapher/intercontinental-trade-per-capita-1500-1800"/> ### The first wave of globalization was marked by the rise and collapse of intra-European trade The following visualization shows a detailed overview of Western European exports by destination. Figures correspond to export-to-GDP ratios (i.e. the sum of the value of exports from all Western European countries, divided by total GDP in this region). Using the option labeled 'relative', at the bottom of the chart, you can see the proportional contribution of each region to total Western European exports. This chart shows that growth in Western European trade throughout the 19th century was largely driven by trade within the region: In the period 1830-1900 intra-European exports went from 1% of GDP to 10% of GDP; and this meant that the relative weight of intra-European exports doubled over the period (in the 'relative' view you can see the changing composition of exports by destination, and you can check that the weight of intra-European trade went from about one third to about two thirds over the period). But this process of European integration then collapsed sharply in the interwar period. After the Second World War trade within Europe rebounded, and from the 1990s onwards exceeded the highest levels of the first wave of globalization. In addition Western Europe then started to increasingly trade with Asia, the Americas, and to a smaller extent Africa and Oceania. <Chart url="https://ourworldindata.org/grapher/merchandise-exports-by-continent?facet=none&country=~Western+Europe"/> The next graph, from Broadberry and O'Rourke (2010)21, shows another perspective on the integration of the global economy and plots the evolution of three indicators measuring integration across different markets – specifically goods, labor, and capital markets. The indicators in this chart are indexed, so they show changes relative to the levels of integration observed in 1900. This gives us another viewpoint to understand how quickly global integration collapsed with the two World Wars. _(NB. Integration in the goods markets is measured here through the 'trade openness index', which is defined by the sum of exports and imports as share of GDP. __[In this interactive chart](https://ourworldindata.org/grapher/trade-openness-in-europe?country=FRA+DEU+ITA+ESP+SWE+GBR)__ you can explore trends in trade openness over this period for a selection of European countries.)_ <Image filename="broadberry-migration.png" alt="Migration, Financial integration, and Trade openness from 1880–1996"/> ### The second wave of globalization was enabled by technology The world-wide expansion of trade after the Second World War was largely possible because of reductions in transaction costs stemming from technological advances, such as the development of commercial civil aviation, the improvement of productivity in the merchant marines, and the democratization of the telephone as the main mode of communication. The visualization shows how, at the global level, costs across these three variables have been going down since 1930. <Chart url="https://ourworldindata.org/grapher/real-transport-and-communication-costs"/> The reductions in transaction costs had an impact, not only on the volumes of trade, but also on the types of exchanges that were possible and profitable. The first wave of globalization was characterized by inter-industry trade. This means that countries exported goods that were very different to what they imported – England exchanged machines for Australian wool and Indian tea. As transaction costs went down, this changed. In the second wave of globalization we are seeing a rise in _intra_-industry trade (i.e. the exchange of broadly similar goods and services is becoming more and more common). France, for example, now both imports and exports machines to and from Germany. The following visualization, from the [UN World Development Report (2009)](http://siteresources.worldbank.org/INTWDRS/Resources/477365-1327525347307/8392086-1327528510568/WDR09_12_Ch06web.pdf), plots the fraction of total world trade that is accounted for by intra-industry trade, by type of goods. As we can see, intra-industry trade has been going up for primary, intermediate and final goods. This pattern of trade is important because the scope for specialization increases if countries are able to exchange intermediate goods (e.g. auto parts) for related final goods (e.g. cars). <Image filename="intraindustry-trade-unwde.png" alt="GrubelLloyd_WDR09"/> ## Two centuries of trade, country by country Above we took a look at the broad global trends over the last two centuries. Let's now zoom in on country-level trends over this long and dynamic period. This chart plots estimates of the value of trade in goods, relative to total economic activity (i.e. export-to-GDP ratios). These historical estimates obviously come with a large margin of error (in the [measurement section below](https://ourworldindata.org/trade-and-globalization#measurement-and-data-quality) we discuss the data limitations); yet they offer an interesting perspective. You can add more series by clicking on the option 'Add country'. Each country tells a different story. If you add the Netherlands, for example, you will see how important the [Dutch Golden Age](https://en.wikipedia.org/wiki/Dutch_Golden_Age) was. _(NB. __[Here is the same chart but showing imports](https://ourworldindata.org/grapher/merchandise-imports-gdp-cepii)__, rather than exports.)_ <Chart url="https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii"/> ### Changing trade partners In the next chart we plot, country by country, the regional breakdown of exports. India is shown by default, but you can switch country using the option 'Change entity'. Using the option 'relative', at the bottom of the chart, you can see the proportional contribution of purchases from each region. For example: We see that 48% of the total value of Indian exports in 2014 went to Asian countries. This gives us an interesting perspective on the changing nature of trade partnerships. In India, we see the rising importance of trade with Africa – this is a pattern that we [discuss in more detail below](https://ourworldindata.org/trade-and-globalization#south-south-trade-is-becoming-increasingly-important). <Chart url="https://ourworldindata.org/grapher/merchandise-exports-by-continent?facet=none&country=~IND"/> --- # Trade around the world today --- ## How much do countries trade? ### Trade openness around the world The so-called trade openness index is an economic metric calculated as the ratio of country's total trade (the sum of exports plus imports) to the country's gross domestic product. This metric gives us an idea of integration, because it captures all incoming and outgoing transactions. The higher the index the larger the influence of trade on domestic economic activities. The visualization presents a world map showing the trade openness index country by country. You can explore country-specific time series by clicking on a country, or by using the 'Chart' tab. For any given year, we see that there is a lot of variation across countries. The weight of trade in the US economy, for example, is much lower than in other rich countries. If you press the play button in the map, you can see changes over time. This reveals that, despite the great variation between countries, there is a common trend: Over the last couple of decades trade openness has gone up in most countries. <Chart url="https://ourworldindata.org/grapher/trade-as-share-of-gdp"/> ### Exports and imports in real dollars Expressing trade values as a share of GDP tells us the importance of trade in relation to the size of economic activity. Let's now take a look at trade in monetary terms – this tells us the importance of trade in absolute, rather than relative terms. The chart shows the value of exports (goods plus services) in dollars, country by country. All estimates are expressed in constant 2010 dollars (i.e. all values have been adjusted to correct for inflation). The main takeaway here are the country-specific trends, which are positive and more pronounced than in the charts showing shares of GDP. This is not surprising: most countries today [produce more than a couple of decades ago](https://ourworldindata.org/app/uploads/2013/05/Scatter-1960-vs-2014-GDP.png); and at the same time they trade more of what they produce. You can plot trends by region using the option 'Add country'. _(NB. __[Here is the same chart, but showing imports](https://ourworldindata.org/grapher/imports-of-goods-and-services-constant-2010-us)__ rather than exports.)_ <Chart url="https://ourworldindata.org/grapher/exports-of-goods-and-services-constant-2010-us"/> ## What do countries trade? ### Trade in goods vs Trade in services Trade transactions include goods (tangible products that are physically shipped across borders by road, rail, water, or air) and services (intangible commodities, such as tourism, financial services, and legal advice). Many traded services make merchandise trade easier or cheaper—for example, shipping services, or insurance and financial services. Trade in goods has [been happening for millenia](https://www.caitlingreen.org/2017/03/a-very-long-way-from-home.html); while trade in services is a relatively recent phenomenon. In some countries services are today an important driver of trade: In the UK services account for about 45% of all exports; and in the Bahamas almost all exports are services (about 87% in 2016). In other countries the opposite is true: In Nigeria and Venezuela services accounted for around 2% and 3% of exports, respectively, in 2014. Globally, trade in goods accounts for the majority of trade transactions. But as this chart shows, the share of services in total global exports has increased, from 17% in 1979 to 24% in 2017. _(NB. __[This interactive chart](https://ourworldindata.org/grapher/service-exports-and-imports-gdp)__ shows trade in services as share of GDP across countries and regions.)_ <Chart url="https://ourworldindata.org/grapher/share-of-services-in-total-exports?country=BMU+BRA+NGA+GBR+USA+VEN+OWID_WRL+BHS"/> ### Domestic vs Foreign value added in exports Firms around the world import goods and services, in order to use them as inputs to produce goods and services that are later exported. The imported goods and services incorporated in a country’s exports are a key indicator of economic integration – they tell us something about 'global value chains', where the different stages of the production process are located across different countries. The chart, from UNCTAD's [World Investment Report 2018 - Investment and New Industrial Policies](https://unctad.org/en/PublicationsLibrary/wir2018_en.pdf), shows trends of gross exports, broken down into domestic and foreign value added. That is, the share of the value of exports that comes from foreign inputs. Today, about 30% of the value of global exports comes from foreign inputs. In 1990, the share was about 25%. Foreign value added in trade peaked in 2010–2012 after two decades of continuous increase. This is consistent with the fact that, after the global financial crisis, there has been a [slowdown in the rate of growth of trade in goods and services, relative to global GDP](https://ourworldindata.org/grapher/trade-as-share-of-gdp?tab=chart&country=OWID_WRL). This is a sign that global integration stalled after the financial crisis. _(NB. The integration of global value chains is a common source of measurement error in trade data, because it makes it hard to correctly attribute the origin and destination of goods and services. We discuss this in more detail __[below](https://ourworldindata.org/trade-and-globalization#measurement-and-data-quality)__.)_ <Image filename="UNCTAD-FVA.png"/> ## How are trade partnerships changing? ### Bilateral trade is becoming increasingly common If we consider all pairs of countries that engage in trade around the world, we find that in the majority of cases, there is a bilateral relationship today: Most countries that export goods to a country, also import goods from the same country. The interactive visualization shows this.23 In this chart, all possible country pairs are partitioned into three categories: the top portion represents the fraction of country pairs that do not trade with one-another; the middle portion represents those that trade in both directions (they export to one-another); and the bottom portion represents those that trade in one direction only (one country imports from, but does not export to, the other country). As we can see, bilateral trade is becoming increasingly common (the middle portion has grown substantially). But it remains true that many countries still do not trade with each other at all (in 2014 about 25% of all country-pairs recorded no trade). <Chart url="https://ourworldindata.org/grapher/distribution-of-bilateral-and-unilateral-trade-partnerships"/> ### South-South trade is becoming increasingly important The visualization here shows the share of world merchandise trade that corresponds to exchanges between today's rich countries and the rest of the world. The 'rich countries' in this chart are: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the United States. 'Non-rich countries' are all the other countries in the world. As we can see, up until the Second World War the majority of trade transactions involved exchanges between this small group of rich countries. But this has been changing quickly over the last couple of decades, and today trade between non-rich countries is just as important as trade between rich countries. In the past two decades China has been a key driver of this dynamic: the [UN Human Development Report (2013)](http://hdr.undp.org/sites/default/files/reports/14/hdr2013_en_complete.pdf) estimates that between 1992 and 2011, China's trade with Sub-Saharan Africa rose from $1 billion to more than $140 billion. _(NB. __[Here is a stacked area chart showing the total composition of exports by partnership](https://ourworldindata.org/grapher/share-of-world-merchandise-trade-by-type-of-trade)__. It's the same data, but plotted with stacked series.)_ <Chart url="https://ourworldindata.org/grapher/share-of-world-merchandise-trade-by-type-of-trade-percent"/> ### The majority of preferential trade agreements are between emerging economies The last few decades have not only seen an increase in the volume of international trade, but also an increase in the number of preferential trade agreements through which exchanges take place. A preferential trade agreement is a trade pact that reduces tariffs between the participating countries for certain products. The visualization here shows the evolution of the cumulative number of preferential trade agreements that are in force across the world, according to the World Trade Organization (WTO). These numbers include notified and non-notified preferential agreements (the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO), and are disaggregated by country groups. This figure shows the increasingly important role of trade between developing countries (South-South trade), vis-a-vis trade between developed and developing countries (North-South trade). In the late 1970s, North-South agreements accounted for more than half of all agreements – in 2010, they accounted for about one quarter. Today, the majority of preferential trade agreements are between developing economies. <Image filename="PTAs_WTO2011.png"/> ### Trading patterns have been changing quickly in middle income countries The increase in trade among emerging economies over the last half century has been accompanied by an important change in the composition of exported goods in these countries. The next visualization plots the share of food exports in each country's total exported merchandise. These figures, produced by the World Bank, correspond to the Standard International Trade Classification, in which 'food' includes, among other goods, live animals, beverages, tobacco, coffee, oils, and fats. Two points stand out. First, there has been a substantial decrease in the relative importance of food exports since 1960s in most countries (although globally in the last decade it has gone up slightly). And second, this decrease has been largest in middle income countries, particularly in Latin America. Colombia is a notable case in point: food went from 77% of merchandise exports in 1962, to 15.9% in 2015. Regarding levels, as one would expect, in high income countries food still accounts for a much smaller share of merchandise exports than in most low- and middle-income-countries. <Chart url="https://ourworldindata.org/grapher/share-food-exports"/> --- # Explaining trade patterns: Theory and Evidence --- ## Comparative advantage ### Theory: What is 'comparative advantage' and why does it matter to understand trade? In economic theory, the 'economic cost' – or the 'opportunity cost' – of producing a good is the value of everything you need to give up in order to produce that good. Economic costs include physical inputs (the value of the stuff you use to produce the good), plus forgone opportunities (when you allocate scarce resources to a task, you give up alternative uses of those resources). A country or a person is said to have a 'comparative advantage' if they have the ability to produce something at a lower opportunity cost than their trade partners. The forgone opportunities of production are key to understand this concept. It is precisely this that distinguishes absolute advantage from comparative advantage. To see the difference between comparative and absolute advantage, consider a commercial aviation pilot and a baker. Suppose the pilot is an excellent chef, and she can bake just as well, or even better than the baker. In this case, the pilot has an absolute advantage in both tasks. Yet the baker probably has a comparative advantage in baking, because the opportunity cost of baking is much higher for the pilot. The freely available economics textbook [The Economy: Economics for a Changing World](https://core-econ.org/the-economy/book/text/18.html) explains this as follows: _"A person or country has comparative advantage in the production of a particular good, if the cost of producing an additional unit of that good relative to the cost of producing another good is lower than another person or country’s cost to produce the same two goods."_ At the individual level, comparative advantage explains why you might want to delegate tasks to someone else, even if you can do those tasks better and faster than them. This may sound counterintuitive, but it is not: If you are good at many things, it means that investing time in one task has a high opportunity cost, because you are not doing the other amazing things you could be doing with your time and resources. So, at least from an efficiency point of view, you should specialize on what you are best at, and delegate the rest. The same logic applies to countries. Broadly speaking, the principle of comparative advantage postulates that all nations can gain from trade if each specializes in producing what they are relatively more efficient at producing, and import the rest: “do what you do best, import the rest”.24 In countries with relative abundance of certain factors of production, the theory of comparative advantage predicts that they will export goods that rely heavily in those factors: a country typically has a comparative advantage in those goods that use more intensively its abundant resources. Colombia exports bananas to Europe because it has comparatively abundant tropical weather. Under autarky, Colombia would find it cheap to produce bananas relative to e.g. apples. ### Evidence: Is there empirical support for comparative-advantage theories of trade? The empirical evidence suggests that the principle of comparative advantage does help explain trade patterns. Bernhofen and Brown (2004)25, for instance, provide evidence using the experience of Japan. Specifically, they exploit Japan’s dramatic nineteenth-century move from a state of near complete isolation to wide trade openness. The graph here shows the price changes of the key tradable goods after the opening up to trade. It presents a scatter diagram of the net exports in 1869 graphed in relation to the change in prices from 1851–53 to 1869. As we can see, this is consistent with the theory: after opening to trade, the relative prices of major exports such as silk increased (Japan exported what was cheap for them to produce and which was valuable abroad), while the relative price of imports such as sugar declined (they imported what was relatively more difficult for them to produce, but was cheap abroad). <Image filename="Japan_BernhoffenBrown2014.png"/> ## Trade diminishes with distance The resistance that geography imposes on trade has long been studied in the empirical economics literature – and the main conclusion is that trade intensity is strongly linked to geographic distance. The visualization, from Eaton and Kortum (2002)26, graphs 'normalized import shares' against distance. Each dot represents a country-pair from a set of 19 OECD countries, and both the vertical and horizontal axis are expressed on logarithmic scales. The 'normalized import shares' in the vertical axis provide a measure of how much each country imports from different partners (see the paper for details on how this is calculated and normalised), while distance in the horizontal axis corresponds to the distance between central cities in each country (see the paper and references therein for details on the list of cities). As we can see, there is a strong negative relationship. Trade diminishes with distance. Through econometric modeling, the paper shows that this relationship is not just a correlation driven by other factors: their findings suggest that distance imposes a significant barrier to trade. <Image filename="eaton-kortum-distance-and-geography.png"/> The fact that trade diminishes with distance is also corroborated by data of trade intensity within countries. The visualization here shows, through a series of maps, the geographic distribution of French firms that export to France's neighboring countries. The colors reflect the percentage of firms which export to each specific country. As we can see, the share of firms exporting to each of the corresponding neighbors is largest close to the border. The authors also show in the paper that this pattern holds for the value of individual-firm exports – trade value decreases with distance to the border. <Image filename="France_Trade_Borders_2010.jpg"/> ## Institutions Conducting international trade requires both financial and non-financial institutions to support transactions. Some of these institutions are fairly obvious (e.g. law enforcement); but some are less obvious. For example, the evidence shows that producers in exporting countries often need credit in order to engage in trade. The scatter plot, from Manova (2013)28, shows the correlation between levels in private credit (specifically exporters’ private credit as a share of GDP) and exports (average log bilateral exports across destinations and sectors). As can be seen, financially developed economies – those with more dynamic private credit markets – typically outperform exporters with less evolved financial institutions. Other studies have shown that country-specific institutions, like the knowledge of foreign languages, for instance, are also important to promote foreign relative to domestic trade (see Melitz 200829). <Image filename="manova-bilateral-exports-final.png"/> ## Increasing returns to scale The concept of comparative advantage predicts that if all countries had identical endowments and institutions, then there would be little incentives for specialization, because the opportunity cost of producing any good would be the same in every country. So you may wonder: why is it then the case that in the last few years we have seen such rapid growth in intra-industry trade between rich countries? The increase in intra-industry between rich countries seems paradoxical under the light of comparative advantage, because in recent decades we have seen convergence in key factors, such as [human capital](https://ourworldindata.org/global-rise-of-education), across these countries. The solution to the paradox is actually not very complicated: Comparative advantage is one, but not the only force driving incentives to specialization and trade. Several economists, most notably Paul Krugman, have developed theories of trade in which trade is not due to differences between countries, but instead due to "increasing returns to scale" – an economic term used to denote a technology in which producing extra units of a good becomes cheaper if you operate at a larger scale. The idea is that specialization allows countries to reap greater economies of scale (i.e. to reduce production costs by focusing on producing large quantities of specific products), so trade can be a good idea even if the countries do not differ in endowments, including culture and institutions. These models of trade, often referred to as ‘New Trade Theory’, are helpful to explain why in the last few years we have seen such rapid growth in two-way exchanges of goods within industries between developed nations. In a much cited paper, Evenett and Keller (2002)30 show that both factor endowments and increasing returns help explain production and trade patterns around the world. You can learn more about New Trade Theory, and the empirical support behind it, in [Krugman's Nobel lecture](https://www.nobelprize.org/uploads/2018/06/krugman_lecture.pdf). --- # Measurement and data quality --- There are dozens of official sources of data on international trade, and if you compare these different sources, you will find that they do not agree with one another. Even if you focus on what seems to be the same indicator for the same year in the same country, discrepancies are large. For example, for China in 2010, the estimated total value of goods exports was $1.48 trillion according to [World Bank Data](https://data.worldbank.org/indicator/BX.GSR.MRCH.CD?locations=CN), but it was $1.58 trillion according to [WTO Data.](http://data.imf.org/regular.aspx?key=61545870) That's a difference of about 7%, or a hundred billion US dollars. Such differences between sources can also be found for rich countries where statistical agencies tend to follow international reporting guidelines more closely. In Italy, for example, Eurostat figures of the value of exported goods in 2015 are 10% higher than the merchandise trade figures published by the OECD. And there are also large bilateral discrepancies within sources. According to IMF data, for example, the value of goods that Canada reports exporting to the US is almost $20 billion more that the value of goods that the US reports importing from Canada. Here we explain how international trade data is collected and processed, and why there are such large discrepancies. ## What data is available? The data hubs from several large international organizations publish and maintain extensive cross-country datasets on international trade. Here's a list of the most important ones: * [World Bank Open Data](https://data.worldbank.org/topic/trade) * [IMF Data](http://data.imf.org/?sk=9D6028D4-F14A-464C-A2F2-59B2CD424B85&sId=1515614720959) * [WTO Statistics](https://data.wto.org/en) * [UN Comtrade](https://comtrade.un.org) * [UNCTAD World Integrated Trade Solutions](https://wits.worldbank.org/Default.aspx?lang=en) * [Eurostat](http://ec.europa.eu/eurostat/web/international-trade-in-goods/data/database) * [OECD.Stat](https://stats.oecd.org/Index.aspx?DataSetCode=BIMTS_CPA) In addition to these sources, there are also many other academic projects that publish data on international trade. These projects tend to rely on data from one or more of the sources above; and they typically process and merge series in order to improve coverage and consistency. Three important sources are: * The [Correlates of War Project](http://correlatesofwar.org).31 * The [NBER-United Nations Trade Dataset Project](http://cid.econ.ucdavis.edu/wix.html).32 * The [CEPII Bilateral Trade and Gravity Data Project](http://www.cepii.fr/cepii/en/bdd_modele/presentation.asp?id=32).33 ## How large are discrepancies between sources? In the visualization here we provide a comparison of the data published by several of the sources listed above, country by country, since 1955 up until today. For each country, we exclude trade in services, and we focus only on estimates of the total value of exported goods, expressed as shares of GDP.34 As we can clearly see in this chart, different data sources tell often very different stories. And this is true, to varying degrees, across all countries and years. You can use the option labeled 'change country', at the bottom of the chart, to focus on any country. <Chart url="https://ourworldindata.org/grapher/various-sources-of-the-total-value-of-exports-as-a-share-of-gdp?country=CHN"/> Constructing this chart was demanding. It required downloading trade data from many different sources, collecting the relevant series, and then standardising them so that the units of measure and the geographical territories were consistent. All series, except the two long-run series from CEPII and NBER-UN, were produced from data published by the sources in current US dollars, and then converted to GDP shares using a unique source (World Bank).35 So, if all series are in the same units (share of national GDP), and they all measure the same thing (value of goods exported from one country to the rest of the world), what explains the differences? Let's dig deeper to understand what's going on. ## Why doesn't the data add up? ### Differences in guidelines used by countries to record and report trade data Broadly speaking, there are two main approaches used to estimate international merchandise trade: * The first approach relies on estimating trade from _customs records_, often complementing or correcting figures with data from enterprise surveys and administrative records associated with taxation. The main manual providing guidelines for this approach is the [International Merchandise Trade Statistics Manual](https://unstats.un.org/unsd/tradekb/Knowledgebase/50154/IMTS-Publication-List) (IMTS). * The second approach relies on estimating trade from _macroeconomic data_, typically _National Accounts_. The main manual providing guidelines for this approach is the [Balance of Payments and International Investment Position Manual](https://www.imf.org/external/pubs/ft/bop/2007/bopman6.htm) (BPM6), which was drafted in parallel with the 2008 [System of National Accounts of the United Nations](https://unstats.un.org/unsd/nationalaccount/docs/sna2008.pdf) (SNA 2008). The idea behind this approach is recording changes in economic ownership.36 Under these two approaches, it is common to distinguish between 'traded merchandise' and 'traded goods'. The distinction is often made because goods simply being transported through a country (i.e. goods in transit) are not considered to change the stock of material resources of a country, and are hence often excluded from the more narrow concept of 'merchandise trade'. Also, adding to the complexity, countries often rely on measurement protocols that are developed alongside these approaches and concepts that are not perfectly compatible to begin with. In Europe, for example, countries use the ['Compilers guide on European statistics on international trade in goods'.](http://ec.europa.eu/eurostat/web/products-manuals-and-guidelines/-/KS-02-17-333) ### Measurement error and other inconsistencies Even when two sources rely on the same broad accounting approach, discrepancies arise because countries fail to adhere perfectly to the protocols. In theory, for example, the exports of country A to country B should mirror the imports of country B from country A. But in practice this is rarely the case because of differences in valuation. According to the BPM6, imports and exports should be recorded in the balance of payments accounts on a '_free on board_ (FOB) basis', which means using prices that include all charges up to placing the goods on board a ship at the port of departure. Yet many countries stick to FOB values only for exports, and use CIF values for imports (CIF stands for 'Cost, Insurance and Freight', and includes the costs of transportation).37 The chart here gives you an idea of how large import-export asymmetries are. Shown are the differences between the value of goods that each country reports exporting to the US, and the value of goods that the US reports importing from the same countries. For example, for China, the figure in the chart corresponds to the “Value of merchandise imports in the US from China” minus “Value of merchandise exports from China to the US”. The differences in the chart here, which are both positive and negative, suggest that there is more going on than differences in FOB vs CIF values. If all asymmetries were coming from CIF-FOB differences, then we should only see positive values in the chart (recall that, unlike FOB values, CIF values include the cost of transportation, so CIF values are larger). <Chart url="https://ourworldindata.org/grapher/difference-in-the-value-of-goods-exported-to-and-imported-by-the-us"/> What else is going on here? Another common source of measurement error relates to the inconsistent attribution of trade partners. An example is failure to follow the guidelines on how to treat goods passing through intermediary countries for processing or merchanting purposes. As global production chains become more complex, countries find it increasingly difficult to unambiguously establish the origin and final destination of merchandise, even when rules are established in the manuals. 38 And there are still more potential sources of discrepancies. For example differences in customs and tax regimes, and differences between "general" and "special" trade systems (i.e. differences between statistical territories and actual country borders, which do not often coincide because of things like 'custom free zones').39 Even when two sources have identical trade estimates, inconsistencies in published data can arise from differences in exchange rates. If a dataset reports cross-country trade data in US dollars, estimates will vary depending on the exchange rates used. Different exchange rates will lead to conflicting estimates, even if figures in local currency units are consistent. ## Wrapping up Asymmetries in international trade statistics are large and they arise for a variety of reasons. These include conceptual inconsistencies across measurement standards, as well as inconsistencies in the way countries apply agreed protocols. Here's a checklist of issues to keep in mind when comparing sources. * Differences in underlying records: is trade measured from National Accounts data rather than directly from custom or tax records? * Differences in import and export valuations: are transactions valued at FOB or CIF prices? * Inconsistent attribution of trade partners: how is the origin and final destination of merchandise established? * Difference between 'goods' and 'merchandise': how are re-importing, re-exporting, and intermediary merchanting transactions recorded? * Exchange rates: how are values converted from local currency units to the currency that allows international comparisons (most often the US-$)? * Differences between 'general' and 'special' trade system: how is trade recorded for custom-free zones? * Other issues: Time of recording, confidentiality policies, product classification, deliberate misinvoicing for illicit purposes. These factors have long been recognized by many organizations producing trade data. Indeed, international organizations often incorporate corrections, in an attempt to improve data quality along these lines. The OECD's [Balanced International Merchandise Trade Statistics](https://stats.oecd.org/Index.aspx?DataSetCode=BIMTS_CPA), for example, uses its own approach to correct and reconcile international merchandise trade statistics.40 The corrections applied in the OECD's 'balanced' series make this the best source for cross-country comparisons. However, this dataset has low coverage across countries, and it only goes back to 2011. This is an important obstacle, since the complex adjustments introduced by the OECD imply we can't easily improve coverage by appending data from other sources. At Our World in Data we have chosen to rely on CEPII as the main source for exploring long-run changes in international trade; but we also rely on World Bank and OECD data for up-to-date cross-country comparisons. There are two key lessons from all of this. The first lesson is that, for most users of trade data out there, there is no obvious way of choosing between sources. And the second lesson is that, because of statistical glitches, researchers and policymakers should always take analysis of trade data with a pinch of salt. For example, in a recent [high-profile report](http://www.gfintegrity.org/report/illicit-financial-flows-from-developing-countries-2004-2013/), researchers attributed mismatches in bilateral trade data to illicit financial flows through trade misinvoicing (or trade-based money laundering). As we show here, this interpretation of the data is not appropriate, since mismatches in the data can, and often do arise from measurement inconsistencies rather than malfeasance.41 Hopefully the discussion and checklist above can help researchers better interpret and choose between conflicting data sources. --- # Data Sources --- ### International Historical Statistics (by Brian Mitchell) * Data: Aggregate trade (current value), bilateral trade with main trading partners (current value), and major commodity exports by main exporting countries. No data on trade as share of GDP is readily available. * Geographical coverage: Countries around the world * Time span: Long time series with annual observations – from 19th century up to today (2010) * Available at: The books are published in three volumes covering more than 5000 pages.42 At some universities you can access the online version of the books where data tables can be downloaded as ePDFs and Excel files. The online access is [here](https://www.palgrave.com/gp/search?query=International+Historical+Statistics). ### Penn World Tables * Data: Real and PPP-adjusted GDP in US millions of dollars, national accounts (household consumption, investment, government consumption, exports and imports), exchange rates and population figures. * Geographical coverage: Countries around the world * Time span: from 1950-2017 (version 9.1) * Available at: Online [here](http://www.rug.nl/research/ggdc/data/pwt/) * _Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2015), "The Next Generation of the Penn World Table" forthcoming American Economic Review, available for download at __[www.ggdc.net/pwt](http://www.ggdc.net/pwt)_ ### Correlates of War Bilateral Trade * Data: Total national trade and bilateral trade flows between states. Total imports and exports of each country in current US millions of dollars and bilateral flows in current US millions of dollars * Geographical coverage: Single countries around the world * Time span: from 1870-2009 * Available at: Online at [www.correlatesofwar.org](http://www.correlatesofwar.org) * _This data set is hosted by Katherine Barbieri, University of South Carolina, and Omar Keshk, Ohio State University. Authors note in their 'COW Trade Data Set Codebook': "We advise against using the dyadic data file to produce any national or global totals, based on aggregations of the partner trade."_ ### World Bank - World Development Indicators * Data: Trade (% of GDP) and many more specific series: trade in merchandise, trade in services, trade in high-technology, trade in ICT goods, trade in ICT services – always exports and imports separately. Also export and import value index and volume index. * Geographical coverage: Countries and world regions * Time span: Annual since 1960 * Available at: Online at [http://data.worldbank.org](http://data.worldbank.org) ### UN Comtrade * Data: Bilateral trade flows by commodity * Geographical coverage: Countries around the world * Time span: 1962-2013 * Available at: Online [here](http://comtrade.un.org/db/default.aspx) * _Bilateral trade flows can be sorted by goods or services, monthly or annually, with choice of classification (including HS codes, SITC, and BEC). Data is likely to be very time consuming to collate as there is no bulk data download unless a user has a premium site license._ ### UNCTADstat * Data: Many different measures, including trade by volumes and value * Geographical coverage: Countries around the world * Time span: For some series, data is available since 1948 - mostly annual, sometimes quarterly. * Available at: Online [here](http://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx) * _ UNCTADstat reports export and import data between 1995 and 2016 but primarily to different regional groupings than any one country, so it's probably not best suited to comparing country-to-country bilateral flows._ ### Eurostat - COMEXT * Data: Trade flows (also by commodity) * Geographical coverage: Europe (EU and EFTA) * Time span: Mostly since 1988 * Available at: Online [here](http://epp.eurostat.ec.europa.eu/newxtweb/mainxtnet.do) * _Also, the Eurostat website 'Statistics Explained' publishes up-to-date statistical information on international trade in __[goods](http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/International_trade_in_goods)__ and __[services](http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/International_trade_in_services)__. _ ### World Trade Organization - WTO * Data: Many series on tariffs and trade flows * Geographical coverage: Countries around the world * Time span: Since 1948 for some series * Available at: Online [here](http://www.wto.org/english/res_e/statis_e/statis_e.htm) * _The WTO offers a bulk download of trade datasets which can be found __[here](https://www.wto.org/english/res_e/statis_e/trade_datasets_e.htm)__. Amongst these are annual WTO merchandise trade values and WTO-UNCTAD-ITC annual trade in services datasets. The former is available from 1948 - 2017, workable, with very little additional formatting needed. However, observations are country groups, such as the EU28, the BRICS etc. rather than country-by-country values. Otherwise, the __[WTO's Statistics Database (SDB)](https://data.wto.org/en)__ has extensive time series on international trade, by country with their trading partners. Again, trading partners are primarily restricted to country groupings rather than individual nations._ ### Fouquin and Hugot (CEPII 2016) - TRADHIST dataset * Data: Many different data sets related to international trade, including trade flows by commodity geographical variables, and variables to estimate gravity models * Geographical coverage: Countries around the world * Available at: Online [here](http://www.cepii.fr/CEPII/en/bdd_modele/bdd.asp) * _ TRADHIST __[Bilateral Trade Historical Series: New Dataset 1827-2014](http://www.cepii.fr/cepii/en/bdd_modele/presentation.asp?id=32)__ provides extensive dyadic trade data, with 97 percent of the observations from 1948 to today drawing on the IMF's Direction of Trade Statistics (DOTS) dataset._ ### NBER-United Nations Trade Data, 1962-2000 * Data: Export and import values and volumes by commodity * Geographical coverage: Single countries * Time span: 1962-2000 * Available at: Online [here](http://cid.econ.ucdavis.edu/wixd.html) * _ This data is also available from the __[Center for International Data](http://cid.econ.ucdavis.edu/)__. Bilateral trade data value estimates are very close to that of the World Bank's imports of goods and services time series. _ ### Federico-Tena World Trade Historical Database * Data: This website contains annual series of trade by polity from 1800 to 1938 which sum as series for continent and world. * Geographical coverage: Countries around the world * Time span: 1800-1938 * Available at: Federico, G., Tena Junguito, A. (2016). World trade, 1800-1938: a new data-set. EHES Working Papers in Economic History, n. 93. Online [here](https://www.uc3m.es/ss/Satellite/UC3MInstitucional/es/TextoMixta/1371246237481/Federico-Tena_World_Trade_Historical_Database) ### Other historical trade data sets * Data on UK bilateral trade for the time 1870-1913 was collected by David S. Jacks. It is downloadable in excel format [here](http://www.sfu.ca/~djacks/data/publications/UK%20trade,%2017%20countries,%201870-1913.xls). * For the time 1870-1913 21,000 bilateral trade observations can be found in Mitchener and Weidenmier (2008) – Trade and empire, available in the [Economic Journal here](https://scholar.google.com/scholar?hl=en&as_sdt=0%2C44&q=Kris+James+Mitchener+Marc+Weidenmier+2008+Trade+and+Empire&btnG=). * Data on UK, Germany, France, and US between mid-19th to 20th Century can be found [here](http://www.nber.org/databases/macrohistory/contents/chapter07.html). * Data on Developing Country Export - in 1840, 1860, 1880 and 1900 - by John Hanson is available [here](http://eh.net/databases). * Data on trade between England and Africa during the period 1699-1808 is available on the [Dutch Data Archiving and Networked Services](https://easy.dans.knaw.nl/ui/datasets/id/easy-dataset:39576). It was compiled by Marion Johnson. <AllCharts heading="Interactive charts on trade and globalization"/> For more details on this see Forstater, M. (2018) Illicit Financial Flows, Trade Misinvoicing, and Multinational Tax Avoidance: The Same or Different?, CGD Policy Paper 123, available online at: https://www.cgdev.org/publication/illicit-financial-flows-trade-misinvoicing-and-multinational-tax-avoidance It's important to mention here that the economist Jonathan Rothwell recently wrote a [paper](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2920188) suggesting these findings are the result of a statistical illusion. Rothwell's critique received some [attention from the media](https://www.wsj.com/articles/the-truth-about-the-china-trade-shock-1491168339), but Autor and coauthors provided a [reply](http://economics.mit.edu/files/12729), which I think successfully refutes this claim. Magyari, I. (2017). Firm Reorganization, Chinese Imports, and US Manufacturing Employment. US Census Bureau, Center for Economic Studies. Available online [here](http://www.columbia.edu/~im2348/JMP_Magyari.pdf). Topalova, P. (2010). Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India. American Economic Journal: Applied Economics, 2(4), 1-41. Available online [here](http://dl.kli.re.kr/dl_image/IMG/03/000000012162/SERVICE/000000012162_01.PDF). Manova, Kalina. "Credit constraints, heterogeneous firms, and international trade." The Review of Economic Studies 80.2 (2013): 711-744. Alcalá, F., & Ciccone, A. (2004). Trade and productivity. The Quarterly Journal of Economics, 119(2), 613-646. Online [here](https://www.jstor.org/stable/pdf/25098695.pdf). Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press. The graph depicts the 'evolution of three indicators measuring integration in commodity, labor, and capital markets over the long run. Commodity market integration is measured by computing the ratio of exports to GDP. Labor market integration is measured by dividing the migratory turnover by population. Financial integration is measured using Feldstein–Horioka estimators of current account disconnectedness.' This data is taken from: Bayoumi 1990; Flandreau and Rivière 1999; Bordo and Flandreau 2003; Obstfeld and Taylor 2003. The textbook [The Economy: Economics for a Changing World](https://core-econ.org/the-economy/book/text/18.html) explains this in more detail here: [https://core-econ.org/the-economy/book/text/18.html#1810-trade-and-growth](https://core-econ.org/the-economy/book/text/18.html#1810-trade-and-growth) Porto, G (2006). Using Survey Data to Assess the Distributional Effects of Trade Policy. Journal of International Economics 70 (2006) 140–160. Precisely because of the difficulty that arises when trying to establish the origin and final destination of merchandise, some sources distinguish between national and dyadic (i.e. 'directed') trade estimates. For more details about general and special trade see: [http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:General_and_special_trade_systems](http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:General_and_special_trade_systems) Atkin, David, Benjamin Faber, and Marco Gonzalez-Navarro. "Retail globalization and household welfare: Evidence from mexico." Journal of Political Economy 126.1 (2018): 1-73. Leonor Freire Costa, Nuno Palma, and Jaime Reis (2015) – The great escape? The contribution of the empire to Portugal's economic growth, 1500–1800 Leonor Freire Costa Nuno Palma Jaime Reis European Review of Economic History, Volume 19, Issue 1, 1 February 2015, Pages 1–22, https://doi.org/10.1093/ereh/heu019 The chart includes series labeled by the sources as 'merchandise trade' and 'goods trade'. As we explain below, part of the asymmetries in trade data come from the fact that, although 'merchandise' and 'goods' are equivalent in the dictionary, these two terms often measure related but different things. Eaton, J., & Kortum, S. (2002). Technology, geography, and trade. Econometrica, 70(5), 1741-1779. Pavcnik, N. (2002). Trade liberalization, exit, and productivity improvements: Evidence from Chilean plants. The Review of Economic Studies, 69(1), 245-276. Online [here](https://www.jstor.org/stable/pdf/2695960.pdf). The NBER-UN trade data and documentation is available at [http://cid.econ.ucdavis.edu/data/undata/undata.html](http://cid.econ.ucdavis.edu/data/undata/undata.html) There are many papers that try to answer this specific question with macro data. For an overview of papers and methods see: Durlauf, S. N., Johnson, P. A., & Temple, J. R. (2005). Growth econometrics. Handbook of economic growth, 1, 555-677. Online [here](https://digitalwindow.vassar.edu/cgi/viewcontent.cgi?article=1037&context=faculty_research_reports). Frankel, J. A., & Romer, D. H. (1999). Does trade cause growth?. American economic review, 89(3), 379-399. Online [here](https://www.jstor.org/stable/pdf/117025.pd). Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press. Evenett, S. J., & Keller, W. (2002). On theories explaining the success of the gravity equation. Journal of political economy, 110(2), 281-316. Available online [here](https://www.alexandria.unisg.ch/22207/1/evenettkeller.pdf). Trefler, D. (2004). The long and short of the Canada-US free trade agreement. American Economic Review, 94(4), 870-895. Available online [here](https://www.aeaweb.org/articles?id=10.1257/0002828042002633). _Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam: "Name me one proposition in all of the social sciences which is both true and non-trivial." It was several years later than he thought of the correct response: comparative advantage. "That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them."_ (NB. This is an excerpt from https://www.wto.org/english/res_e/reser_e/cadv_e.htm) Crozet, M., & Koenig, P. (2010). Structural Gravity Equations with Intensive and Extensive Margins. The Canadian Journal of Economics / Revue Canadienne D'Economique, 43(1), 41-62. Retrieved from http://www.jstor.org/stable/40389555 The openness index, when calculated for the world as a whole, includes double-counting of transactions: When country A sells goods to country B, this shows up in the data both as an import (B imports from A) and as an export (A sells to B). Indeed, if you compare the chart showing the [global trade openness index](https://ourworldindata.org/grapher/globalization-over-5-centuries-km) and the chart showing [global merchandise exports as share of GDP](https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=OWID_WRL), you find that the former is almost twice as large as the latter. Why is the global openness index not exactly twice the value reported in the chart plotting global merchandise exports? There a three reasons. First, the global openness index uses different sources. Second, the global openness index includes trade in goods and services, while merchandise exports include goods but not services. And third, the amount that country A reports exporting to country B does not usually match the amount that B reports importing from A. We explore this in more detail in our blog post [Trade data: why doesn't it add up?](https://ourworldindata.org/trade-data-sources-discrepancies) See: (i) Feenstra, R. C., & Weinstein, D. E. (2017). Globalization, markups, and US welfare. Journal of Political Economy, 125(4), 1040-1074. (ii) Fajgelbaum, P. D., & Khandelwal, A. K. (2016). Measuring the unequal gains from trade. The Quarterly Journal of Economics, 131(3), 1113-1180. For example, if there is no change in ownership (e.g. a firm exports goods to it's factory in another country for processing, and then re-imports the processed goods) the manual says that statistical agencies should only record the net difference in value. You can find more details about this in [this](http://www.oecd.org/sdd/na/new-standards-for-compiling-national-accounts-SNA2008-OECDSB20.pdf) OECD Statistics Briefing. There are different ways of capturing this correlation. I focus here on all countries with data over the period 1945-2014. You can find a similar chart using different data sources and time periods in Ventura, J. (2005). A global view of economic growth. Handbook of economic growth, 1, 1419-1497. Online [here](https://repositori.upf.edu/bitstream/handle/10230/1248/849.pdf?sequence=1). This issue is actually also a source of disagreement between National Accounts data and customs data. You can read more about it in this report: [Harrison, Anne (2013) FOB/CIF Issue in Merchandise Trade/Transport of Goods in BPM6 and the 2008 SNA, Twenty-Fifth Meeting of the IMF Committee on Balance of Payments Statistics, Washington, D.C](https://web.archive.org/web/20221115005121/https://www.imf.org/external/pubs/ft/bop/2012/12-30.pdf). Berlingieri, G., Breinlich, H., & Dhingra, S. (2018). The Impact of Trade Agreements on Consumer Welfare—Evidence from the EU Common External Trade Policy. Journal of the European Economic Association. Donaldson, D. (2018). Railroads of the Raj: Estimating the impact of transportation infrastructure. American Economic Review, 108(4-5), 899-934. Available online [here](http://eprints.lse.ac.uk/38368/1/ARCWP41-Donaldson.pdf). In the paper, Atkin and coauthors explore the reasons for this, and find that the regressive nature of the distribution is mainly due to richer households placing higher weight on the product variety and shopping amenities on offer at these new foreign stores. Further information on CEPII's methodology can be found at [http://www.cepii.fr/PDF_PUB/wp/2016/wp2016-14.pdf](http://www.cepii.fr/PDF_PUB/wp/2016/wp2016-14.pdf) This chart was inspired by a chart from Helpman, E., Melitz, M., & Rubinstein, Y. (2007). Estimating trade flows: Trading partners and trading volumes (No. w12927). National Bureau of Economic Research. Melitz, J. (2008). Language and foreign trade. European Economic Review, 52(4), 667-699. In the 'Sources' tab in the chart you find a full explanation of how we constructed all series, as well as links to the original raw data. The printed version is published in 3 volumes: Africa, Asia, Oceania – The Americas – Europe. The volume set is described at the publisher's website [here](https://www.palgrave.com/gp/search?query=International+Historical+Statistics). David, H., Dorn, D., & Hanson, G. H. (2013). The China syndrome: Local labor market effects of import competition in the United States. American Economic Review, 103(6), 2121-68. Available online here: [http://economics.mit.edu/files/7723](http://economics.mit.edu/files/7723) Bloom, N., Draca, M., & Van Reenen, J. (2016). Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity. The Review of Economic Studies, 83(1), 87-117. Available online [here](https://web.archive.org/web/20170810215533/http://bfi.uchicago.edu/sites/default/files/research/Van%20Reenen_Trade%20Induced%20Technical%20Change.pdf). Bernhofen, D., & Brown, J. (2004). A Direct Test of the Theory of Comparative Advantage: The Case of Japan. Journal of Political Economy, 112(1), 48-67. doi:1. Retrieved from http://www.jstor.org/stable/10.1086/379944 doi:1 For more information on how the COW trade datasets were constructed see: (i) Barbieri, Katherine and Omar M. G. Omar Keshk. 2016. Correlates of War Project Trade Data Set Codebook, Version 4.0. Available at [http://correlatesofwar.org](http://correlatesofwar.org) and (ii) Barbieri, Katherine, Omar M. G. Keshk, and Brian Pollins. 2009. “TRADING DATA: Evaluating our Assumptions and Coding Rules.” Conflict Management and Peace Science, 26(5): 471–491. Available at: [https://www.researchgate.net/publication/49518195_Trading_Data_Evaluating_Our_Assumptions_and_Coding_Rules](https://www.researchgate.net/publication/49518195_Trading_Data_Evaluating_Our_Assumptions_and_Coding_Rules) The OECD approach consists of four steps, which they describe as follows: "First, data are collected and organized, and imports are converted to FOB prices to match the valuation of exports. Secondly, data are adjusted for several specific large problems known to drive asymmetries. Presently these include “modular” adjustments for unallocated and confidential trade; for exports by Hong Kong, China; for Swiss non-monetary gold; and for clear-cut cases of product misclassifications. The list of modules is expected to grow over time. In the third step, adjusted data are balanced using a “Symmetry Index” that weights exports and imports. As the final step, the data are also converted to Classification of Products by Activity (CPA) products to better align with National Accounts statistics, such as in national Supply-Use tables." You can read more about it here: [http://www.oecd.org/sdd/its/statistical-insights-merchandise-trade-statistics-without-asymmetries.htm](http://www.oecd.org/sdd/its/statistical-insights-merchandise-trade-statistics-without-asymmetries.htm) In addition to the OECD, other sources also use corrections. The IMF's DOTS dataset, for example, uses a 6 percent rule for converting import valuations (in CIF) into export values (in FOB). More information can be found at [the IMF's (2018) working paper on 'New Estimates for Direction of Trade Statistics'.](https://web.archive.org/web/20220208150732/https://www.elibrary.imf.org/view/journals/001/2018/016/001.2018.issue-016-en.xml)	Trade and Globalization

slug

type

content

published

createdAt

publishedAt

updatedAt

publicationContext

revisionId

breadcrumbs

markdown

title

1scFKpuRQ13hmruDYgL3f-nMKNVbjW8YtM-u6mxqLa9k

trade-and-globalization

linear-topic-page

{
    "toc": [
        {
            "slug": "trade-has-changed-the-world-economy",
            "text": "Trade has changed the world economy",
            "title": "Trade has changed the world economy",
            "supertitle": "",
            "isSubheading": false
        },
        {
            "slug": "trade-has-grown-remarkably-over-the-last-century",
            "text": "Trade has grown remarkably over the last century",
            "title": "Trade has grown remarkably over the last century",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "the-increase-in-trade-has-even-outpaced-economic-growth",
            "text": "The increase in trade has even outpaced economic growth",
            "title": "The increase in trade has even outpaced economic growth",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "trade-expanded-in-two-waves",
            "text": "Trade expanded in two waves",
            "title": "Trade expanded in two waves",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "trade-and-trade-partners-by-country",
            "text": "Trade and trade partners by country",
            "title": "Trade and trade partners by country",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "trade-around-the-world-today",
            "text": "Trade around the world today",
            "title": "Trade around the world today",
            "supertitle": "",
            "isSubheading": false
        },
        {
            "slug": "how-much-do-countries-trade",
            "text": "How much do countries trade?",
            "title": "How much do countries trade?",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "what-do-countries-trade",
            "text": "What do countries trade?",
            "title": "What do countries trade?",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "how-are-trade-partnerships-changing",
            "text": "How are trade partnerships changing?",
            "title": "How are trade partnerships changing?",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "trade-generates-efficiency-gains",
            "text": "Trade generates efficiency gains",
            "title": "Trade generates efficiency gains",
            "supertitle": "",
            "isSubheading": false
        },
        {
            "slug": "the-raw-correlation-between-trade-and-growth",
            "text": "The raw correlation between trade and growth",
            "title": "The raw correlation between trade and growth",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "evidence-from-cross-country-differences-in-trade-growth-and-productivity",
            "text": "Evidence from cross-country differences in trade, growth, and productivity",
            "title": "Evidence from cross-country differences in trade, growth, and productivity",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "evidence-from-changes-in-labor-productivity-at-the-firm-level",
            "text": "Evidence from changes in labor productivity at the firm level",
            "title": "Evidence from changes in labor productivity at the firm level",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "trade-does-not-only-increase-efficiency-gains",
            "text": "Trade does not only increase efficiency gains",
            "title": "Trade does not only increase efficiency gains",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "trade-has-distributional-consequences",
            "text": "Trade has distributional consequences",
            "title": "Trade has distributional consequences",
            "supertitle": "",
            "isSubheading": false
        },
        {
            "slug": "the-conceptual-link-between-trade-and-household-welfare",
            "text": "The conceptual link between trade and household welfare",
            "title": "The conceptual link between trade and household welfare",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "the-link-between-trade-jobs-and-wages",
            "text": "The link between trade, jobs and wages",
            "title": "The link between trade, jobs and wages",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "the-link-between-trade-and-the-cost-of-living",
            "text": "The link between trade and the cost of living",
            "title": "The link between trade and the cost of living",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "implications-of-trade-s-distributional-effects",
            "text": "Implications of trade\u2019s distributional effects",
            "title": "Implications of trade\u2019s distributional effects",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "explaining-trade-patterns-theory-and-evidence",
            "text": "Explaining trade patterns: Theory and Evidence",
            "title": "Explaining trade patterns: Theory and Evidence",
            "supertitle": "",
            "isSubheading": false
        },
        {
            "slug": "comparative-advantage",
            "text": "Comparative advantage",
            "title": "Comparative advantage",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "trade-diminishes-with-distance",
            "text": "Trade diminishes with distance",
            "title": "Trade diminishes with distance",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "institutions",
            "text": "Institutions",
            "title": "Institutions",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "increasing-returns-to-scale",
            "text": "Increasing returns to scale",
            "title": "Increasing returns to scale",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "measurement-and-data-quality",
            "text": "Measurement and data quality",
            "title": "Measurement and data quality",
            "supertitle": "",
            "isSubheading": false
        },
        {
            "slug": "what-data-is-available",
            "text": "What data is available?",
            "title": "What data is available?",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "how-large-are-the-discrepancies-between-sources",
            "text": "How large are the discrepancies between sources?",
            "title": "How large are the discrepancies between sources?",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "why-doesn-t-the-data-add-up",
            "text": "Why doesn't the data add up?",
            "title": "Why doesn't the data add up?",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "a-checklist-for-comparing-sources",
            "text": "A checklist for comparing sources",
            "title": "A checklist for comparing sources",
            "supertitle": "",
            "isSubheading": true
        },
        {
            "slug": "all-charts",
            "text": "Interactive charts on Trade and Globalization",
            "title": "Interactive charts on Trade and Globalization",
            "isSubheading": false
        },
        {
            "slug": "article-endnotes",
            "text": "Endnotes",
            "title": "Endnotes",
            "isSubheading": false
        },
        {
            "slug": "article-citation",
            "text": "Citation",
            "title": "Citation",
            "isSubheading": false
        },
        {
            "slug": "article-licence",
            "text": "Licence",
            "title": "Licence",
            "isSubheading": false
        }
    ],
    "body": [
        {
            "type": "text",
            "value": [
                {
                    "text": "On this topic page, you can find data, visualizations, and research on historical and current patterns of international trade, as well as discussions of their origins and effects.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Other research and writing on trade and globalization on Our World in Data:",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "list",
            "items": [
                {
                    "type": "text",
                    "value": [
                        {
                            "url": "https://ourworldindata.org/is-globalization-an-engine-of-economic-development",
                            "children": [
                                {
                                    "text": "Is globalization an engine of economic development?",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "url": "https://ourworldindata.org/trade-and-income-inequality",
                            "children": [
                                {
                                    "text": "Is trade a major driver of income inequality?",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "parseErrors": []
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Related topics",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "url": "https://docs.google.com/document/d/1gVSV2gqzPSTMI80gmHEgbaKeWalj6daqe519RtZaJ7I/edit",
            "type": "prominent-link",
            "parseErrors": []
        },
        {
            "url": "https://docs.google.com/document/d/1yzOrFd6uWvrAl2oFB3S67oOSbhgL1ffPHxjAqS7i-4w/edit",
            "type": "prominent-link",
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/migration",
            "type": "prominent-link",
            "title": "Migration",
            "description": "See all our data, visualizations, and writing on migration.",
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "children": [
                        {
                            "url": "#all-charts",
                            "children": [
                                {
                                    "text": "See all interactive charts on Trade and Globalization \u2193",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "spanType": "span-bold"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade has changed the world economy",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 1,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade has grown remarkably over the last century",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "One of the most important developments of the last century has been the integration of national economies into a global economic system. This process of integration, often called globalization, has resulted in a remarkable growth in trade between countries.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The chart here shows the growth of world exports over more than the last two centuries. These estimates are in constant prices (i.e. have been adjusted to account for inflation) and are indexed at 1913 values.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The chart shows an extraordinary growth in international trade over the last couple of centuries: Exports today are more than 40 times larger than in 1913.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "You can switch to a logarithmic scale under \u2018Settings\u2019. This will help you see that, over the long run, growth has roughly followed an exponential path.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/world-trade-exports-constant-prices",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "The increase in trade has even outpaced economic growth",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The chart above shows how much more trade we have today relative to a century ago. But what about trade relative to total economic output?",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Over the last couple of centuries the world economy has experienced ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia",
                    "children": [
                        {
                            "text": "sustained positive economic growth",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", so looking at changes in trade relative to GDP offers another interesting perspective.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The next chart plots the value of traded goods relative to GDP (i.e. the value of merchandise trade as a share of global economic output).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Up to 1870, the sum of worldwide exports accounted for less than 10% of global output. Today, the value of exported goods around the world is around 25%. This shows that over the last hundred years, the growth in trade has even outpaced rapid economic growth.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=OWID_WRL",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade expanded in two waves",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "The first\u00a0\"wave of globalization\" started in the 19th century, the second one after WW2",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The following visualization presents a compilation of available trade estimates, showing the evolution of world exports and imports as a share of ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/gdp-data/",
                    "children": [
                        {
                            "text": "global economic output",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ".",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This metric (the ratio of total trade, exports plus imports, to global GDP) is known as the \u201copenness index\u201d. The higher the index, the higher the influence of trade transactions on global economic activity.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-1",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "1",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "As we can see, until 1800 there was a long period characterized by persistently low international trade \u2013 globally the index never exceeded 10% before 1800. This then changed over the course of the 19th century, when technological advances triggered a period of marked growth in world trade \u2013 the so-called \u201cfirst wave of globalization\u201d.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This first wave came to an end with the beginning of World War I, when the decline of liberalism and the rise of nationalism led to a slump in international trade. In the chart we see a large drop in the interwar period.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "After World War II trade started growing again. This new \u2013 and ongoing \u2013 wave of globalization has seen international trade grow faster than ever before. Today the sum of exports and imports across nations amounts to more than 50% of the value of total global output.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/globalization-over-5-centuries",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Before the first wave of globalization, trade was driven mostly by colonialism",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Over the early modern period, transoceanic flows of goods between empires and colonies accounted for an important part of international trade. The following visualizations provide a comparison of intercontinental trade, in per capita terms, for different countries.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "As we can see, intercontinental trade was very dynamic, with volumes varying considerably across time and from empire to empire.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Leonor Freire Costa, Nuno Palma, and Jaime Reis, who compiled and published the original data shown here, argue that trade, also in this period, had a substantial positive impact on the economy.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-2",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "2",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/intercontinental-trade-per-capita-1500-1800",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "The first wave of globalization was marked by the rise and collapse of intra-European trade",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The following visualization shows a detailed overview of Western European exports by destination. Figures correspond to export-to-GDP ratios (i.e. the sum of the value of exports from all Western European countries, divided by the total GDP in this region). You can use \u201cSettings\u201d to switch to a relative view and see the proportional contribution of each region to total Western European exports.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This chart shows that growth in Western European trade throughout the 19th century was largely driven by trade within the region: In the period 1830-1900 intra-European exports went from 1% of GDP to 10% of GDP, and this meant that the relative weight of intra-European exports doubled over the period. However, this process of European integration then collapsed sharply in the interwar period.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "After the Second World War trade within Europe rebounded, and from the 1990s onwards exceeded the highest levels of the first wave of globalization. In addition, Western Europe then started to increasingly trade with Asia, the Americas, and to a smaller extent Africa and Oceania.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/merchandise-exports-by-continent?facet=none&country=~Western+Europe",
            "type": "chart",
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The next graph, using data from Broadberry and O'Rourke (2010)",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-3",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "3",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                },
                {
                    "text": ", shows another perspective on the integration of the global economy and plots the evolution of three indicators measuring integration across\u00a0different markets \u2013 specifically goods, labor, and capital markets.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The indicators in this chart are indexed, so they show changes relative to the levels of integration observed in 1900. This gives us another perspective on how quickly global integration collapsed with the two World Wars.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-4",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "4",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "alt": "Migration, Financial integration, and Trade openness from 1880\u20131996",
            "size": "wide",
            "type": "image",
            "caption": [
                {
                    "text": "Migration, financial integration and trade openness, World,\u00a01880-1996 (indexed to 1900 = 100) \u2013\u00a0Cambridge Economic History Vol. 2",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-5",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "5",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "filename": "broadberry-migration.png",
            "hasOutline": false,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "The second wave of globalization was enabled by technology",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The worldwide expansion of trade after the Second World War was largely possible because of reductions in transaction costs stemming from technological advances, such as the development of commercial civil aviation, the improvement of productivity in the merchant marines, and the democratization of the telephone as the main mode of communication. The visualization shows how, at the global level, costs across these three variables have been going down since 1930.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/real-transport-and-communication-costs",
            "type": "chart",
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Reductions in transaction costs impacted not only the volumes of trade but also the types of exchanges that were possible and profitable.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The first wave of globalization was characterized by inter-industry trade. This means that countries exported goods that were very different from what they imported \u2013 England exchanged machines for Australian wool and Indian tea. As transaction costs went down, this changed. In the second wave of globalization, we are seeing a rise in ",
                    "spanType": "span-simple-text"
                },
                {
                    "children": [
                        {
                            "text": "intra",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-italic"
                },
                {
                    "text": "-industry trade (i.e. the exchange of broadly similar goods and services is becoming more and more common). France, for example, now both imports and exports machines to and from Germany.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The following visualization, from the ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://documents1.worldbank.org/curated/en/730971468139804495/pdf/437380REVISED01BLIC1097808213760720.pdf",
                    "children": [
                        {
                            "text": "UN World Development Report (2009)",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", plots the fraction of total world trade that is accounted for by intra-industry trade, by type of goods. As we can see, intra-industry trade has been going up for primary, intermediate, and final goods.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This pattern of trade is important because the scope for specialization increases if countries are able to exchange intermediate goods (e.g. auto parts) for related final goods (e.g. cars).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "alt": "GrubelLloyd_WDR09",
            "size": "wide",
            "type": "image",
            "caption": [
                {
                    "text": "Share of intraindustry trade by type of goods \u2013 Figure 6.1 in ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://documents1.worldbank.org/curated/en/730971468139804495/pdf/437380REVISED01BLIC1097808213760720.pdf",
                    "children": [
                        {
                            "text": "UN World Development Report (2009)",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                }
            ],
            "filename": "intraindustry-trade-unwde.png",
            "hasOutline": false,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade and trade partners by country",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Above, we examined the broad global trends over the last two centuries. Let's now examine country-level trends over this long and dynamic period.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This chart plots estimates of the value of trade in goods, relative to total economic activity (i.e. export-to-GDP ratios).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "These historical estimates obviously come with a large margin of error (in the ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/trade-and-globalization#measurement-and-data-quality",
                    "children": [
                        {
                            "text": "measurement section below",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": " we discuss the data limitations); yet they offer an interesting perspective.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "You can edit the countries and regions selected. Each country tells a different story.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-6",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "6",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii",
            "type": "chart",
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In the next chart we plot, country by country, the regional breakdown of exports. India is shown by default, but you can edit the countries and regions shown.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "When switching to displaying relative values under \u2018Settings\u2019, we see the proportional contribution of purchases from each region. For example, we see that more than a third of Indian exports went to Asian countries in recent decades.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This gives us an interesting perspective on the changing nature of trade partnerships. In India, we see the rising importance of trade with Africa\u2014a pattern that we ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/trade-and-globalization#south-south-trade-is-becoming-increasingly-important",
                    "children": [
                        {
                            "text": "discuss in more detail below",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ".",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/merchandise-exports-by-continent?facet=none&country=~IND",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade around the world today",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 1,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "How much do countries trade?",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade openness around the world",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The metric trade as a share of GDP gives us an idea of global integration by capturing all incoming and outgoing transactions of a country.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The charts shows that countries differ a lot in the extent to which they engage in trade. Trade, for example, is much less important to the US economy than for other rich countries.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "If you press the play button on the map, you can see changes over time. This reveals that, despite the great variation between countries, there is a common trend: over the last couple of decades trade openness has gone up in most countries.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/trade-as-share-of-gdp",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Exports and imports in real dollars",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Expressing the value of trade as a share of GDP tells us the importance of trade in relation to the size of economic activity. Let's now take a look at trade in monetary terms \u2013 this tells us the importance of trade in absolute, rather than relative terms.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The chart shows the value of exports (goods plus services) in dollars, country by country.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The main takeaway here is that the trend towards more trade is more pronounced than in the charts showing shares of GDP. This is not surprising: most countries today ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/app/uploads/2013/05/Scatter-1960-vs-2014-GDP.png",
                    "children": [
                        {
                            "text": "produce more than a couple of decades ago",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", and at the same time they trade more of what they produce.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-7",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "7",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/exports-of-goods-and-services-constant-2010-us",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "What do countries trade?",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade in goods vs. trade in services",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Trade transactions include goods (tangible products that are physically shipped across borders by road, rail, water, or air) and services (intangible commodities, such as tourism, financial services, and legal advice).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Many traded services make merchandise trade easier or cheaper\u2014for example, shipping services, or insurance and financial services.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Trade in goods has ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://www.caitlingreen.org/2017/03/a-very-long-way-from-home.html",
                    "children": [
                        {
                            "text": "been happening for millennia",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", while trade in services is a relatively recent phenomenon.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In some countries services are today an important driver of trade: in the UK services account for around half of all exports; and in the Bahamas, almost all exports are services.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In other countries, such as Nigeria and Venezuela, services account for a small share of total exports.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Globally, trade in goods accounts for the majority of trade transactions. But as this chart shows, the share of services in total global exports has slightly increased in recent decades.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-8",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "8",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/share-of-services-in-total-exports?country=BMU+BRA+NGA+GBR+USA+VEN+OWID_WRL+BHS",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "How are trade partnerships changing?",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Bilateral trade is becoming increasingly common",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "If we consider all pairs of countries that engage in trade around the world, we find that in the majority of cases, there is a bilateral relationship today: most countries that export goods to a country also import goods from the same country.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The interactive visualization shows this.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-9",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "9",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                },
                {
                    "text": " In the chart, all possible country pairs are partitioned into three categories: the top portion represents the fraction of country pairs that do not trade with one another; the middle portion represents those that trade in both directions (they export to one another); and the bottom portion represents those that trade in one direction only (one country imports from, but does not export to, the other country).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "As we can see, bilateral trade is becoming increasingly common (the middle portion has grown substantially). However, many countries still do not trade with each other at all.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/distribution-of-bilateral-and-unilateral-trade-partnerships",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "South-South trade is becoming increasingly important",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The next visualization here shows the share of world merchandise trade that corresponds to exchanges between today's rich countries and the rest of the world.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The 'rich countries' in this chart are: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the United States. 'Non-rich countries' are all the other countries in the world.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "As we can see, up until the Second World War, the majority of trade transactions involved exchanges between this small group of rich countries. But this has changed quickly over the last couple of decades, and today, trade between non-rich countries is just as important as trade between rich countries.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In the past two decades, China has been a key driver of this dynamic: the ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://hdr.undp.org/content/human-development-report-2013",
                    "children": [
                        {
                            "text": "UN Human Development Report (2013)",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": " estimates that between 1992 and 2011, China's trade with Sub-Saharan Africa rose from $1 billion to more than $140 billion.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-10",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "10",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/share-of-world-merchandise-trade-by-type-of-trade-percent",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "The majority of preferential trade agreements are between emerging economies",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The last few decades have not only seen an increase in the volume of international trade, but also an increase in the number of preferential trade agreements through which exchanges take place. A preferential trade agreement is a trade pact that reduces tariffs between the participating countries for certain products.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The visualization here shows the evolution of the cumulative number of preferential trade agreements in force worldwide, according to the World Trade Organization (WTO). These numbers include notified and non-notified preferential agreements (the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO) and are disaggregated by country groups.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This figure shows the increasingly important role of trade between developing countries (South-South trade), vis-a-vis trade between developed and developing countries (North-South trade). In the late 1970s, North-South agreements accounted for more than half of all agreements \u2013 in 2010, they accounted for about one-quarter. Today, the majority of preferential trade agreements are between developing economies.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "size": "wide",
            "type": "image",
            "caption": [
                {
                    "text": "Number of preferential trade agreements in force by country group, 1950-2010 \u2013 Figure B1 in ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report11_e.pdf",
                    "children": [
                        {
                            "text": "WTO Trade Report (2011)",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                }
            ],
            "filename": "PTAs_WTO2011.png",
            "hasOutline": false,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trading patterns have been changing quickly in middle-income countries",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "An important change in the composition of exported goods in these countries has accompanied the increase in trade among emerging economies over the last half century.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The next visualization plots the share of food exports in each country's total exported merchandise. These figures, produced by the World Bank, correspond to the Standard International Trade Classification, in which 'food' includes, among other goods, live animals, beverages, tobacco, coffee, oils, and fats.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Two points stand out. First, the relative importance of food exports has substantially decreased in most countries since the 1960s (although globally, it has gone up slightly more recently). Second, this decrease has been largest in middle-income countries, particularly in Latin America.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Regarding levels, as one would expect, in high-income countries, food still accounts for a much smaller share of merchandise exports than in most low- and middle-income-countries.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/share-food-exports?country=COL~BRA~RUS~ITA~FRA~OWID_WRL",
            "type": "chart",
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade generates efficiency gains",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 1,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "The raw correlation between trade and growth",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Over the last couple of centuries, the world economy has experienced ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia",
                    "children": [
                        {
                            "text": "sustained positive economic growth",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", and over the same period, this process of economic growth has been accompanied by ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=~OWID_WRL",
                    "children": [
                        {
                            "text": "even faster growth in global trade",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ".",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In a similar way, if we look at country-level data from the last half century we find that there is also a correlation between economic growth and trade: countries with higher rates of GDP growth also tend to have higher rates of growth in trade as a share of output. This basic correlation is shown in the chart here, where we plot the average annual change in real GDP per capita, against growth in trade (average annual change in value of exports as a share of GDP).",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-11",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "11",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/growth-of-income-and-trade",
            "type": "chart",
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Is this statistical association between economic output and trade causal?",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Among the potential growth-enhancing factors that may come from greater global economic integration are: competition (firms that fail to adopt new technologies and cut costs are more likely to fail and be replaced by more dynamic firms); economies of scale (firms that can export to the world face larger demand, and under the right conditions, they can operate at larger scales where the price per unit of product is lower); learning and innovation (firms that trade gain more experience and exposure to develop and adopt technologies and industry standards from foreign competitors).",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-12",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "12",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Are these mechanisms supported by the data? Let's take a look at the available empirical evidence.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Evidence from cross-country differences in trade, growth, and productivity",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "When it comes to academic studies estimating the impact of trade on GDP growth, the most cited paper is Frankel and Romer (1999).",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-13",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "13",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In this study, Frankel and Romer used geography as a proxy for trade to estimate the impact of trade on growth. This is a classic example of the so-called ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://en.wikipedia.org/wiki/Instrumental_variables_estimation",
                    "children": [
                        {
                            "text": "instrumental variables approach",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ". The idea is that a country's geography is fixed, and mainly affects national income through trade. So if we observe that a country's distance from other countries is a powerful predictor of economic growth (after accounting for other characteristics), then the conclusion is drawn that it must be because ",
                    "spanType": "span-simple-text"
                },
                {
                    "children": [
                        {
                            "text": "trade",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-italic"
                },
                {
                    "text": " has an effect on economic growth. Following this logic, Frankel and Romer find evidence of a strong impact of trade on economic growth.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Other papers have applied the same approach to richer cross-country data, and they have found similar results. A key example is Alcal\u00e1 and Ciccone (2004).",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-14",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "14",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This body of evidence suggests trade is indeed one of the factors driving national average incomes (GDP per capita) and macroeconomic productivity (GDP per worker) over the long run.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-15",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "15",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Evidence from changes in labor productivity at the firm level",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "If trade is causally linked to economic growth, we would expect that trade liberalization episodes also lead to firms becoming more productive in the medium and even short run. There is evidence suggesting this is often the case.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Pavcnik (2002) examined the effects of liberalized trade on plant productivity in the case of Chile, during the late 1970s and early 1980s. She found a positive impact on firm productivity in the import-competing sector. She also found evidence of aggregate productivity improvements from the reshuffling of resources and output from less to more efficient producers.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-16",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "16",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Bloom, Draca, and Van Reenen (2016) examined the impact of rising Chinese import competition on European firms over the period 1996-2007 and obtained similar results. They found that innovation increased more in those firms most affected by Chinese imports. They also found evidence of efficiency gains through two related channels: innovation increased and new existing technologies were adopted within firms, and aggregate productivity also increased because employment was reallocated towards more technologically advanced firms.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-17",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "17",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade does not only increase efficiency gains",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Overall, the available evidence suggests that trade liberalization does improve economic efficiency. This evidence comes from different political and economic contexts and includes both micro and macro measures of efficiency.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This result is important because it shows that there are gains from trade. But of course, efficiency is not the only relevant consideration here. As we discuss in a ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/trade-and-income-inequality",
                    "children": [
                        {
                            "text": "companion article",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", the efficiency gains from trade are not generally equally shared by everyone. The evidence from the impact of trade on firm productivity confirms this: \"reshuffling workers from less to more efficient producers\" means closing down some jobs in some places. Because distributional concerns are real it is important to promote public policies \u2013 such as unemployment benefits and other safety-net programs \u2013 that help redistribute the gains from trade.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade has distributional consequences",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 1,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "The conceptual link between trade and household welfare",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "When a country opens up to trade, the demand and supply of goods and services in the economy shift. As a consequence, local markets respond, and prices change. This has an impact on households, both as consumers and as wage earners.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The implication is that trade has an impact on everyone. It's not the case that the effects are restricted to workers from industries in the trade sector; or to consumers who buy imported goods. The effects of trade extend to everyone because markets are interlinked, so imports and exports have knock-on effects on all prices in the economy, including those in non-traded sectors.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Economists usually distinguish between \"general equilibrium consumption effects\" (i.e. changes in consumption that arise from the fact that trade affects the prices of non-traded goods relative to traded goods) and \"general equilibrium income effects\" (i.e. changes in wages that arise from the fact that trade has an impact on the demand for specific types of workers, who could be employed in both the traded and non-traded sectors).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Considering all these complex interrelations, it's not surprising that economic theories predict that not everyone will benefit from international trade in the same way. The distribution of the gains from trade depends on what different groups of people consume, and which types of jobs they have, or could have.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-18",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "18",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "The link between trade, jobs and wages",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Evidence from Chinese imports and their impact on factory workers in the US",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The most famous study looking at this question is Autor, Dorn and Hanson (2013): \"The China syndrome: Local labor market effects of import competition in the United States\".",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-19",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "19",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In this paper, Autor and coauthors examined how local labor markets changed in the parts of the country most exposed to Chinese competition. They found that rising exposure increased unemployment, lowered labor force participation, and reduced wages. Additionally, they found that claims for unemployment and healthcare benefits also increased in more trade-exposed labor markets.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The visualization here is one of the key charts from their paper. It's a scatter plot of cross-regional exposure to rising imports, against changes in employment. Each dot is a small region (a 'commuting zone' to be precise). The vertical position of the dots represents the percent change in manufacturing employment for the working-age population, and the horizontal position represents the predicted exposure to rising imports (exposure varies across regions depending on the local weight of different industries).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The trend line in this chart shows a negative relationship: more exposure goes along with less employment. There are large deviations from the trend (there are some low-exposure regions with big negative changes in employment); but the paper provides more sophisticated regressions and robustness checks, and finds that this relationship is statistically significant.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "size": "wide",
            "type": "image",
            "caption": [
                {
                    "text": "Exposure to rising Chinese imports and changes in employment across local labor markets in the US (1999-2007) \u2013 Autor, Dorn, and Hanson (2013)",
                    "spanType": "span-simple-text"
                }
            ],
            "filename": "Autor-et-al-Fig-2b-01.png",
            "hasOutline": false,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This result is important because it shows that the labor market adjustments were large. Many workers and communities were affected over a long period of time.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-20",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "20",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "But it's also important to keep in mind that Autor and colleagues are only giving us a partial perspective on the total effect of trade on employment. In particular, comparing changes in employment at the regional level misses the fact that firms operate in multiple regions and industries at the same time. Indeed, Ildik\u00f3 Magyari found evidence suggesting the Chinese trade shock provided incentives for US firms to diversify and reorganize production.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-21",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "21",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "So companies that outsourced jobs to China often ended up closing some lines of business, but at the same time expanded other lines elsewhere in the US. This means that job losses in some regions subsidized new jobs in other parts of the country.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "On the whole, Magyari finds that although Chinese imports may have reduced employment within some establishments, these losses were more than offset by gains in employment within the same firms in other places. This is no consolation to people who lost their jobs. But it is necessary to add this perspective to the simplistic story of \"trade with China is bad for US workers\".",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Evidence from the expansion of trade in India and the impact on poverty reductions",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Another important paper in this field is Topalova (2010): \"Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India\".",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-22",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "22",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In this paper, Topalova examines the impact of trade liberalization on poverty across different regions in India, using the sudden and extensive change in India's trade policy in 1991. She finds that rural regions that were more exposed to liberalization experienced a slower decline in poverty and lower consumption growth.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Analyzing the mechanisms underlying this effect, Topalova finds that liberalization had a stronger negative impact among the least geographically mobile at the bottom of the income distribution and in places where labor laws deterred workers from reallocating across sectors.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The evidence from India shows that (i) discussions that only look at \"winners\" in poor countries and \"losers\" in rich countries miss the point that the gains from trade are unequally distributed within both sets of countries; and (ii) context-specific factors, like worker mobility across sectors and geographic regions, are crucial to understand the impact of trade on incomes.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Evidence from other studies",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "list",
            "items": [
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Donaldson (2018) uses archival data from colonial India to estimate the impact of India\u2019s vast railroad network. He finds railroads increased trade, and in doing so they increased real incomes (and reduced income volatility).",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "#note-23",
                            "children": [
                                {
                                    "children": [
                                        {
                                            "text": "23",
                                            "spanType": "span-simple-text"
                                        }
                                    ],
                                    "spanType": "span-superscript"
                                }
                            ],
                            "spanType": "span-ref"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Porto (2006) looks at the distributional effects of ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "https://en.wikipedia.org/wiki/Mercosur",
                            "children": [
                                {
                                    "text": "Mercosur",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        },
                        {
                            "text": " on Argentine families, and finds this regional trade agreement led to benefits across the entire income distribution. He finds the effect was progressive: poor households gained more than middle-income households because prior to the reform, trade protection benefitted the rich disproportionately.",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "#note-24",
                            "children": [
                                {
                                    "children": [
                                        {
                                            "text": "24",
                                            "spanType": "span-simple-text"
                                        }
                                    ],
                                    "spanType": "span-superscript"
                                }
                            ],
                            "spanType": "span-ref"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Trefler (2004) looks at the Canada-US Free Trade Agreement and finds there was a group who bore \"adjustment costs\" (displaced workers and struggling plants) and a group who enjoyed \"long-run gains\" (consumers and efficient plants). ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "#note-25",
                            "children": [
                                {
                                    "children": [
                                        {
                                            "text": "25",
                                            "spanType": "span-simple-text"
                                        }
                                    ],
                                    "spanType": "span-superscript"
                                }
                            ],
                            "spanType": "span-ref"
                        }
                    ],
                    "parseErrors": []
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "The link between trade and the cost of living",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The fact that trade negatively affects labor market opportunities for specific groups of people does not necessarily imply that trade has a negative aggregate effect on household welfare. This is because, while trade affects wages and employment, it also affects the prices of consumption goods. So households are affected both as consumers and as wage earners.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Most studies focus on the earnings channel and try to approximate the impact of trade on welfare by looking at how much wages can buy, using as a reference the changing prices of a fixed basket of goods.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This approach is problematic because it fails to consider welfare gains from increased product variety, and obscures complicated distributional issues such as the fact that poor and rich individuals consume different baskets so they benefit differently from changes in relative prices.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-26",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "26",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Ideally, studies looking at the impact of trade on household welfare should rely on fine-grained data on prices, consumption, and earnings. This is the approach followed in Atkin, Faber, and Gonzalez-Navarro (2018): \"Retail globalization and household welfare: Evidence from Mexico\".",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-27",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "27",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Atkin and coauthors use a uniquely rich dataset from Mexico, and find that the arrival of global retail chains led to reductions in the incomes of traditional retail sector workers, but had little impact on average municipality-level incomes or employment; and led to lower costs of living for both rich and poor households.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The chart here shows the estimated distribution of total welfare gains across the household income distribution (the light-gray lines correspond to confidence intervals). These are proportional gains expressed as a percent of initial household income.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "As we can see, there is a net positive welfare effect across all income groups; but these improvements in welfare are regressive, in the sense that richer households gain proportionally more (about 7.5 percent gain compared to 5 percent).",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-28",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "28",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Evidence from other countries confirms this is not an isolated case \u2013 the expenditure channel really seems to be an important and understudied source of household welfare. Giuseppe Berlingieri, Holger Breinlich, Swati Dhingra, for example, investigated the consumer benefits from trade agreements implemented by the EU between 1993 and 2013; and they found that these trade agreements increased the quality of available products, which translated into a cumulative reduction in consumer prices equivalent to savings of \u20ac24 billion per year for EU consumers.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-29",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "29",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "size": "wide",
            "type": "image",
            "caption": [
                {
                    "text": "Distribution of total household welfare gains from the arrival of foreign retail chains in Mexico \u2013 Atkin, Faber, and Gonzalez-Navarro (2018)",
                    "spanType": "span-simple-text"
                }
            ],
            "filename": "Atkin-et-al-2018-lower-opacity.png",
            "hasOutline": false,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Implications of trade\u2019s distributional effects",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The available evidence shows that, for some groups of people, trade has a negative effect on wages and employment opportunities; at the same time, it has a large positive effect via lower consumer prices and increased product availability.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Two points are worth emphasizing.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "For some households, the net effect is positive. But for some households that's not the case. In particular, workers who lose their jobs can be affected for extended periods of time, so the positive effect via lower prices is not enough to compensate them for the reduction in earnings.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "On the whole, if we aggregate changes in welfare across households, the net effect is usually positive. But this is hardly a consolation for the worse off.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "This highlights a complex reality: There are ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/trade-and-econ-growth",
                    "children": [
                        {
                            "text": "aggregate gains from trade",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", but there are also real distributional concerns. Even if ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/trade-and-income-inequality",
                    "children": [
                        {
                            "text": "trade is not a major driver of income inequalities",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", it's important to keep in mind that public policies, such as unemployment benefits and other safety-net programs, can and should help redistribute the gains from trade.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Explaining trade patterns: Theory and Evidence",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 1,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Comparative advantage",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Theory: What is 'comparative advantage' and why does it matter to understand trade?",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In economic theory, the 'economic cost' \u2013 or the 'opportunity cost' \u2013 of producing a good is the value of everything you need to give up in order to produce that good.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Economic costs include physical inputs (the value of the stuff you use to produce the good), plus forgone opportunities (when you allocate scarce resources to a task, you give up alternative uses of those resources).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "A country or a person is said to have a 'comparative advantage' if it can produce something at a lower opportunity cost than its trade partners.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The forgone opportunities of production are key to understanding this concept. It is precisely this that distinguishes absolute advantage from comparative advantage.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "To see the difference between comparative and absolute advantage, consider a commercial aviation pilot and a baker. Suppose the pilot is an excellent chef, and she can bake just as well, or even better than the baker. In this case, the pilot has an absolute advantage in both tasks. Yet the baker probably has a comparative advantage in baking, because the opportunity cost of baking is much higher for the pilot.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The freely available economics textbook ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://core-econ.org/the-economy/book/text/18.html",
                    "children": [
                        {
                            "text": "The Economy: Economics for a Changing World",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": " explains this as follows: ",
                    "spanType": "span-simple-text"
                },
                {
                    "children": [
                        {
                            "text": "\"A person or country has comparative advantage in the production of a particular good, if the cost of producing an additional unit of that good relative to the cost of producing another good is lower than another person or country\u2019s cost to produce the same two goods.\"",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-italic"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "At the individual level, comparative advantage explains why you might want to delegate tasks to someone else, even if you can do those tasks better and faster than them. This may sound counterintuitive, but it is not: If you are good at many things, it means that investing time in one task has a high opportunity cost, because you are not doing the other amazing things you could be doing with your time and resources. So, at least from an efficiency point of view, you should specialize on what you are best at, and delegate the rest.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The same logic applies to countries. Broadly speaking, the principle of comparative advantage postulates that all nations can gain from trade if each specializes in producing what they are relatively more efficient at producing, and imports the rest: \u201cdo what you do best, import the rest\u201d.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-30",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "30",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In countries with a relative abundance of certain factors of production, the theory of comparative advantage predicts that they will export goods that rely heavily upon those factors: a country typically has a comparative advantage in those goods that use its abundant resources. Colombia exports bananas to Europe because it has comparatively abundant tropical weather.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Is there empirical support for comparative-advantage theories of trade?",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The empirical evidence suggests that the principle of comparative advantage does help explain trade patterns. Bernhofen and Brown (2004)",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-31",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "31",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                },
                {
                    "text": ", for instance, provide evidence using the experience of Japan. Specifically, they exploit Japan\u2019s dramatic nineteenth-century move from a state of near complete isolation to wide trade openness.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The graph here shows the price changes of the key tradable goods after the opening up to trade. It presents a scatter diagram of the net exports in 1869 graphed in relation to the change in prices from 1851\u201353 to 1869. As we can see, this is consistent with the theory: after opening to trade, the relative prices of major exports such as silk increased (Japan exported what was cheap for them to produce and which was valuable abroad), while the relative price of imports such as sugar declined (they imported what was relatively more difficult for them to produce, but was cheap abroad).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "size": "wide",
            "type": "image",
            "caption": [
                {
                    "text": "Net exports and price changes for 1869, Japan \u2013 Figure 4 in Bernhofen and Brown (2014)",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-31",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "31",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "filename": "Japan_BernhoffenBrown2014.png",
            "hasOutline": false,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Trade diminishes with distance",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The resistance that geography imposes on trade has long been studied in the empirical economics literature \u2013 and the main conclusion is that trade intensity is strongly linked to geographic distance.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The visualization, from Eaton and Kortum (2002), graphs 'normalized import shares' against distance.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-32",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "32",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                },
                {
                    "text": " Each dot represents a country pair from a set of 19 OECD countries, and both the vertical and horizontal axes are expressed on logarithmic scales.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The 'normalized import shares' in the vertical axis provide a measure of how much each country imports from different partners (see the paper for details on how this is calculated and normalized), while the distance in the horizontal axis corresponds to the distance between central cities in each country (see the paper and references therein for details on the list of cities). As we can see, there is a strong negative relationship. Trade diminishes with distance. Through econometric modeling, the paper shows that this relationship is not just a correlation driven by other factors: their findings suggest that distance imposes a significant barrier to trade.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "size": "wide",
            "type": "image",
            "caption": [
                {
                    "text": "Import share and distance between country pairs, OECD, 1990 \u2013 Figure 1 in Eaton and Kortum (2002)",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-32",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "32",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "filename": "eaton-kortum-distance-and-geography.png",
            "hasOutline": false,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The fact that trade diminishes with distance is also corroborated by data on trade intensity within countries. The visualization here shows, through a series of maps, the geographic distribution of French firms that export to France's neighboring countries. The colors reflect the percentage of firms that export to each specific country.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "As we can see, the share of firms exporting to each of the corresponding neighbors is the largest close to the border. The authors also show in the paper that this pattern holds for the value of individual-firm exports \u2013 trade value decreases with distance to the border.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "size": "wide",
            "type": "image",
            "caption": [
                {
                    "text": "Percentage of firms which export in France, by importing country, 1992 \u2013 Figure 2 in Crozet and Koenig (2010)",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-33",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "33",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "filename": "France_Trade_Borders_2010.jpg",
            "hasOutline": false,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Institutions",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Conducting international trade requires both financial and non-financial institutions to support transactions. Some of these institutions are fairly obvious (e.g. law enforcement); but some are less obvious. For example, the evidence shows that producers in exporting countries often need credit in order to engage in trade.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The scatter plot, from Manova (2013), shows the correlation between levels in private credit (specifically exporters\u2019 private credit as a share of GDP) and exports (average log bilateral exports across destinations and sectors).",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-34",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "34",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                },
                {
                    "text": " As can be seen, financially developed economies \u2013 those with more dynamic private credit markets \u2013 typically outperform exporters with less evolved financial institutions.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Other studies have shown that country-specific institutions, like the knowledge of foreign languages, for instance, are also important to promote foreign relative to domestic trade.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-35",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "35",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "size": "wide",
            "type": "image",
            "caption": [
                {
                    "text": "Cross-country correlation between private credit and exports \u2013 Figure 2 in Manova (2013)",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-34",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "34",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "filename": "manova-bilateral-exports-final.png",
            "hasOutline": false,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Increasing returns to scale",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The concept of comparative advantage predicts that if all countries had identical endowments and institutions, there would be little incentive for specialization because the opportunity cost of producing any good would be the same in every country.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "So you may wonder: why is it then the case that in the last few years, we have seen such rapid growth in intra-industry trade between rich countries?",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The increase in intra-industry between rich countries seems paradoxical under the light of comparative advantage because in recent decades we have seen convergence in key factors, such as ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://ourworldindata.org/global-rise-of-education",
                    "children": [
                        {
                            "text": "human capital",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", across these countries.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The solution to the paradox is actually not very complicated: Comparative advantage is one, but not the only force driving incentives to specialization and trade.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Several economists, most notably Paul Krugman, have developed theories of trade in which trade is not due to differences between countries, but instead due to \"increasing returns to scale\" \u2013 an economic term used to denote a technology in which producing extra units of a good becomes cheaper if you operate at a larger scale.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The idea is that specialization allows countries to reap greater economies of scale (i.e. to reduce production costs by focusing on producing large quantities of specific products), so trade can be a good idea even if the countries do not differ in endowments, including culture and institutions.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "These models of trade, often referred to as \u201cNew Trade Theory\u201d, are helpful in explaining why in the last few years we have seen such rapid growth in two-way exchanges of goods within industries between developed nations.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In a much-cited paper, Evenett and Keller (2002) show that both factor endowments and increasing returns help explain production and trade patterns around the world.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-36",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "36",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "You can learn more about New Trade Theory, and the empirical support behind it, in ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://www.nobelprize.org/uploads/2018/06/krugman_lecture.pdf",
                    "children": [
                        {
                            "text": "Paul Krugman's Nobel lecture",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ".",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Measurement and data quality",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 1,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "There are dozens of official sources of data on international trade, and if you compare these different sources, you will find that they do not agree with one another. Even if you focus on what seems to be the same indicator for the same year in the same country, discrepancies are large.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Such differences between sources can also be found in rich countries where statistical agencies tend to follow international reporting guidelines more closely.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "There are also large bilateral discrepancies within sources: the value of goods that country A exports to country B can be more than the value of goods that country B imports from country A.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Here we explain how international trade data is collected and processed, and why there are such large discrepancies.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "What data is available?",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The data hubs from several large international organizations publish and maintain extensive cross-country datasets on international trade. Here's a list of the most important ones:",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "list",
            "items": [
                {
                    "type": "text",
                    "value": [
                        {
                            "url": "https://data.worldbank.org/topic/trade",
                            "children": [
                                {
                                    "text": "World Bank Open Data",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "url": "http://data.imf.org/?sk=9D6028D4-F14A-464C-A2F2-59B2CD424B85&sId=1515614720959",
                            "children": [
                                {
                                    "text": "IMF Data",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "url": "https://stats.wto.org/",
                            "children": [
                                {
                                    "text": "WTO Statistics",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "url": "https://comtrade.un.org",
                            "children": [
                                {
                                    "text": "UN Comtrade",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "url": "https://wits.worldbank.org/Default.aspx?lang=en",
                            "children": [
                                {
                                    "text": "UNCTAD World Integrated Trade Solutions",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "url": "https://ec.europa.eu/eurostat/web/international-trade-in-goods/information-data#Aggregated%20data",
                            "children": [
                                {
                                    "text": "Eurostat",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "url": "https://stats.oecd.org/Index.aspx?DataSetCode=BIMTS_CPA",
                            "children": [
                                {
                                    "text": "OECD.Stat",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        }
                    ],
                    "parseErrors": []
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In addition to these sources, there are also many other academic projects that publish data on international trade. These projects tend to rely on data from one or more of the sources above, and they typically process and merge series in order to improve coverage and consistency. Three important sources are:",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "list",
            "items": [
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "The ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "http://correlatesofwar.org",
                            "children": [
                                {
                                    "text": "Correlates of War Project",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        },
                        {
                            "text": ".",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "#note-37",
                            "children": [
                                {
                                    "children": [
                                        {
                                            "text": "37",
                                            "spanType": "span-simple-text"
                                        }
                                    ],
                                    "spanType": "span-superscript"
                                }
                            ],
                            "spanType": "span-ref"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "The ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "http://www.princeton.edu/~reddings/data/NBER/NBER-world-trade.html",
                            "children": [
                                {
                                    "text": "NBER-United Nations Trade Dataset Project",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        },
                        {
                            "text": ".",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "The ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "http://www.cepii.fr/cepii/en/bdd_modele/presentation.asp?id=32",
                            "children": [
                                {
                                    "text": "CEPII Bilateral Trade and Gravity Data Project",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        },
                        {
                            "text": ".",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "#note-38",
                            "children": [
                                {
                                    "children": [
                                        {
                                            "text": "38",
                                            "spanType": "span-simple-text"
                                        }
                                    ],
                                    "spanType": "span-superscript"
                                }
                            ],
                            "spanType": "span-ref"
                        }
                    ],
                    "parseErrors": []
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "How large are the discrepancies between sources?",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In the visualization here, we compare the data published by several of the sources listed above, country by country, from 1955 to today.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "For each country, we exclude trade in services, and we focus only on estimates of the total value of exported goods, expressed as shares of GDP.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-39",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "39",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "As this chart clearly shows, different data sources often tell very different stories. If you change the country or region shown you will see that this is true, to varying degrees, across all countries and years.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/various-sources-of-the-total-value-of-exports-as-a-share-of-gdp?country=CHN",
            "type": "chart",
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Constructing this chart was demanding. It required downloading trade data from many different sources, collecting the relevant series, and then standardizing them so that the units of measure and the geographical territories were consistent.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "All series, except the two long-run series from CEPII and NBER-UN, were produced from data published by the sources in current US dollars and then converted to GDP shares using a unique source (World Bank).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "So, if all series are in the same units (share of national GDP) and they measure the same thing (value of goods exported from one country to the rest of the world), what explains the differences?",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Let's dig deeper to understand what's going on.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Why doesn't the data add up?",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Differences in guidelines used by countries to record and report trade data",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Broadly speaking, there are two main approaches used to estimate international merchandise trade:",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "list",
            "items": [
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "The first approach relies on estimating trade from ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "children": [
                                {
                                    "text": "customs records",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-italic"
                        },
                        {
                            "text": ", often complementing or correcting figures with data from enterprise surveys and administrative records associated with taxation. The main manual providing guidelines for this approach is the ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "https://unstats.un.org/unsd/trade/eg-imts/IMTS%202010%20(English).pdf",
                            "children": [
                                {
                                    "text": "International Merchandise Trade Statistics Manual",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        },
                        {
                            "text": " (IMTS).",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "The second approach relies on estimating trade from ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "children": [
                                {
                                    "text": "macroeconomic data",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-italic"
                        },
                        {
                            "text": ", typically ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "children": [
                                {
                                    "text": "National Accounts",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-italic"
                        },
                        {
                            "text": ". The main manual providing guidelines for this approach is the ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "https://www.imf.org/external/pubs/ft/bop/2007/bopman6.htm",
                            "children": [
                                {
                                    "text": "Balance of Payments and International Investment Position Manual",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        },
                        {
                            "text": " (BPM6), which was drafted in parallel with the 2008 ",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "https://unstats.un.org/unsd/nationalaccount/docs/sna2008.pdf",
                            "children": [
                                {
                                    "text": "System of National Accounts of the United Nations",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-link"
                        },
                        {
                            "text": " (SNA 2008). The idea behind this approach is to record changes in economic ownership.",
                            "spanType": "span-simple-text"
                        },
                        {
                            "url": "#note-40",
                            "children": [
                                {
                                    "children": [
                                        {
                                            "text": "40",
                                            "spanType": "span-simple-text"
                                        }
                                    ],
                                    "spanType": "span-superscript"
                                }
                            ],
                            "spanType": "span-ref"
                        }
                    ],
                    "parseErrors": []
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Under these two approaches, it is common to distinguish between 'traded merchandise' and 'traded goods'. The distinction is often made because goods simply being transported through a country (i.e., goods in transit) are not considered to change a country's stock of material resources and are hence often excluded from the more narrow concept of 'merchandise trade'.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Also, adding to the complexity, countries often rely on measurement protocols developed alongside approaches and concepts that are not perfectly compatible to begin with. In Europe, for example, countries use the ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "http://ec.europa.eu/eurostat/web/products-manuals-and-guidelines/-/KS-02-17-333",
                    "children": [
                        {
                            "text": "'Compilers guide on European statistics on international trade in goods'.",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "Measurement error and other inconsistencies",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 3,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Even when two sources rely on the same broad accounting approach, discrepancies arise because countries fail to adhere perfectly to the protocols.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "In theory, for example, the exports of country A to country B should mirror the imports of country B from country A. But in practice this is rarely the case because of differences in valuation. According to the BPM6, imports, and exports should be recorded in the balance of payments accounts on a '",
                    "spanType": "span-simple-text"
                },
                {
                    "children": [
                        {
                            "text": "free on board",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-italic"
                },
                {
                    "text": " (FOB) basis', which means using prices that include all charges up to placing the goods on board a ship at the port of departure. Yet many countries stick to FOB values only for exports, and use CIF values for imports (CIF stands for 'Cost, Insurance and Freight', and includes the costs of transportation).",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-41",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "41",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The chart here gives you an idea of how large import-export asymmetries are. Shown are the differences between the value of goods that each country reports exporting to the US, and the value of goods that the US reports importing from the same countries. For example, for China, the figure in the chart corresponds to the \u201cValue of merchandise imports in the US from China\u201d minus the \u201cValue of merchandise exports from China to the US\u201d.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The differences in the chart here, which are both positive and negative, suggest that there is more going on than differences in FOB vs. CIF values. If all asymmetries were coming from FOB-CIF differences, then we should only see positive values in the chart (recall that, unlike FOB values, CIF values include the cost of transportation, so CIF values are larger).",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "url": "https://ourworldindata.org/grapher/difference-in-the-value-of-goods-exported-to-and-imported-by-the-us",
            "type": "chart",
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "What else may be going on here?",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Another common source of measurement error relates to the inconsistent attribution of trade partners. An example is failure to follow the guidelines on how to treat goods passing through intermediary countries for processing or merchanting purposes. As global production chains become more complex, countries find it increasingly difficult to unambiguously establish the origin and final destination of merchandise, even when rules are established in the manuals.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-42",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "42",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "And there are still more potential sources of discrepancies. For example differences in customs and tax regimes, and differences between \"general\" and \"special\" trade systems (i.e. differences between statistical territories and actual country borders, which do not often coincide because of things like 'custom free zones').",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-43",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "43",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Even when two sources have identical trade estimates, inconsistencies in published data can arise from differences in exchange rates. If a dataset reports cross-country trade data in US dollars, estimates will vary depending on the exchange rates used. Different exchange rates will lead to conflicting estimates, even if figures in local currency units are consistent.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "text": [
                {
                    "text": "A checklist for comparing sources",
                    "spanType": "span-simple-text"
                }
            ],
            "type": "heading",
            "level": 2,
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Asymmetries in international trade statistics are large and arise for a variety of reasons. These include conceptual inconsistencies across measurement standards and inconsistencies in the way countries apply agreed-upon protocols. Here's a checklist of issues to keep in mind when comparing sources.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "list",
            "items": [
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Differences in underlying records: is trade measured from National Accounts data rather than directly from custom or tax records?",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Differences in import and export valuations: are transactions valued at FOB or CIF prices?",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Inconsistent attribution of trade partners: how is the origin and final destination of merchandise established?",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Difference between 'goods' and 'merchandise': how are re-importing, re-exporting, and intermediary merchanting transactions recorded?",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Exchange rates: how are values converted from local currency units to the currency that allows international comparisons (most often the US-$)?",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Differences between 'general' and 'special' trade system: how is trade recorded for custom-free zones?",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "parseErrors": []
                },
                {
                    "type": "text",
                    "value": [
                        {
                            "text": "Other issues: Time of recording, confidentiality policies, product classification, deliberate mis-invoicing for illicit purposes.",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "parseErrors": []
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Many organizations producing trade data have long recognized these factors. Indeed, international organizations often incorporate corrections in an attempt to improve data quality.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The OECD's ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "https://stats.oecd.org/Index.aspx?DataSetCode=BIMTS_CPA",
                    "children": [
                        {
                            "text": "Balanced International Merchandise Trade Statistics",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", for example, uses its own approach to correct and reconcile international merchandise trade statistics.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-44",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "44",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "The corrections applied in the OECD's 'balanced' series make this the best source for cross-country comparisons. However, this dataset has low coverage across countries, and it only goes back to 2011. This is an important obstacle since the complex adjustments introduced by the OECD imply we can't easily improve coverage by appending data from other sources. At Our World in Data we have chosen to rely on CEPII as the main source for exploring long-run changes in international trade, but we also rely on World Bank and OECD data for up-to-date cross-country comparisons.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "There are two key lessons from all of this. The first lesson is that, for most users of trade data out there, there is no obvious way of choosing between sources. And the second lesson is that, because of statistical glitches, researchers and policymakers should always take analyses of trade data with a pinch of salt. For example, in a recent ",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "http://www.gfintegrity.org/report/illicit-financial-flows-from-developing-countries-2004-2013/",
                    "children": [
                        {
                            "text": "high-profile report",
                            "spanType": "span-simple-text"
                        }
                    ],
                    "spanType": "span-link"
                },
                {
                    "text": ", researchers attributed mismatches in bilateral trade data to illicit financial flows through trade mis-invoicing (or trade-based money laundering). As we show here, this interpretation of the data is not appropriate, since mismatches in the data can, and often do arise from measurement inconsistencies rather than malfeasance.",
                    "spanType": "span-simple-text"
                },
                {
                    "url": "#note-45",
                    "children": [
                        {
                            "children": [
                                {
                                    "text": "45",
                                    "spanType": "span-simple-text"
                                }
                            ],
                            "spanType": "span-superscript"
                        }
                    ],
                    "spanType": "span-ref"
                }
            ],
            "parseErrors": []
        },
        {
            "type": "text",
            "value": [
                {
                    "text": "Hopefully, the discussion and checklist above can help researchers better interpret and choose between conflicting data sources.",
                    "spanType": "span-simple-text"
                }
            ],
            "parseErrors": []
        },
        {
            "top": [],
            "type": "all-charts",
            "heading": "Interactive charts on Trade and Globalization",
            "parseErrors": []
        }
    ],
    "refs": {
        "errors": [],
        "definitions": {
            "0c6f0c95b79f4a74d3c1f4d57eeda2d057273093": {
                "id": "0c6f0c95b79f4a74d3c1f4d57eeda2d057273093",
                "index": 11,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "The textbook ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://core-econ.org/the-economy/book/text/18.html",
                                "children": [
                                    {
                                        "text": "The Economy: Economics for a Changing World",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": " explains this in more detail.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "1ac0445bad4eaf58109902761d70e9b26a066020": {
                "id": "1ac0445bad4eaf58109902761d70e9b26a066020",
                "index": 42,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "For more details about general and special trade see the ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Glossary:General_and_special_trade_systems",
                                "children": [
                                    {
                                        "text": "Eurostat glossary",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "1d21eeb1db3efcc7df1568d44aaa90a7fdd4de2c": {
                "id": "1d21eeb1db3efcc7df1568d44aaa90a7fdd4de2c",
                "index": 13,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Alcal\u00e1, F., & Ciccone, A. (2004). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.jstor.org/stable/pdf/25098695.pdf",
                                "children": [
                                    {
                                        "text": "Trade and productivity",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". The Quarterly Journal of Economics, 119(2), 613-646.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "1e0a4ad38b370016865ff79cc05866ce78b82775": {
                "id": "1e0a4ad38b370016865ff79cc05866ce78b82775",
                "index": 27,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "In the paper, Atkin and coauthors explore the reasons for this and find that the regressive nature of the distribution is mainly due to richer households placing higher weight on the product variety and shopping amenities on offer at these new foreign stores.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "1eb35a0fa6466cb6bb88e502ef19502fb290b32f": {
                "id": "1eb35a0fa6466cb6bb88e502ef19502fb290b32f",
                "index": 22,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Donaldson, D. (2018). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "http://eprints.lse.ac.uk/38368/1/ARCWP41-Donaldson.pdf",
                                "children": [
                                    {
                                        "text": "Railroads of the Raj: Estimating the impact of transportation infrastructure",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". American Economic Review, 108(4-5), 899-934.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "2892e54eefcc7797729b5f7d3c3d079a64639764": {
                "id": "2892e54eefcc7797729b5f7d3c3d079a64639764",
                "index": 33,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Manova, Kalina. \"Credit constraints, heterogeneous firms, and international trade.\" The Review of Economic Studies 80.2 (2013): 711-744.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "2f3312dd92bfc82142ba7ebe3bdf80a2b06016e5": {
                "id": "2f3312dd92bfc82142ba7ebe3bdf80a2b06016e5",
                "index": 24,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Trefler, D. (2004). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.aeaweb.org/articles?id=10.1257/0002828042002633",
                                "children": [
                                    {
                                        "text": "The long and short of the Canada-US free trade agreement",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". American Economic Review, 94(4), 870-895.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "3c542c5da06ad021fa8dfa4aaaa623d6835cba35": {
                "id": "3c542c5da06ad021fa8dfa4aaaa623d6835cba35",
                "index": 9,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "We also have the same data, but as ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://ourworldindata.org/grapher/share-of-world-merchandise-trade-by-type-of-trade",
                                "children": [
                                    {
                                        "text": "a stacked-area chart",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "3db283d0effc6f9098c63f7f39bbcb9bf18bc9a0": {
                "id": "3db283d0effc6f9098c63f7f39bbcb9bf18bc9a0",
                "index": 26,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Atkin, David, Benjamin Faber, and Marco Gonzalez-Navarro. \"Retail globalization and household welfare: Evidence from Mexico.\" Journal of Political Economy 126.1 (2018): 1-73.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "4007ed6c67d1fd2298015dbcce3bb80343930bf6": {
                "id": "4007ed6c67d1fd2298015dbcce3bb80343930bf6",
                "index": 12,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Frankel, J. A., & Romer, D. H. (1999). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.aeaweb.org/articles?id=10.1257/aer.89.3.379",
                                "children": [
                                    {
                                        "text": "Does trade cause growth?",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": " American Economic Review, 89(3), 379-399.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "47e712ad82926594085de7b1fdfed0aaa9e91340": {
                "id": "47e712ad82926594085de7b1fdfed0aaa9e91340",
                "index": 23,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Porto, G (2006). Using Survey Data to Assess the Distributional Effects of Trade Policy. Journal of International Economics 70 (2006) 140\u2013160.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "4bf8a075397711359aacd767771bbf8cdf4bbc61": {
                "id": "4bf8a075397711359aacd767771bbf8cdf4bbc61",
                "index": 41,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Precisely because of the difficulty that arises when trying to establish the origin and final destination of merchandise, some sources distinguish between national and dyadic (i.e. 'directed') trade estimates.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "52d90237271cc6f46ee1abbb2e948e59d0772af4": {
                "id": "52d90237271cc6f46ee1abbb2e948e59d0772af4",
                "index": 5,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "We also have the",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://ourworldindata.org/grapher/merchandise-imports-gdp-cepii",
                                "children": [
                                    {
                                        "text": " same chart but showing imports",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "65c4f99814a493fae8c5d96dc0570f4c0929f1c9": {
                "id": "65c4f99814a493fae8c5d96dc0570f4c0929f1c9",
                "index": 7,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "url": "https://ourworldindata.org/grapher/service-exports-and-imports-gdp",
                                "children": [
                                    {
                                        "text": "This interactive chart",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": " shows trade in services as a share of GDP across countries and regions.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "69393bb344b8170cefafe286c6fe2915068bc5f5": {
                "id": "69393bb344b8170cefafe286c6fe2915068bc5f5",
                "index": 1,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Leonor Freire Costa, Nuno Palma, and Jaime Reis (2015) \u2013 The great escape? The contribution of the empire to Portugal's economic growth, 1500\u20131800 Leonor Freire Costa Nuno Palma Jaime Reis European Review of Economic History, Volume 19, Issue 1, 1 February 2015, Pages 1\u201322, https://doi.org/10.1093/ereh/heu019",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "75aaa3b827fde7e760780df5e4a6a8c321a5c90f": {
                "id": "75aaa3b827fde7e760780df5e4a6a8c321a5c90f",
                "index": 31,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Eaton, J., & Kortum, S. (2002). Technology, geography, and trade. Econometrica, 70(5), 1741-1779.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "76600fbd7e564654381befaa7b6ef4afe38c6194": {
                "id": "76600fbd7e564654381befaa7b6ef4afe38c6194",
                "index": 0,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "The openness index, when calculated for the world as a whole, includes double-counting of transactions: When country A sells goods to country B, this shows up in the data both as an import (B imports from A) and as an export (A sells to B).",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    },
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Indeed, if you compare the chart showing the ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://ourworldindata.org/grapher/globalization-over-5-centuries-km",
                                "children": [
                                    {
                                        "text": "global trade openness index",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": " and the chart showing ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=OWID_WRL",
                                "children": [
                                    {
                                        "text": "global merchandise exports as a share of GDP",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ", you find that the former is almost twice as large as the latter.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    },
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Why is the global openness index not exactly twice the value reported in the chart plotting global merchandise exports? There a three reasons.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    },
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "First, the global openness index uses different sources. Second, the global openness index includes trade in goods and services, while merchandise exports include goods but not services. And third, the amount that country A reports exporting to country B does not usually match the amount that B reports importing from A.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    },
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "We explore this in more detail in ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://ourworldindata.org/trade-and-globalization#measurement-and-data-quality",
                                "children": [
                                    {
                                        "text": "our measurement section",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "7ddd057c6b9a182806350b70f1d48e492e66024f": {
                "id": "7ddd057c6b9a182806350b70f1d48e492e66024f",
                "index": 2,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "8077162ab76808d15fe834a871cf1b79a251bd64": {
                "id": "8077162ab76808d15fe834a871cf1b79a251bd64",
                "index": 37,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Further information on CEPII's methodology can be found in ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "http://www.cepii.fr/PDF_PUB/wp/2016/wp2016-14.pdf",
                                "children": [
                                    {
                                        "text": "their working paper",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "914132290c63413dd642c4d362cfd9aa5d988858": {
                "id": "914132290c63413dd642c4d362cfd9aa5d988858",
                "index": 29,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "children": [
                                    {
                                        "text": "Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam: \"Name me one proposition in all of the social sciences which is both true and non-trivial.\" It was several years later than he thought of the correct response: comparative advantage. \"That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.\"",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-italic"
                            }
                        ],
                        "parseErrors": []
                    },
                    {
                        "type": "text",
                        "value": [],
                        "parseErrors": []
                    },
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "(NB. This is an excerpt from https://www.wto.org/english/res_e/reser_e/cadv_e.htm)",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "96e4ab4b13e7e45dd280185718a11410119f00f5": {
                "id": "96e4ab4b13e7e45dd280185718a11410119f00f5",
                "index": 32,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Crozet, M., & Koenig, P. (2010). Structural Gravity Equations with Intensive and Extensive Margins. The Canadian Journal of Economics / Revue Canadienne D'Economique, 43(1), 41-62. Retrieved from http://www.jstor.org/stable/40389555",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "9bffeda9d923bb029127f74cdfd4ea487ff58832": {
                "id": "9bffeda9d923bb029127f74cdfd4ea487ff58832",
                "index": 19,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "It's important to mention here that the economist Jonathan Rothwell wrote a ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2920188",
                                "children": [
                                    {
                                        "text": "paper",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": " suggesting these findings are the result of a statistical illusion. Rothwell's critique received some ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.wsj.com/articles/the-truth-about-the-china-trade-shock-1491168339",
                                "children": [
                                    {
                                        "text": "attention from the media",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ", but Autor and coauthors provided a ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://chinashock.info/wp-content/uploads/2016/06/ADH-Response-to-Rothwell.pdf",
                                "children": [
                                    {
                                        "text": "reply",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ", which I think successfully refutes this claim.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "9cc41b6cf6e4ca45b28877557c8e1af1caff5c2b": {
                "id": "9cc41b6cf6e4ca45b28877557c8e1af1caff5c2b",
                "index": 15,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Pavcnik, N. (2002). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.jstor.org/stable/pdf/2695960.pdf",
                                "children": [
                                    {
                                        "text": "Trade liberalization, exit, and productivity improvements: Evidence from Chilean plants",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". The Review of Economic Studies, 69(1), 245-276.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "9d7525bf752d0b59404230e0ba68895525c634c7": {
                "id": "9d7525bf752d0b59404230e0ba68895525c634c7",
                "index": 14,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "There are many papers that try to answer this specific question with macro data. For an overview of papers and methods see: Durlauf, S. N., Johnson, P. A., & Temple, J. R. (2005). Growth econometrics. Handbook of economic growth, 1, 555-677.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "9f1841e1fd93ed993bcfc7d23755d26f352f6dae": {
                "id": "9f1841e1fd93ed993bcfc7d23755d26f352f6dae",
                "index": 6,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "We also have the ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://ourworldindata.org/grapher/imports-of-goods-and-services-constant-2010-us",
                                "children": [
                                    {
                                        "text": "same chart, but showing imports",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "b543c38f2ae38cf5226bb346f6e5c974d41230c5": {
                "id": "b543c38f2ae38cf5226bb346f6e5c974d41230c5",
                "index": 4,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press. The graph depicts the \u201cevolution of three indicators measuring integration in commodity, labor, and capital markets over the long run. Commodity market integration is measured by computing the ratio of exports to GDP. Labor market integration is measured by dividing the migratory turnover by population. Financial integration is measured using Feldstein\u2013Horioka estimators of current account disconnectedness.\u201d",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "c150ba7c7a005562f9e9dc70a86d273eb844d703": {
                "id": "c150ba7c7a005562f9e9dc70a86d273eb844d703",
                "index": 3,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Integration in the goods markets is measured here through the 'trade openness index', which is defined by the sum of exports and imports as a share of GDP. ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://ourworldindata.org/grapher/trade-openness-in-europe?country=FRA+DEU+ITA+ESP+SWE+GBR",
                                "children": [
                                    {
                                        "text": "In our interactive chart",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": " you can explore trends in trade openness over this period for a selection of European countries.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "c4030df18a7e84507ace48be9fc816f8ccbc62ee": {
                "id": "c4030df18a7e84507ace48be9fc816f8ccbc62ee",
                "index": 35,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Evenett, S. J., & Keller, W. (2002). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.researchgate.net/publication/4729534_On_Theories_Explaining_the_Success_of_the_Gravity_Equation",
                                "children": [
                                    {
                                        "text": "On theories explaining the success of the gravity equation",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". Journal of Political Economy, 110(2), 281-316.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "d24089251472716a3f50de372989e0ec009ac73e": {
                "id": "d24089251472716a3f50de372989e0ec009ac73e",
                "index": 21,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Topalova, P. (2010). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.aeaweb.org/articles?id=10.1257/app.2.4.1",
                                "children": [
                                    {
                                        "text": "Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". American Economic Journal: Applied Economics, 2(4), 1-41.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "d3fa0bb68da20d625a567567171202ad6e12c512": {
                "id": "d3fa0bb68da20d625a567567171202ad6e12c512",
                "index": 10,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "There are different ways of capturing this correlation. I focus here on all countries with data over the period 1945-2014. You can find a similar chart using different data sources and time periods in Ventura, J. (2005). A global view of economic growth. Handbook of economic growth, 1, 1419-1497. Online ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://repositori.upf.edu/bitstream/handle/10230/1248/849.pdf?sequence=1",
                                "children": [
                                    {
                                        "text": "here",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "d48543993e3185cf5ae81bc81779c339e96b7d2d": {
                "id": "d48543993e3185cf5ae81bc81779c339e96b7d2d",
                "index": 40,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "This issue is actually also a source of disagreement between National Accounts data and customs data. You can read more about it in this report: ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://web.archive.org/web/20221115005121/https://www.imf.org/external/pubs/ft/bop/2012/12-30.pdf",
                                "children": [
                                    {
                                        "text": "Harrison, Anne (2013) FOB/CIF Issue in Merchandise Trade/Transport of Goods in BPM6 and the 2008 SNA, Twenty-Fifth Meeting of the IMF Committee on Balance of Payments Statistics, Washington, D.C",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "d85bdbbaa3b805a965d3eac160b7cc09fcb76d30": {
                "id": "d85bdbbaa3b805a965d3eac160b7cc09fcb76d30",
                "index": 17,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "You can read more about these economic concepts, and the related predictions from economic theory, in Chapter 18 of the textbook ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://core-econ.org/the-economy/book/text/18.html",
                                "children": [
                                    {
                                        "text": "The Economy: Economics for a Changing World",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "db335036a3a254ba8dd38b184cf33c1942e72818": {
                "id": "db335036a3a254ba8dd38b184cf33c1942e72818",
                "index": 44,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "For more details on this see Forstater, M. (2018) ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.cgdev.org/publication/illicit-financial-flows-trade-misinvoicing-and-multinational-tax-avoidance",
                                "children": [
                                    {
                                        "text": "Illicit Financial Flows, Trade Misinvoicing, and Multinational Tax Avoidance: The Same or Different?",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ", CGD Policy Paper 123.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "ddf308fc7f17ee0efa0913851917c536c5916d96": {
                "id": "ddf308fc7f17ee0efa0913851917c536c5916d96",
                "index": 28,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Berlingieri, G., Breinlich, H., & Dhingra, S. (2018). The Impact of Trade Agreements on Consumer Welfare\u2014Evidence from the EU Common External Trade Policy. Journal of the European Economic Association.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "e5fca460d06d7eedf009d77e28bcc0e64ec3bfa2": {
                "id": "e5fca460d06d7eedf009d77e28bcc0e64ec3bfa2",
                "index": 38,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "The chart includes series labeled by the sources as 'merchandise trade' and 'goods trade'. As we explain below, part of the asymmetries in trade data comes from the fact that, although 'merchandise' and 'goods' are equivalent in the dictionary, these two terms often measure related but different things.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "e6f9fb6ec6ee7a0cd970fb183a7ad2e2dee2c053": {
                "id": "e6f9fb6ec6ee7a0cd970fb183a7ad2e2dee2c053",
                "index": 18,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "David, H., Dorn, D., & Hanson, G. H. (2013). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.aeaweb.org/articles?id=10.1257/aer.103.6.2121",
                                "children": [
                                    {
                                        "text": "The China syndrome: Local labor market effects of import competition in the United States",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". American Economic Review, 103(6), 2121-68.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "e709bfa6f51748845d0b836492415ce924397143": {
                "id": "e709bfa6f51748845d0b836492415ce924397143",
                "index": 8,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "This chart was inspired by a chart from Helpman, E., Melitz, M., & Rubinstein, Y. (2007). Estimating trade flows: Trading partners and trading volumes (No. w12927). National Bureau of Economic Research.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "e834b0b3fdd4ac3bcff756498cfc2af694d6cec8": {
                "id": "e834b0b3fdd4ac3bcff756498cfc2af694d6cec8",
                "index": 34,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Melitz, J. (2008). Language and foreign trade. European Economic Review, 52(4), 667-699.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "f12637956bbf72f83a9c7e0f7c016023dae58367": {
                "id": "f12637956bbf72f83a9c7e0f7c016023dae58367",
                "index": 43,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "The OECD approach consists of four steps, which they describe as follows: \"First, data are collected and organized, and imports are converted to FOB prices to match the valuation of exports. Secondly, data are adjusted for several specific large problems known to drive asymmetries. Presently these include \u201cmodular\u201d adjustments for unallocated and confidential trade; for exports by Hong Kong, China; for Swiss non-monetary gold; and for clear-cut cases of product misclassifications. The list of modules is expected to grow over time. In the third step, adjusted data are balanced using a \u201cSymmetry Index\u201d that weights exports and imports. As the final step, the data are also converted to Classification of Products by Activity (CPA) products to better align with National Accounts statistics, such as in national Supply-Use tables.\" You can read more about it ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://oecdecoscope.blog/2017/12/22/statistical-insights-merchandise-trade-statistics-without-asymmetries/",
                                "children": [
                                    {
                                        "text": "here",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". In addition to the OECD, other sources also use corrections. The IMF's DOTS dataset, for example, uses a 6 percent rule for converting import valuations (in CIF) into export values (in FOB). More information can be found in ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://web.archive.org/web/20220208150732/https://www.elibrary.imf.org/view/journals/001/2018/016/001.2018.issue-016-en.xml",
                                "children": [
                                    {
                                        "text": "the IMF's (2018) working paper on 'New Estimates for Direction of Trade Statistics'.",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "f22d0dbbf5f0fcd77e6d6919396e4c18cc92c5cb": {
                "id": "f22d0dbbf5f0fcd77e6d6919396e4c18cc92c5cb",
                "index": 16,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Bloom, N., Draca, M., & Van Reenen, J. (2016). Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity. The Review of Economic Studies, 83(1), 87-117. Available online ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://web.archive.org/web/20170810215533/http://bfi.uchicago.edu/sites/default/files/research/Van%20Reenen_Trade%20Induced%20Technical%20Change.pdf",
                                "children": [
                                    {
                                        "text": "here",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "f6de5b7ea6a9825366c680b2d71fe2eda84ac38e": {
                "id": "f6de5b7ea6a9825366c680b2d71fe2eda84ac38e",
                "index": 30,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Bernhofen, D., & Brown, J. (2004). A Direct Test of the Theory of Comparative Advantage: The Case of Japan. Journal of Political Economy, 112(1), 48-67. doi:1. Retrieved from http://www.jstor.org/stable/10.1086/379944 doi:1",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "f7e7b5ce0ac7f6995afb3455efe8d6a4c617ef74": {
                "id": "f7e7b5ce0ac7f6995afb3455efe8d6a4c617ef74",
                "index": 25,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "See: (i) Feenstra, R. C., & Weinstein, D. E. (2017). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "http://www.nber.org/papers/w15749",
                                "children": [
                                    {
                                        "text": "Globalization, markups, and US welfare",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". Journal of Political Economy, 125(4), 1040-1074. (ii) Fajgelbaum, P. D., & Khandelwal, A. K. (2016). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "http://www.econ.ucla.edu/pfajgelbaum/mugft_qje.pdf",
                                "children": [
                                    {
                                        "text": "Measuring the unequal gains from trade",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". The Quarterly Journal of Economics, 131(3), 1113-1180.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "fb048779f0a2100d1fdf2f5ff6f3f6db29231851": {
                "id": "fb048779f0a2100d1fdf2f5ff6f3f6db29231851",
                "index": 36,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "For more information on how the COW trade datasets were constructed see: (i) Barbieri, Katherine, and Omar M. G. Omar Keshk. 2016. Correlates of War Project Trade Data Set Codebook, Version 4.0. Available at ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "http://correlatesofwar.org",
                                "children": [
                                    {
                                        "text": "http://correlatesofwar.org",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": " and (ii) Barbieri, Katherine, Omar M. G. Keshk, and Brian Pollins. 2009. ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.researchgate.net/publication/49518195_Trading_Data_Evaluating_Our_Assumptions_and_Coding_Rules",
                                "children": [
                                    {
                                        "text": "TRADING DATA: Evaluating our Assumptions and Coding Rules.",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": " Conflict Management and Peace Science, 26(5): 471\u2013491.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "fc4388eef523c3aaef74a8f8be1156ea2ae80dbd": {
                "id": "fc4388eef523c3aaef74a8f8be1156ea2ae80dbd",
                "index": 20,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "Magyari, I. (2017). ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "http://www.columbia.edu/~im2348/JMP_Magyari.pdf",
                                "children": [
                                    {
                                        "text": "Firm Reorganization, Chinese Imports, and US Manufacturing Employment",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ". US Census Bureau, Center for Economic Studies.",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            },
            "fd71cbbf3f749a164b6cc1d144efbf4ab5b89b2e": {
                "id": "fd71cbbf3f749a164b6cc1d144efbf4ab5b89b2e",
                "index": 39,
                "content": [
                    {
                        "type": "text",
                        "value": [
                            {
                                "text": "For example, if there is no change in ownership (e.g. a firm exports goods to its factory in another country for processing, and then re-imports the processed goods) the manual says that statistical agencies should only record the net difference in value. You can find more details about this in an ",
                                "spanType": "span-simple-text"
                            },
                            {
                                "url": "https://www.oecd.org/sdd/na/new-standards-for-compiling-national-accounts-SNA2008-OECDSB20.pdf",
                                "children": [
                                    {
                                        "text": "OECD Statistics Briefing",
                                        "spanType": "span-simple-text"
                                    }
                                ],
                                "spanType": "span-link"
                            },
                            {
                                "text": ".",
                                "spanType": "span-simple-text"
                            }
                        ],
                        "parseErrors": []
                    }
                ],
                "parseErrors": []
            }
        }
    },
    "type": "linear-topic-page",
    "title": "Trade and Globalization",
    "authors": [
        "Esteban Ortiz-Ospina",
        "Diana Beltekian",
        "Max Roser"
    ],
    "excerpt": "How did international trade and globalization change over time? What do they look like today? And what are their impacts?",
    "dateline": "This page was first published in 2014 and last revised in April 2024.",
    "subtitle": "How did international trade and globalization change over time? What is the structure today? And what is its impact?",
    "sidebar-toc": true,
    "featured-image": "trade-and-globalization-thumbnail.png"
}

2023-11-10 14:14:22

2018-10-01 13:16:00

2023-12-28 16:31:11

unlisted

ALBJ4LsGp4SIu0H1hMBgOXPX9ibpXTIO6RJp8E5ZFfYpN7ifBNqm98E52KjnwFAV0OBHLo7XBIo0k4ypPchYBw

In this topic page we analyze available data and research on international trade patterns, including the determinants and consequences of globalization over the last couple of decades. Here is an overview of the main points we cover below. **Related topics:** * [Is trade a major driver of income inequality?](https://ourworldindata.org/trade-and-income-inequality) – a brief discussion of the link between globalization and income inequality. * [Is globalization an engine of economic development?](https://ourworldindata.org/is-globalization-an-engine-of-economic-development) – an overview of the main arguments linking globalization and economic development. **[See all interactive charts on Trade and Globalization ↓](#all-charts)** --- # Trade has changed the world economy --- ## Trade has grown remarkably over the last century The integration of national economies into a global economic system has been one of the most important developments of the last century. This process of integration, often called Globalization, has materialized in a remarkable growth in trade between countries. The chart here shows the value of world exports over the period 1800-2014. These estimates are in constant prices (i.e. have been adjusted to account for inflation) and are indexed at 1913 values. This chart shows an extraordinary growth in international trade over the last couple of centuries: Exports today are more than 40 times larger than in 1913. You can click on the option marked 'Linear', on top of the vertical axis, to change into a logarithmic scale. This will help you see that, over the long run, growth has roughly followed an exponential path. <Chart url="https://ourworldindata.org/grapher/world-trade-exports-constant-prices"/> ### Trade has grown more than proportionately with GDP The chart above shows how much more trade we have today relative to a century ago. But what about trade relative to total economic output? Over the last couple of centuries the world economy has experienced [sustained positive economic growth](https://ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia), so looking at changes in trade relative to GDP offers another interesting perspective. The next chart plots the value of trade in goods relative to GDP (i.e. the value of merchandise trade as a share of global economic output). Up to 1870, the sum of worldwide exports accounted for less than 10% of global output. Today, the value of exported goods around the world is close to 25%. This shows that over the last hundred years of economic growth, there has been more than proportional growth in global trade. _(NB. In this chart you can add countries by choosing the option on the bottom left; or you can compare countries around the world by clicking on 'Map' on the chart.)_ <Chart url="https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=OWID_WRL"/> ### Today trade is a fundamental part of economic activity everywhere In today's global economic system, countries exchange not only final products, but also intermediate inputs. This creates an intricate network of economic interactions that cover the whole world. The interactive data visualization, created by the [London-based data visualisation studio Kiln](https://www.kiln.digital/) and the [UCL Energy Institute](http://www.bartlett.ucl.ac.uk/energy), gives us an insight into the complex nature of trade. It plots the position of cargo ships across the oceans. <Chart url="https://www.shipmap.org/"/> --- # Trade generates efficiency gains --- ## The raw correlation between trade and growth Over the last couple of centuries the world economy has experienced [sustained positive economic growth](https://ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia), and over the same period, this process of economic growth has been accompanied by [even faster growth in global trade](https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=~OWID_WRL). In a similar way, if we look at country-level data from the last half century we find that there is also a correlation between economic growth and trade: countries with higher rates of GDP growth also tend to have higher rates of growth in trade as a share of output. This basic correlation is shown in the chart here, where we plot average annual change in real GDP per capita, against growth in trade (average annual change in value of exports as a share of GDP).1 Is this statistical association between economic output and trade causal? Among the potential growth-enhancing factors that may come from greater global economic integration are: Competition (firms that fail to adopt new technologies and cut costs are more likely to fail and to be replaced by more dynamic firms); Economies of scale (firms that can export to the world face larger demand, and under the right conditions, they can operate at larger scales where the price per unit of product is lower); Learning and innovation (firms that trade gain more experience and exposure to develop and adopt technologies and industry standards from foreign competitors).2 Are these mechanisms supported by the data? Let's take a look at the available empirical evidence. <Chart url="https://ourworldindata.org/grapher/growth-of-income-and-trade"/> ## Causality: Evidence from cross-country differences in trade, growth and productivity When it comes to academic studies estimating the impact of trade on GDP growth, the most cited paper is Frankel and Romer (1999).3 In this study, Frankel and Romer used geography as a proxy for trade, in order to estimate the impact of trade on growth. This is a classic example of the so-called [instrumental variable approach](https://en.wikipedia.org/wiki/Instrumental_variables_estimation). The idea is that a country's geography is fixed, and mainly affects national income through trade. So if we observe that a country's distance from other countries is a powerful predictor of economic growth (after accounting for other characteristics), then the conclusion is drawn that it must be because _trade_ has an effect on economic growth. Following this logic, Frankel and Romer find evidence of a strong impact of trade on economic growth. Other papers have applied the same approach to richer cross-country data, and they have found similar results. A key example is Alcalá and Ciccone (2004).4 This body of evidence suggests trade is indeed one of the factors driving national average incomes (GDP per capita) and macroeconomic productivity (GDP per worker) over the long run.5 ## Causality: Evidence from changes in labor productivity at the firm level If trade is causally linked to economic growth, we would expect that trade liberalization episodes also lead to firms becoming more productive in the medium, and even short run. There is evidence suggesting this is often the case. Pavcnik (2002) examined the effects of liberalized trade on plant productivity in the case of Chile, during the late 1970s and early 1980s. She found a positive impact on firm productivity in the import-competing sector. And she also found evidence of aggregate productivity improvements from the reshuffling of resources and output from less to more efficient producers. 6 Bloom, Draca and Van Reenen (2016) examined the impact of rising Chinese import competition on European firms over the period 1996-2007, and obtained similar results. They found that innovation increased more in those firms most affected by Chinese imports. And they found evidence of efficiency gains through two related channels: innovation increased and new existing technologies were adopted within firms; and aggregate productivity also increased because employment was reallocated towards more technologically advanced firms.7 ## Wrapping up: Trade does generate efficiency gains On the whole, the available evidence suggests trade liberalization does improve economic efficiency. This evidence comes from different political and economic contexts, and includes both micro and macro measures of efficiency. This result is important, because it shows that there are gains from trade. But of course efficiency is not the only relevant consideration here. As we discuss in a [companion blog post](https://ourworldindata.org/trade-and-income-inequality), the efficiency gains from trade are not generally equally shared by everyone. The evidence from the impact of trade on firm productivity confirms this: "reshuffling workers from less to more efficient producers" means closing down some jobs in some places. Because distributional concerns are real it is important to promote public policies – such as unemployment benefits and other safety-net programs – that help redistribute the gains from trade. --- # Trade has distributional consequences --- ## The conceptual link between trade and household welfare When a country opens up to trade, the demand and supply of goods and services in the economy shift. As a consequence, local markets respond, and prices change. This has an impact on households, both as consumers and as wage earners. The implication is that trade has an impact on everyone. It's not the case that the effects are restricted to workers from industries in the trade sector; or to consumers who buy imported goods. The effect of trade extends to everyone because markets are interlinked, so imports and exports have knock-on effects on all prices in the economy, including those in non-traded sectors. Economists usually distinguish between "general equilibrium consumption effects" (i.e. changes in consumption that arise from the fact that trade affects the prices of non-traded goods relative to traded goods) and "general equilibrium income effects" (i.e. changes in wages that arise from the fact that trade has an impact on the demand for specific types of workers, who could be employed in both the traded and non-traded sectors). Considering all these complex interrelations, it's not surprising that economic theories predict that not everyone will benefit from international trade in the same way. The distribution of the gains from trade depends on what different groups of people consume, and which types of jobs they have, or could have. _(NB. You can read more about these economic concepts, and the related predictions from economic theory, in Chapter 18 of the textbook __[The Economy: Economics for a Changing World](https://core-econ.org/the-economy/book/text/18.html)__.)_ ## The link between trade, jobs and wages ### Evidence from Chinese imports and their impact on factory workers in the US The most famous study looking at this question is Autor, Dorn and Hanson (2013): "The China syndrome: Local labor market effects of import competition in the United States".8 In this paper, Autor and coauthors looked at how local labor markets changed in the parts of the country most exposed to Chinese competition, and they found that rising exposure increased unemployment, lowered labor force participation, and reduced wages. Additionally, they found that claims for unemployment and healthcare benefits also increased in more trade-exposed labor markets. The visualization here is one of the key charts from their paper. It's a scatter plot of cross-regional exposure to rising imports, against changes in employment. Each dot is a small region (a 'commuting zone' to be precise). The vertical position of the dots represents the percent change in manufacturing employment for working age population; and the horizontal position represents the predicted exposure to rising imports (exposure varies across regions depending on the local weight of different industries). The trend line in this chart shows a negative relationship: more exposure goes together with less employment. There are large deviations from the trend (there are some low-exposure regions with big negative changes in employment); but the paper provides more sophisticated regressions and robustness checks, and finds that this relationship is statistically significant. <Image filename="Autor-et-al-Fig-2b-01.png"/> This result is important because it shows that the labor market adjustments were large. Many workers and communities were affected over a long period of time.9 But it's also important to keep in mind that Autor and colleagues are only giving us a partial perspective on the total effect of trade on employment. In particular, comparing changes in employment at the regional level misses the fact that firms operate in multiple regions and industries at the same time. Indeed, [Ildikó Magyari recently found evidence](http://www.columbia.edu/~im2348/JMP_Magyari.pdf) suggesting the Chinese trade shock provided incentives for US firms to diversify and reorganize production.10 So companies that outsourced jobs to China often ended up closing some lines of business, but at the same time expanded other lines elsewhere in the US. This means that job losses in some regions subsidized new jobs in other parts of the country. On the whole, Magyari finds that although Chinese imports may have reduced employment within some establishments, these losses were more than offset by gains in employment within the same firms in other places. This is no consolation to people who lost their job. But it is necessary to add this perspective to the simplistic story of "trade with China is bad for US workers". ### Evidence from the expansion of trade in India and the impact on poverty reductions Another important paper in this field is Topalova (2010): "Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India".11 In this paper Topalova looks at the impact of trade liberalization on poverty across different regions in India, using the sudden and extensive [change](https://ourworldindata.org/grapher/trade-as-share-of-gdp?country=IND) in India's trade policy in 1991. She finds that rural regions that were more exposed to liberalization, experienced a slower decline in poverty, and had lower consumption growth. In the analysis of the mechanisms underlying this effect, Topalova finds that liberalization had a stronger negative impact among the least geographically mobile at the bottom of the income distribution, and in places where labor laws deterred workers from reallocating across sectors. The evidence from India shows that (i) discussions that only look at "winners" in poor countries and "losers" in rich countries miss the point that the gains from trade are unequally distributed within both sets of countries; and (ii) context-specific factors, like worker mobility across sectors and geographic regions, are crucial to understand the impact of trade on incomes. ### Evidence from other studies * Donaldson (2018) uses archival data from colonial India to estimate the impact of India’s vast railroad network. He finds railroads increased trade, and in doing so they increased real incomes (and reduced income volatility).12 * Porto (2006) looks at the distributional effects of [Mercosur](https://en.wikipedia.org/wiki/Mercosur) on Argentine families, and finds this regional trade agreement led to benefits across the entire income distribution. He finds the effect was progressive: poor households gained more than middle-income households, because prior to the reform, trade protection benefitted the rich disproportionately.13 * Trefler (2004) looks at the Canada-US Free Trade Agreement and finds there was a group who bore "adjustment costs" (displaced workers and struggling plants) and a group who enjoyed "long-run gains" (consumers and efficient plants). 14 ## The link between trade and the cost of living The fact that trade negatively affects labor market opportunities for specific groups of people does not necessarily imply that trade has a negative aggregate effect on household welfare. This is because, while trade affects wages and employment, it also affects the prices of consumption goods. So households are affected both as consumers and as wage earners. Most studies focus on the earnings channel, and try to approximate the impact of trade on welfare by looking at how much wages can buy, using as reference the changing prices of a fixed basket of goods. This approach is problematic because it fails to consider [welfare gains from increased product variety](http://www.nber.org/papers/w15749), and obscures complicated distributional issues such as the fact that poor and rich individuals consume different baskets so [they benefit differently from changes in relative prices](http://www.econ.ucla.edu/pfajgelbaum/mugft_qje.pdf).15 Ideally, studies looking at the impact of trade on household welfare should rely on fine-grained data on prices, consumption and earnings. This is the approach followed in Atkin, Faber, and Gonzalez-Navarro (2018): "Retail globalization and household welfare: Evidence from Mexico".16 Atkin and coauthors use a uniquely rich dataset from Mexico, and find that the arrival of global retail chains led to reductions in the incomes of traditional retail sector workers, but had little impact on average municipality-level incomes or employment; and led to lower costs of living for both rich and poor households. The chart here shows the estimated distribution of total welfare gains across the household income distribution (the light-gray lines correspond to confidence intervals). These are proportional gains, and are expressed as percent of initial household income. As we can see, there is a net positive welfare effect across all income groups; but these improvements in welfare are regressive, in the sense that richer households gain proportionally more (about 7.5 percent gain compared to 5 percent).17 Evidence from other countries confirms this is not an isolated case – the expenditure channel really seems to be an important and understudied source of household welfare. Giuseppe Berlingieri, Holger Breinlich, Swati Dhingra, for example, investigate the consumer benefits from trade agreements implemented by the EU between 1993 and 2013; and they find that these trade agreements increased the quality of available products, which translated into a cumulative reduction in consumer prices equivalent to savings of €24 billion per year for EU consumers.18 <Image filename="Atkin-et-al-2018-lower-opacity.png"/> ## Wrapping up: Net welfare effects and implications The available evidence shows that, for some groups of people, trade has a negative effect on wages and employment opportunities; and at the same time it has a large positive effect via lower consumer prices and increased availability of products. Two points are worth emphasising. For some households, the net effect is positive. But for some households that's not the case. In particular, workers who lose their job can be affected for extended periods of time, so the positive effect via lower prices is not enough to compensate them for the reduction in earnings. On the whole, if we aggregate changes in welfare across households, the net effect is usually positive. But this is hardly a consolation for those who are worse off. This highlights a complex reality: There are [aggregate gains from trade](https://ourworldindata.org/trade-and-econ-growth), but there are also real distributional concerns. Even if [trade is not a major driver of income inequalities](https://ourworldindata.org/trade-and-income-inequality), it's important to keep in mind that public policies, such as unemployment benefits and other safety-net programs, can and should help redistribute the gains from trade. --- # Trade from a historical perspective --- ## The "two waves of globalization" ### The first "wave of globalization" started in the 19th century, the second one after WW2 The following visualization presents a compilation of available trade estimates, showing the evolution of world exports and imports as a share of [global economic output](https://ourworldindata.org/gdp-data/). This metric (the ratio of total trade, exports plus imports, to global GDP) is known as the 'openness index'. The higher the index, the higher the influence of trade transactions on global economic activity.19 As we can see, until 1800 there was a long period characterized by persistently low international trade – globally the index never exceeded 10% before 1800. This then changed over the course of the 19th century, when technological advances triggered a period of marked growth in world trade – the so-called 'first wave of globalization'. The first wave of globalization came to an end with the beginning of the First World War, when the decline of liberalism and the rise of nationalism led to a slump in international trade. In the chart we see a large drop in the interwar period. After the Second World War trade started growing again. This new – and ongoing – wave of globalization has seen international trade grow faster than ever before. Today the sum of exports and imports across nations amounts to more than 50% of the value of total global output. _(NB. Klasing and Milionis (2014), which is one of the sources in the chart, published an additional set of estimates under an alternative specification. Similarly, for the period 1960-2015, the World Bank's World Development Indicators published an alternative set of estimates, which are similar but not identical to those included from the Penn World Tables (9.1). You find all these alternative overlapping sources in __[this comparison chart](http://ourworldindata.org/grapher/globalization-over-5-centuries)__.)_ <Chart url="https://ourworldindata.org/grapher/globalization-over-5-centuries-km"/> ### Before the first wave of globalization, trade was driven mostly by colonialism Over the early modern period, transoceanic flows of goods between empires and colonies accounted for an important part of international trade. The following visualizations provides a comparison of intercontinental trade, in per capita terms, for different countries. As we can see, intercontinental trade was very dynamic, with volumes varying considerably across time and from empire to empire. Leonor Freire Costa, Nuno Palma, and Jaime Reis, who compiled and published the original data shown here, argue that trade, also in this period, had a substantial positive impact on the economy.20 <Chart url="https://ourworldindata.org/grapher/intercontinental-trade-per-capita-1500-1800"/> ### The first wave of globalization was marked by the rise and collapse of intra-European trade The following visualization shows a detailed overview of Western European exports by destination. Figures correspond to export-to-GDP ratios (i.e. the sum of the value of exports from all Western European countries, divided by total GDP in this region). Using the option labeled 'relative', at the bottom of the chart, you can see the proportional contribution of each region to total Western European exports. This chart shows that growth in Western European trade throughout the 19th century was largely driven by trade within the region: In the period 1830-1900 intra-European exports went from 1% of GDP to 10% of GDP; and this meant that the relative weight of intra-European exports doubled over the period (in the 'relative' view you can see the changing composition of exports by destination, and you can check that the weight of intra-European trade went from about one third to about two thirds over the period). But this process of European integration then collapsed sharply in the interwar period. After the Second World War trade within Europe rebounded, and from the 1990s onwards exceeded the highest levels of the first wave of globalization. In addition Western Europe then started to increasingly trade with Asia, the Americas, and to a smaller extent Africa and Oceania. <Chart url="https://ourworldindata.org/grapher/merchandise-exports-by-continent?facet=none&country=~Western+Europe"/> The next graph, from Broadberry and O'Rourke (2010)21, shows another perspective on the integration of the global economy and plots the evolution of three indicators measuring integration across different markets – specifically goods, labor, and capital markets. The indicators in this chart are indexed, so they show changes relative to the levels of integration observed in 1900. This gives us another viewpoint to understand how quickly global integration collapsed with the two World Wars. _(NB. Integration in the goods markets is measured here through the 'trade openness index', which is defined by the sum of exports and imports as share of GDP. __[In this interactive chart](https://ourworldindata.org/grapher/trade-openness-in-europe?country=FRA+DEU+ITA+ESP+SWE+GBR)__ you can explore trends in trade openness over this period for a selection of European countries.)_ <Image filename="broadberry-migration.png" alt="Migration, Financial integration, and Trade openness from 1880–1996"/> ### The second wave of globalization was enabled by technology The world-wide expansion of trade after the Second World War was largely possible because of reductions in transaction costs stemming from technological advances, such as the development of commercial civil aviation, the improvement of productivity in the merchant marines, and the democratization of the telephone as the main mode of communication. The visualization shows how, at the global level, costs across these three variables have been going down since 1930. <Chart url="https://ourworldindata.org/grapher/real-transport-and-communication-costs"/> The reductions in transaction costs had an impact, not only on the volumes of trade, but also on the types of exchanges that were possible and profitable. The first wave of globalization was characterized by inter-industry trade. This means that countries exported goods that were very different to what they imported – England exchanged machines for Australian wool and Indian tea. As transaction costs went down, this changed. In the second wave of globalization we are seeing a rise in _intra_-industry trade (i.e. the exchange of broadly similar goods and services is becoming more and more common). France, for example, now both imports and exports machines to and from Germany. The following visualization, from the [UN World Development Report (2009)](http://siteresources.worldbank.org/INTWDRS/Resources/477365-1327525347307/8392086-1327528510568/WDR09_12_Ch06web.pdf), plots the fraction of total world trade that is accounted for by intra-industry trade, by type of goods. As we can see, intra-industry trade has been going up for primary, intermediate and final goods. This pattern of trade is important because the scope for specialization increases if countries are able to exchange intermediate goods (e.g. auto parts) for related final goods (e.g. cars). <Image filename="intraindustry-trade-unwde.png" alt="GrubelLloyd_WDR09"/> ## Two centuries of trade, country by country Above we took a look at the broad global trends over the last two centuries. Let's now zoom in on country-level trends over this long and dynamic period. This chart plots estimates of the value of trade in goods, relative to total economic activity (i.e. export-to-GDP ratios). These historical estimates obviously come with a large margin of error (in the [measurement section below](https://ourworldindata.org/trade-and-globalization#measurement-and-data-quality) we discuss the data limitations); yet they offer an interesting perspective. You can add more series by clicking on the option 'Add country'. Each country tells a different story. If you add the Netherlands, for example, you will see how important the [Dutch Golden Age](https://en.wikipedia.org/wiki/Dutch_Golden_Age) was. _(NB. __[Here is the same chart but showing imports](https://ourworldindata.org/grapher/merchandise-imports-gdp-cepii)__, rather than exports.)_ <Chart url="https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii"/> ### Changing trade partners In the next chart we plot, country by country, the regional breakdown of exports. India is shown by default, but you can switch country using the option 'Change entity'. Using the option 'relative', at the bottom of the chart, you can see the proportional contribution of purchases from each region. For example: We see that 48% of the total value of Indian exports in 2014 went to Asian countries. This gives us an interesting perspective on the changing nature of trade partnerships. In India, we see the rising importance of trade with Africa – this is a pattern that we [discuss in more detail below](https://ourworldindata.org/trade-and-globalization#south-south-trade-is-becoming-increasingly-important). <Chart url="https://ourworldindata.org/grapher/merchandise-exports-by-continent?facet=none&country=~IND"/> --- # Trade around the world today --- ## How much do countries trade? ### Trade openness around the world The so-called trade openness index is an economic metric calculated as the ratio of country's total trade (the sum of exports plus imports) to the country's gross domestic product. This metric gives us an idea of integration, because it captures all incoming and outgoing transactions. The higher the index the larger the influence of trade on domestic economic activities. The visualization presents a world map showing the trade openness index country by country. You can explore country-specific time series by clicking on a country, or by using the 'Chart' tab. For any given year, we see that there is a lot of variation across countries. The weight of trade in the US economy, for example, is much lower than in other rich countries. If you press the play button in the map, you can see changes over time. This reveals that, despite the great variation between countries, there is a common trend: Over the last couple of decades trade openness has gone up in most countries. <Chart url="https://ourworldindata.org/grapher/trade-as-share-of-gdp"/> ### Exports and imports in real dollars Expressing trade values as a share of GDP tells us the importance of trade in relation to the size of economic activity. Let's now take a look at trade in monetary terms – this tells us the importance of trade in absolute, rather than relative terms. The chart shows the value of exports (goods plus services) in dollars, country by country. All estimates are expressed in constant 2010 dollars (i.e. all values have been adjusted to correct for inflation). The main takeaway here are the country-specific trends, which are positive and more pronounced than in the charts showing shares of GDP. This is not surprising: most countries today [produce more than a couple of decades ago](https://ourworldindata.org/app/uploads/2013/05/Scatter-1960-vs-2014-GDP.png); and at the same time they trade more of what they produce. You can plot trends by region using the option 'Add country'. _(NB. __[Here is the same chart, but showing imports](https://ourworldindata.org/grapher/imports-of-goods-and-services-constant-2010-us)__ rather than exports.)_ <Chart url="https://ourworldindata.org/grapher/exports-of-goods-and-services-constant-2010-us"/> ## What do countries trade? ### Trade in goods vs Trade in services Trade transactions include goods (tangible products that are physically shipped across borders by road, rail, water, or air) and services (intangible commodities, such as tourism, financial services, and legal advice). Many traded services make merchandise trade easier or cheaper—for example, shipping services, or insurance and financial services. Trade in goods has [been happening for millenia](https://www.caitlingreen.org/2017/03/a-very-long-way-from-home.html); while trade in services is a relatively recent phenomenon. In some countries services are today an important driver of trade: In the UK services account for about 45% of all exports; and in the Bahamas almost all exports are services (about 87% in 2016). In other countries the opposite is true: In Nigeria and Venezuela services accounted for around 2% and 3% of exports, respectively, in 2014. Globally, trade in goods accounts for the majority of trade transactions. But as this chart shows, the share of services in total global exports has increased, from 17% in 1979 to 24% in 2017. _(NB. __[This interactive chart](https://ourworldindata.org/grapher/service-exports-and-imports-gdp)__ shows trade in services as share of GDP across countries and regions.)_ <Chart url="https://ourworldindata.org/grapher/share-of-services-in-total-exports?country=BMU+BRA+NGA+GBR+USA+VEN+OWID_WRL+BHS"/> ### Domestic vs Foreign value added in exports Firms around the world import goods and services, in order to use them as inputs to produce goods and services that are later exported. The imported goods and services incorporated in a country’s exports are a key indicator of economic integration – they tell us something about 'global value chains', where the different stages of the production process are located across different countries. The chart, from UNCTAD's [World Investment Report 2018 - Investment and New Industrial Policies](https://unctad.org/en/PublicationsLibrary/wir2018_en.pdf), shows trends of gross exports, broken down into domestic and foreign value added. That is, the share of the value of exports that comes from foreign inputs. Today, about 30% of the value of global exports comes from foreign inputs. In 1990, the share was about 25%. Foreign value added in trade peaked in 2010–2012 after two decades of continuous increase. This is consistent with the fact that, after the global financial crisis, there has been a [slowdown in the rate of growth of trade in goods and services, relative to global GDP](https://ourworldindata.org/grapher/trade-as-share-of-gdp?tab=chart&country=OWID_WRL). This is a sign that global integration stalled after the financial crisis. _(NB. The integration of global value chains is a common source of measurement error in trade data, because it makes it hard to correctly attribute the origin and destination of goods and services. We discuss this in more detail __[below](https://ourworldindata.org/trade-and-globalization#measurement-and-data-quality)__.)_ <Image filename="UNCTAD-FVA.png"/> ## How are trade partnerships changing? ### Bilateral trade is becoming increasingly common If we consider all pairs of countries that engage in trade around the world, we find that in the majority of cases, there is a bilateral relationship today: Most countries that export goods to a country, also import goods from the same country. The interactive visualization shows this.23 In this chart, all possible country pairs are partitioned into three categories: the top portion represents the fraction of country pairs that do not trade with one-another; the middle portion represents those that trade in both directions (they export to one-another); and the bottom portion represents those that trade in one direction only (one country imports from, but does not export to, the other country). As we can see, bilateral trade is becoming increasingly common (the middle portion has grown substantially). But it remains true that many countries still do not trade with each other at all (in 2014 about 25% of all country-pairs recorded no trade). <Chart url="https://ourworldindata.org/grapher/distribution-of-bilateral-and-unilateral-trade-partnerships"/> ### South-South trade is becoming increasingly important The visualization here shows the share of world merchandise trade that corresponds to exchanges between today's rich countries and the rest of the world. The 'rich countries' in this chart are: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the United States. 'Non-rich countries' are all the other countries in the world. As we can see, up until the Second World War the majority of trade transactions involved exchanges between this small group of rich countries. But this has been changing quickly over the last couple of decades, and today trade between non-rich countries is just as important as trade between rich countries. In the past two decades China has been a key driver of this dynamic: the [UN Human Development Report (2013)](http://hdr.undp.org/sites/default/files/reports/14/hdr2013_en_complete.pdf) estimates that between 1992 and 2011, China's trade with Sub-Saharan Africa rose from $1 billion to more than $140 billion. _(NB. __[Here is a stacked area chart showing the total composition of exports by partnership](https://ourworldindata.org/grapher/share-of-world-merchandise-trade-by-type-of-trade)__. It's the same data, but plotted with stacked series.)_ <Chart url="https://ourworldindata.org/grapher/share-of-world-merchandise-trade-by-type-of-trade-percent"/> ### The majority of preferential trade agreements are between emerging economies The last few decades have not only seen an increase in the volume of international trade, but also an increase in the number of preferential trade agreements through which exchanges take place. A preferential trade agreement is a trade pact that reduces tariffs between the participating countries for certain products. The visualization here shows the evolution of the cumulative number of preferential trade agreements that are in force across the world, according to the World Trade Organization (WTO). These numbers include notified and non-notified preferential agreements (the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO), and are disaggregated by country groups. This figure shows the increasingly important role of trade between developing countries (South-South trade), vis-a-vis trade between developed and developing countries (North-South trade). In the late 1970s, North-South agreements accounted for more than half of all agreements – in 2010, they accounted for about one quarter. Today, the majority of preferential trade agreements are between developing economies. <Image filename="PTAs_WTO2011.png"/> ### Trading patterns have been changing quickly in middle income countries The increase in trade among emerging economies over the last half century has been accompanied by an important change in the composition of exported goods in these countries. The next visualization plots the share of food exports in each country's total exported merchandise. These figures, produced by the World Bank, correspond to the Standard International Trade Classification, in which 'food' includes, among other goods, live animals, beverages, tobacco, coffee, oils, and fats. Two points stand out. First, there has been a substantial decrease in the relative importance of food exports since 1960s in most countries (although globally in the last decade it has gone up slightly). And second, this decrease has been largest in middle income countries, particularly in Latin America. Colombia is a notable case in point: food went from 77% of merchandise exports in 1962, to 15.9% in 2015. Regarding levels, as one would expect, in high income countries food still accounts for a much smaller share of merchandise exports than in most low- and middle-income-countries. <Chart url="https://ourworldindata.org/grapher/share-food-exports"/> --- # Explaining trade patterns: Theory and Evidence --- ## Comparative advantage ### Theory: What is 'comparative advantage' and why does it matter to understand trade? In economic theory, the 'economic cost' – or the 'opportunity cost' – of producing a good is the value of everything you need to give up in order to produce that good. Economic costs include physical inputs (the value of the stuff you use to produce the good), plus forgone opportunities (when you allocate scarce resources to a task, you give up alternative uses of those resources). A country or a person is said to have a 'comparative advantage' if they have the ability to produce something at a lower opportunity cost than their trade partners. The forgone opportunities of production are key to understand this concept. It is precisely this that distinguishes absolute advantage from comparative advantage. To see the difference between comparative and absolute advantage, consider a commercial aviation pilot and a baker. Suppose the pilot is an excellent chef, and she can bake just as well, or even better than the baker. In this case, the pilot has an absolute advantage in both tasks. Yet the baker probably has a comparative advantage in baking, because the opportunity cost of baking is much higher for the pilot. The freely available economics textbook [The Economy: Economics for a Changing World](https://core-econ.org/the-economy/book/text/18.html) explains this as follows: _"A person or country has comparative advantage in the production of a particular good, if the cost of producing an additional unit of that good relative to the cost of producing another good is lower than another person or country’s cost to produce the same two goods."_ At the individual level, comparative advantage explains why you might want to delegate tasks to someone else, even if you can do those tasks better and faster than them. This may sound counterintuitive, but it is not: If you are good at many things, it means that investing time in one task has a high opportunity cost, because you are not doing the other amazing things you could be doing with your time and resources. So, at least from an efficiency point of view, you should specialize on what you are best at, and delegate the rest. The same logic applies to countries. Broadly speaking, the principle of comparative advantage postulates that all nations can gain from trade if each specializes in producing what they are relatively more efficient at producing, and import the rest: “do what you do best, import the rest”.24 In countries with relative abundance of certain factors of production, the theory of comparative advantage predicts that they will export goods that rely heavily in those factors: a country typically has a comparative advantage in those goods that use more intensively its abundant resources. Colombia exports bananas to Europe because it has comparatively abundant tropical weather. Under autarky, Colombia would find it cheap to produce bananas relative to e.g. apples. ### Evidence: Is there empirical support for comparative-advantage theories of trade? The empirical evidence suggests that the principle of comparative advantage does help explain trade patterns. Bernhofen and Brown (2004)25, for instance, provide evidence using the experience of Japan. Specifically, they exploit Japan’s dramatic nineteenth-century move from a state of near complete isolation to wide trade openness. The graph here shows the price changes of the key tradable goods after the opening up to trade. It presents a scatter diagram of the net exports in 1869 graphed in relation to the change in prices from 1851–53 to 1869. As we can see, this is consistent with the theory: after opening to trade, the relative prices of major exports such as silk increased (Japan exported what was cheap for them to produce and which was valuable abroad), while the relative price of imports such as sugar declined (they imported what was relatively more difficult for them to produce, but was cheap abroad). <Image filename="Japan_BernhoffenBrown2014.png"/> ## Trade diminishes with distance The resistance that geography imposes on trade has long been studied in the empirical economics literature – and the main conclusion is that trade intensity is strongly linked to geographic distance. The visualization, from Eaton and Kortum (2002)26, graphs 'normalized import shares' against distance. Each dot represents a country-pair from a set of 19 OECD countries, and both the vertical and horizontal axis are expressed on logarithmic scales. The 'normalized import shares' in the vertical axis provide a measure of how much each country imports from different partners (see the paper for details on how this is calculated and normalised), while distance in the horizontal axis corresponds to the distance between central cities in each country (see the paper and references therein for details on the list of cities). As we can see, there is a strong negative relationship. Trade diminishes with distance. Through econometric modeling, the paper shows that this relationship is not just a correlation driven by other factors: their findings suggest that distance imposes a significant barrier to trade. <Image filename="eaton-kortum-distance-and-geography.png"/> The fact that trade diminishes with distance is also corroborated by data of trade intensity within countries. The visualization here shows, through a series of maps, the geographic distribution of French firms that export to France's neighboring countries. The colors reflect the percentage of firms which export to each specific country. As we can see, the share of firms exporting to each of the corresponding neighbors is largest close to the border. The authors also show in the paper that this pattern holds for the value of individual-firm exports – trade value decreases with distance to the border. <Image filename="France_Trade_Borders_2010.jpg"/> ## Institutions Conducting international trade requires both financial and non-financial institutions to support transactions. Some of these institutions are fairly obvious (e.g. law enforcement); but some are less obvious. For example, the evidence shows that producers in exporting countries often need credit in order to engage in trade. The scatter plot, from Manova (2013)28, shows the correlation between levels in private credit (specifically exporters’ private credit as a share of GDP) and exports (average log bilateral exports across destinations and sectors). As can be seen, financially developed economies – those with more dynamic private credit markets – typically outperform exporters with less evolved financial institutions. Other studies have shown that country-specific institutions, like the knowledge of foreign languages, for instance, are also important to promote foreign relative to domestic trade (see Melitz 200829). <Image filename="manova-bilateral-exports-final.png"/> ## Increasing returns to scale The concept of comparative advantage predicts that if all countries had identical endowments and institutions, then there would be little incentives for specialization, because the opportunity cost of producing any good would be the same in every country. So you may wonder: why is it then the case that in the last few years we have seen such rapid growth in intra-industry trade between rich countries? The increase in intra-industry between rich countries seems paradoxical under the light of comparative advantage, because in recent decades we have seen convergence in key factors, such as [human capital](https://ourworldindata.org/global-rise-of-education), across these countries. The solution to the paradox is actually not very complicated: Comparative advantage is one, but not the only force driving incentives to specialization and trade. Several economists, most notably Paul Krugman, have developed theories of trade in which trade is not due to differences between countries, but instead due to "increasing returns to scale" – an economic term used to denote a technology in which producing extra units of a good becomes cheaper if you operate at a larger scale. The idea is that specialization allows countries to reap greater economies of scale (i.e. to reduce production costs by focusing on producing large quantities of specific products), so trade can be a good idea even if the countries do not differ in endowments, including culture and institutions. These models of trade, often referred to as ‘New Trade Theory’, are helpful to explain why in the last few years we have seen such rapid growth in two-way exchanges of goods within industries between developed nations. In a much cited paper, Evenett and Keller (2002)30 show that both factor endowments and increasing returns help explain production and trade patterns around the world. You can learn more about New Trade Theory, and the empirical support behind it, in [Krugman's Nobel lecture](https://www.nobelprize.org/uploads/2018/06/krugman_lecture.pdf). --- # Measurement and data quality --- There are dozens of official sources of data on international trade, and if you compare these different sources, you will find that they do not agree with one another. Even if you focus on what seems to be the same indicator for the same year in the same country, discrepancies are large. For example, for China in 2010, the estimated total value of goods exports was $1.48 trillion according to [World Bank Data](https://data.worldbank.org/indicator/BX.GSR.MRCH.CD?locations=CN), but it was $1.58 trillion according to [WTO Data.](http://data.imf.org/regular.aspx?key=61545870) That's a difference of about 7%, or a hundred billion US dollars. Such differences between sources can also be found for rich countries where statistical agencies tend to follow international reporting guidelines more closely. In Italy, for example, Eurostat figures of the value of exported goods in 2015 are 10% higher than the merchandise trade figures published by the OECD. And there are also large bilateral discrepancies within sources. According to IMF data, for example, the value of goods that Canada reports exporting to the US is almost $20 billion more that the value of goods that the US reports importing from Canada. Here we explain how international trade data is collected and processed, and why there are such large discrepancies. ## What data is available? The data hubs from several large international organizations publish and maintain extensive cross-country datasets on international trade. Here's a list of the most important ones: * [World Bank Open Data](https://data.worldbank.org/topic/trade) * [IMF Data](http://data.imf.org/?sk=9D6028D4-F14A-464C-A2F2-59B2CD424B85&sId=1515614720959) * [WTO Statistics](https://data.wto.org/en) * [UN Comtrade](https://comtrade.un.org) * [UNCTAD World Integrated Trade Solutions](https://wits.worldbank.org/Default.aspx?lang=en) * [Eurostat](http://ec.europa.eu/eurostat/web/international-trade-in-goods/data/database) * [OECD.Stat](https://stats.oecd.org/Index.aspx?DataSetCode=BIMTS_CPA) In addition to these sources, there are also many other academic projects that publish data on international trade. These projects tend to rely on data from one or more of the sources above; and they typically process and merge series in order to improve coverage and consistency. Three important sources are: * The [Correlates of War Project](http://correlatesofwar.org).31 * The [NBER-United Nations Trade Dataset Project](http://cid.econ.ucdavis.edu/wix.html).32 * The [CEPII Bilateral Trade and Gravity Data Project](http://www.cepii.fr/cepii/en/bdd_modele/presentation.asp?id=32).33 ## How large are discrepancies between sources? In the visualization here we provide a comparison of the data published by several of the sources listed above, country by country, since 1955 up until today. For each country, we exclude trade in services, and we focus only on estimates of the total value of exported goods, expressed as shares of GDP.34 As we can clearly see in this chart, different data sources tell often very different stories. And this is true, to varying degrees, across all countries and years. You can use the option labeled 'change country', at the bottom of the chart, to focus on any country. <Chart url="https://ourworldindata.org/grapher/various-sources-of-the-total-value-of-exports-as-a-share-of-gdp?country=CHN"/> Constructing this chart was demanding. It required downloading trade data from many different sources, collecting the relevant series, and then standardising them so that the units of measure and the geographical territories were consistent. All series, except the two long-run series from CEPII and NBER-UN, were produced from data published by the sources in current US dollars, and then converted to GDP shares using a unique source (World Bank).35 So, if all series are in the same units (share of national GDP), and they all measure the same thing (value of goods exported from one country to the rest of the world), what explains the differences? Let's dig deeper to understand what's going on. ## Why doesn't the data add up? ### Differences in guidelines used by countries to record and report trade data Broadly speaking, there are two main approaches used to estimate international merchandise trade: * The first approach relies on estimating trade from _customs records_, often complementing or correcting figures with data from enterprise surveys and administrative records associated with taxation. The main manual providing guidelines for this approach is the [International Merchandise Trade Statistics Manual](https://unstats.un.org/unsd/tradekb/Knowledgebase/50154/IMTS-Publication-List) (IMTS). * The second approach relies on estimating trade from _macroeconomic data_, typically _National Accounts_. The main manual providing guidelines for this approach is the [Balance of Payments and International Investment Position Manual](https://www.imf.org/external/pubs/ft/bop/2007/bopman6.htm) (BPM6), which was drafted in parallel with the 2008 [System of National Accounts of the United Nations](https://unstats.un.org/unsd/nationalaccount/docs/sna2008.pdf) (SNA 2008). The idea behind this approach is recording changes in economic ownership.36 Under these two approaches, it is common to distinguish between 'traded merchandise' and 'traded goods'. The distinction is often made because goods simply being transported through a country (i.e. goods in transit) are not considered to change the stock of material resources of a country, and are hence often excluded from the more narrow concept of 'merchandise trade'. Also, adding to the complexity, countries often rely on measurement protocols that are developed alongside these approaches and concepts that are not perfectly compatible to begin with. In Europe, for example, countries use the ['Compilers guide on European statistics on international trade in goods'.](http://ec.europa.eu/eurostat/web/products-manuals-and-guidelines/-/KS-02-17-333) ### Measurement error and other inconsistencies Even when two sources rely on the same broad accounting approach, discrepancies arise because countries fail to adhere perfectly to the protocols. In theory, for example, the exports of country A to country B should mirror the imports of country B from country A. But in practice this is rarely the case because of differences in valuation. According to the BPM6, imports and exports should be recorded in the balance of payments accounts on a '_free on board_ (FOB) basis', which means using prices that include all charges up to placing the goods on board a ship at the port of departure. Yet many countries stick to FOB values only for exports, and use CIF values for imports (CIF stands for 'Cost, Insurance and Freight', and includes the costs of transportation).37 The chart here gives you an idea of how large import-export asymmetries are. Shown are the differences between the value of goods that each country reports exporting to the US, and the value of goods that the US reports importing from the same countries. For example, for China, the figure in the chart corresponds to the “Value of merchandise imports in the US from China” minus “Value of merchandise exports from China to the US”. The differences in the chart here, which are both positive and negative, suggest that there is more going on than differences in FOB vs CIF values. If all asymmetries were coming from CIF-FOB differences, then we should only see positive values in the chart (recall that, unlike FOB values, CIF values include the cost of transportation, so CIF values are larger). <Chart url="https://ourworldindata.org/grapher/difference-in-the-value-of-goods-exported-to-and-imported-by-the-us"/> What else is going on here? Another common source of measurement error relates to the inconsistent attribution of trade partners. An example is failure to follow the guidelines on how to treat goods passing through intermediary countries for processing or merchanting purposes. As global production chains become more complex, countries find it increasingly difficult to unambiguously establish the origin and final destination of merchandise, even when rules are established in the manuals. 38 And there are still more potential sources of discrepancies. For example differences in customs and tax regimes, and differences between "general" and "special" trade systems (i.e. differences between statistical territories and actual country borders, which do not often coincide because of things like 'custom free zones').39 Even when two sources have identical trade estimates, inconsistencies in published data can arise from differences in exchange rates. If a dataset reports cross-country trade data in US dollars, estimates will vary depending on the exchange rates used. Different exchange rates will lead to conflicting estimates, even if figures in local currency units are consistent. ## Wrapping up Asymmetries in international trade statistics are large and they arise for a variety of reasons. These include conceptual inconsistencies across measurement standards, as well as inconsistencies in the way countries apply agreed protocols. Here's a checklist of issues to keep in mind when comparing sources. * Differences in underlying records: is trade measured from National Accounts data rather than directly from custom or tax records? * Differences in import and export valuations: are transactions valued at FOB or CIF prices? * Inconsistent attribution of trade partners: how is the origin and final destination of merchandise established? * Difference between 'goods' and 'merchandise': how are re-importing, re-exporting, and intermediary merchanting transactions recorded? * Exchange rates: how are values converted from local currency units to the currency that allows international comparisons (most often the US-$)? * Differences between 'general' and 'special' trade system: how is trade recorded for custom-free zones? * Other issues: Time of recording, confidentiality policies, product classification, deliberate misinvoicing for illicit purposes. These factors have long been recognized by many organizations producing trade data. Indeed, international organizations often incorporate corrections, in an attempt to improve data quality along these lines. The OECD's [Balanced International Merchandise Trade Statistics](https://stats.oecd.org/Index.aspx?DataSetCode=BIMTS_CPA), for example, uses its own approach to correct and reconcile international merchandise trade statistics.40 The corrections applied in the OECD's 'balanced' series make this the best source for cross-country comparisons. However, this dataset has low coverage across countries, and it only goes back to 2011. This is an important obstacle, since the complex adjustments introduced by the OECD imply we can't easily improve coverage by appending data from other sources. At Our World in Data we have chosen to rely on CEPII as the main source for exploring long-run changes in international trade; but we also rely on World Bank and OECD data for up-to-date cross-country comparisons. There are two key lessons from all of this. The first lesson is that, for most users of trade data out there, there is no obvious way of choosing between sources. And the second lesson is that, because of statistical glitches, researchers and policymakers should always take analysis of trade data with a pinch of salt. For example, in a recent [high-profile report](http://www.gfintegrity.org/report/illicit-financial-flows-from-developing-countries-2004-2013/), researchers attributed mismatches in bilateral trade data to illicit financial flows through trade misinvoicing (or trade-based money laundering). As we show here, this interpretation of the data is not appropriate, since mismatches in the data can, and often do arise from measurement inconsistencies rather than malfeasance.41 Hopefully the discussion and checklist above can help researchers better interpret and choose between conflicting data sources. --- # Data Sources --- ### International Historical Statistics (by Brian Mitchell) * **Data:** Aggregate trade (current value), bilateral trade with main trading partners (current value), and major commodity exports by main exporting countries. No data on trade as share of GDP is readily available. * **Geographical coverage:** Countries around the world * **Time span:** Long time series with annual observations – from 19th century up to today (2010) * **Available at:** The books are published in three volumes covering more than 5000 pages.42 At some universities you can access the online version of the books where data tables can be downloaded as ePDFs and Excel files. The online access is [here](https://www.palgrave.com/gp/search?query=International+Historical+Statistics). ### Penn World Tables * **Data:** Real and PPP-adjusted GDP in US millions of dollars, national accounts (household consumption, investment, government consumption, exports and imports), exchange rates and population figures. * **Geographical coverage:** Countries around the world * **Time span:** from 1950-2017 (version 9.1) * **Available at:** Online [here](http://www.rug.nl/research/ggdc/data/pwt/) * _Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2015), "The Next Generation of the Penn World Table" forthcoming American Economic Review, available for download at __[www.ggdc.net/pwt](http://www.ggdc.net/pwt)_ ### Correlates of War Bilateral Trade * **Data:** Total national trade and bilateral trade flows between states. Total imports and exports of each country in current US millions of dollars and bilateral flows in current US millions of dollars * **Geographical coverage:** Single countries around the world * **Time span:** from 1870-2009 * **Available at:** Online at [www.correlatesofwar.org](http://www.correlatesofwar.org) * _This data set is hosted by Katherine Barbieri, University of South Carolina, and Omar Keshk, Ohio State University. Authors note in their 'COW Trade Data Set Codebook': "We advise against using the dyadic data file to produce any national or global totals, based on aggregations of the partner trade."_ ### World Bank - World Development Indicators * **Data:** Trade (% of GDP) and many more specific series: trade in merchandise, trade in services, trade in high-technology, trade in ICT goods, trade in ICT services – always exports and imports separately. Also export and import value index and volume index. * **Geographical coverage:** Countries and world regions * **Time span:** Annual since 1960 * **Available at:** Online at [http://data.worldbank.org](http://data.worldbank.org) ### UN Comtrade * **Data:** Bilateral trade flows by commodity * **Geographical coverage:** Countries around the world * **Time span:** 1962-2013 * **Available at:** Online [here](http://comtrade.un.org/db/default.aspx) * _Bilateral trade flows can be sorted by goods or services, monthly or annually, with choice of classification (including HS codes, SITC, and BEC). Data is likely to be very time consuming to collate as there is no bulk data download unless a user has a premium site license._ ### UNCTADstat * **Data:** Many different measures, including trade by volumes and value * **Geographical coverage:** Countries around the world * **Time span:** For some series, data is available since 1948 - mostly annual, sometimes quarterly. * **Available at:** Online [here](http://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx) * _ UNCTADstat reports export and import data between 1995 and 2016 but primarily to different regional groupings than any one country, so it's probably not best suited to comparing country-to-country bilateral flows._ ### Eurostat - COMEXT * **Data:** Trade flows (also by commodity) * **Geographical coverage:** Europe (EU and EFTA) * **Time span:** Mostly since 1988 * **Available at:** Online [here](http://epp.eurostat.ec.europa.eu/newxtweb/mainxtnet.do) * _Also, the Eurostat website 'Statistics Explained' publishes up-to-date statistical information on international trade in __[goods](http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/International_trade_in_goods)__ and __[services](http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/International_trade_in_services)__. _ ### World Trade Organization - WTO * **Data:** Many series on tariffs and trade flows * **Geographical coverage:** Countries around the world * **Time span:** Since 1948 for some series * **Available at:** Online [here](http://www.wto.org/english/res_e/statis_e/statis_e.htm) * _The WTO offers a bulk download of trade datasets which can be found __[here](https://www.wto.org/english/res_e/statis_e/trade_datasets_e.htm)__. Amongst these are annual WTO merchandise trade values and WTO-UNCTAD-ITC annual trade in services datasets. The former is available from 1948 - 2017, workable, with very little additional formatting needed. However, observations are country groups, such as the EU28, the BRICS etc. rather than country-by-country values. Otherwise, the __[WTO's Statistics Database (SDB)](https://data.wto.org/en)__ has extensive time series on international trade, by country with their trading partners. Again, trading partners are primarily restricted to country groupings rather than individual nations._ ### Fouquin and Hugot (CEPII 2016) - TRADHIST dataset * **Data:** Many different data sets related to international trade, including trade flows by commodity geographical variables, and variables to estimate gravity models * **Geographical coverage:** Countries around the world * **Available at:** Online [here](http://www.cepii.fr/CEPII/en/bdd_modele/bdd.asp) * _ TRADHIST __[Bilateral Trade Historical Series: New Dataset 1827-2014](http://www.cepii.fr/cepii/en/bdd_modele/presentation.asp?id=32)__ provides extensive dyadic trade data, with 97 percent of the observations from 1948 to today drawing on the IMF's Direction of Trade Statistics (DOTS) dataset._ ### NBER-United Nations Trade Data, 1962-2000 * **Data:** Export and import values and volumes by commodity * **Geographical coverage:** Single countries * **Time span:** 1962-2000 * **Available at:** Online [here](http://cid.econ.ucdavis.edu/wixd.html) * _ This data is also available from the __[Center for International Data](http://cid.econ.ucdavis.edu/)__. Bilateral trade data value estimates are very close to that of the World Bank's imports of goods and services time series. _ ### Federico-Tena World Trade Historical Database * **Data:** This website contains annual series of trade by polity from 1800 to 1938 which sum as series for continent and world. * **Geographical coverage:** Countries around the world * **Time span:** 1800-1938 * **Available at:** Federico, G., Tena Junguito, A. (2016). World trade, 1800-1938: a new data-set. EHES Working Papers in Economic History, n. 93. Online [here](https://www.uc3m.es/ss/Satellite/UC3MInstitucional/es/TextoMixta/1371246237481/Federico-Tena_World_Trade_Historical_Database) ### Other historical trade data sets * Data on **UK bilateral trade** for the time 1870-1913 was collected by David S. Jacks. It is downloadable in excel format [here](http://www.sfu.ca/~djacks/data/publications/UK%20trade,%2017%20countries,%201870-1913.xls). * For the time **1870-1913** 21,000 bilateral trade observations can be found in Mitchener and Weidenmier (2008) – Trade and empire, available in the [Economic Journal here](https://scholar.google.com/scholar?hl=en&as_sdt=0%2C44&q=Kris+James+Mitchener+Marc+Weidenmier+2008+Trade+and+Empire&btnG=). * Data on **UK, Germany, France, and US** between mid-19th to 20th Century can be found [here](http://www.nber.org/databases/macrohistory/contents/chapter07.html). * Data on **Developing Country Export** - in 1840, 1860, 1880 and 1900 - by John Hanson is available [here](http://eh.net/databases). * Data on **trade between England and Africa** during the period 1699-1808 is available on the [Dutch Data Archiving and Networked Services](https://easy.dans.knaw.nl/ui/datasets/id/easy-dataset:39576). It was compiled by Marion Johnson. <AllCharts heading="Interactive charts on trade and globalization"/> For more details on this see Forstater, M. (2018) Illicit Financial Flows, Trade Misinvoicing, and Multinational Tax Avoidance: The Same or Different?, CGD Policy Paper 123, available online at: https://www.cgdev.org/publication/illicit-financial-flows-trade-misinvoicing-and-multinational-tax-avoidance It's important to mention here that the economist Jonathan Rothwell recently wrote a [paper](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2920188) suggesting these findings are the result of a statistical illusion. Rothwell's critique received some [attention from the media](https://www.wsj.com/articles/the-truth-about-the-china-trade-shock-1491168339), but Autor and coauthors provided a [reply](http://economics.mit.edu/files/12729), which I think successfully refutes this claim. Magyari, I. (2017). Firm Reorganization, Chinese Imports, and US Manufacturing Employment. US Census Bureau, Center for Economic Studies. Available online [here](http://www.columbia.edu/~im2348/JMP_Magyari.pdf). Topalova, P. (2010). Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India. American Economic Journal: Applied Economics, 2(4), 1-41. Available online [here](http://dl.kli.re.kr/dl_image/IMG/03/000000012162/SERVICE/000000012162_01.PDF). Manova, Kalina. "Credit constraints, heterogeneous firms, and international trade." The Review of Economic Studies 80.2 (2013): 711-744. Alcalá, F., & Ciccone, A. (2004). Trade and productivity. The Quarterly Journal of Economics, 119(2), 613-646. Online [here](https://www.jstor.org/stable/pdf/25098695.pdf). Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press. The graph depicts the 'evolution of three indicators measuring integration in commodity, labor, and capital markets over the long run. Commodity market integration is measured by computing the ratio of exports to GDP. Labor market integration is measured by dividing the migratory turnover by population. Financial integration is measured using Feldstein–Horioka estimators of current account disconnectedness.' This data is taken from: Bayoumi 1990; Flandreau and Rivière 1999; Bordo and Flandreau 2003; Obstfeld and Taylor 2003. The textbook [The Economy: Economics for a Changing World](https://core-econ.org/the-economy/book/text/18.html) explains this in more detail here: [https://core-econ.org/the-economy/book/text/18.html#1810-trade-and-growth](https://core-econ.org/the-economy/book/text/18.html#1810-trade-and-growth) Porto, G (2006). Using Survey Data to Assess the Distributional Effects of Trade Policy. Journal of International Economics 70 (2006) 140–160. Precisely because of the difficulty that arises when trying to establish the origin and final destination of merchandise, some sources distinguish between national and dyadic (i.e. 'directed') trade estimates. For more details about general and special trade see: [http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:General_and_special_trade_systems](http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:General_and_special_trade_systems) Atkin, David, Benjamin Faber, and Marco Gonzalez-Navarro. "Retail globalization and household welfare: Evidence from mexico." Journal of Political Economy 126.1 (2018): 1-73. Leonor Freire Costa, Nuno Palma, and Jaime Reis (2015) – The great escape? The contribution of the empire to Portugal's economic growth, 1500–1800 Leonor Freire Costa Nuno Palma Jaime Reis European Review of Economic History, Volume 19, Issue 1, 1 February 2015, Pages 1–22, https://doi.org/10.1093/ereh/heu019 The chart includes series labeled by the sources as 'merchandise trade' and 'goods trade'. As we explain below, part of the asymmetries in trade data come from the fact that, although 'merchandise' and 'goods' are equivalent in the dictionary, these two terms often measure related but different things. Eaton, J., & Kortum, S. (2002). Technology, geography, and trade. Econometrica, 70(5), 1741-1779. Pavcnik, N. (2002). Trade liberalization, exit, and productivity improvements: Evidence from Chilean plants. The Review of Economic Studies, 69(1), 245-276. Online [here](https://www.jstor.org/stable/pdf/2695960.pdf). The NBER-UN trade data and documentation is available at [http://cid.econ.ucdavis.edu/data/undata/undata.html](http://cid.econ.ucdavis.edu/data/undata/undata.html) There are many papers that try to answer this specific question with macro data. For an overview of papers and methods see: Durlauf, S. N., Johnson, P. A., & Temple, J. R. (2005). Growth econometrics. Handbook of economic growth, 1, 555-677. Online [here](https://digitalwindow.vassar.edu/cgi/viewcontent.cgi?article=1037&context=faculty_research_reports). Frankel, J. A., & Romer, D. H. (1999). Does trade cause growth?. American economic review, 89(3), 379-399. Online [here](https://www.jstor.org/stable/pdf/117025.pd). Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press. Evenett, S. J., & Keller, W. (2002). On theories explaining the success of the gravity equation. Journal of political economy, 110(2), 281-316. Available online [here](https://www.alexandria.unisg.ch/22207/1/evenettkeller.pdf). Trefler, D. (2004). The long and short of the Canada-US free trade agreement. American Economic Review, 94(4), 870-895. Available online [here](https://www.aeaweb.org/articles?id=10.1257/0002828042002633). _Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam: "Name me one proposition in all of the social sciences which is both true and non-trivial." It was several years later than he thought of the correct response: comparative advantage. "That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them."_ (NB. This is an excerpt from https://www.wto.org/english/res_e/reser_e/cadv_e.htm) Crozet, M., & Koenig, P. (2010). Structural Gravity Equations with Intensive and Extensive Margins. The Canadian Journal of Economics / Revue Canadienne D'Economique, 43(1), 41-62. Retrieved from http://www.jstor.org/stable/40389555 The openness index, when calculated for the world as a whole, includes double-counting of transactions: When country A sells goods to country B, this shows up in the data both as an import (B imports from A) and as an export (A sells to B). Indeed, if you compare the chart showing the [global trade openness index](https://ourworldindata.org/grapher/globalization-over-5-centuries-km) and the chart showing [global merchandise exports as share of GDP](https://ourworldindata.org/grapher/merchandise-exports-gdp-cepii?country=OWID_WRL), you find that the former is almost twice as large as the latter. Why is the global openness index not exactly twice the value reported in the chart plotting global merchandise exports? There a three reasons. First, the global openness index uses different sources. Second, the global openness index includes trade in goods and services, while merchandise exports include goods but not services. And third, the amount that country A reports exporting to country B does not usually match the amount that B reports importing from A. We explore this in more detail in our blog post [Trade data: why doesn't it add up?](https://ourworldindata.org/trade-data-sources-discrepancies) See: (i) Feenstra, R. C., & Weinstein, D. E. (2017). Globalization, markups, and US welfare. Journal of Political Economy, 125(4), 1040-1074. (ii) Fajgelbaum, P. D., & Khandelwal, A. K. (2016). Measuring the unequal gains from trade. The Quarterly Journal of Economics, 131(3), 1113-1180. For example, if there is no change in ownership (e.g. a firm exports goods to it's factory in another country for processing, and then re-imports the processed goods) the manual says that statistical agencies should only record the net difference in value. You can find more details about this in [this](http://www.oecd.org/sdd/na/new-standards-for-compiling-national-accounts-SNA2008-OECDSB20.pdf) OECD Statistics Briefing. There are different ways of capturing this correlation. I focus here on all countries with data over the period 1945-2014. You can find a similar chart using different data sources and time periods in Ventura, J. (2005). A global view of economic growth. Handbook of economic growth, 1, 1419-1497. Online [here](https://repositori.upf.edu/bitstream/handle/10230/1248/849.pdf?sequence=1). This issue is actually also a source of disagreement between National Accounts data and customs data. You can read more about it in this report: [Harrison, Anne (2013) FOB/CIF Issue in Merchandise Trade/Transport of Goods in BPM6 and the 2008 SNA, Twenty-Fifth Meeting of the IMF Committee on Balance of Payments Statistics, Washington, D.C](https://web.archive.org/web/20221115005121/https://www.imf.org/external/pubs/ft/bop/2012/12-30.pdf). Berlingieri, G., Breinlich, H., & Dhingra, S. (2018). The Impact of Trade Agreements on Consumer Welfare—Evidence from the EU Common External Trade Policy. Journal of the European Economic Association. Donaldson, D. (2018). Railroads of the Raj: Estimating the impact of transportation infrastructure. American Economic Review, 108(4-5), 899-934. Available online [here](http://eprints.lse.ac.uk/38368/1/ARCWP41-Donaldson.pdf). In the paper, Atkin and coauthors explore the reasons for this, and find that the regressive nature of the distribution is mainly due to richer households placing higher weight on the product variety and shopping amenities on offer at these new foreign stores. Further information on CEPII's methodology can be found at [http://www.cepii.fr/PDF_PUB/wp/2016/wp2016-14.pdf](http://www.cepii.fr/PDF_PUB/wp/2016/wp2016-14.pdf) This chart was inspired by a chart from Helpman, E., Melitz, M., & Rubinstein, Y. (2007). Estimating trade flows: Trading partners and trading volumes (No. w12927). National Bureau of Economic Research. Melitz, J. (2008). Language and foreign trade. European Economic Review, 52(4), 667-699. In the 'Sources' tab in the chart you find a full explanation of how we constructed all series, as well as links to the original raw data. The printed version is published in 3 volumes: Africa, Asia, Oceania – The Americas – Europe. The volume set is described at the publisher's website [here](https://www.palgrave.com/gp/search?query=International+Historical+Statistics). David, H., Dorn, D., & Hanson, G. H. (2013). The China syndrome: Local labor market effects of import competition in the United States. American Economic Review, 103(6), 2121-68. Available online here: [http://economics.mit.edu/files/7723](http://economics.mit.edu/files/7723) Bloom, N., Draca, M., & Van Reenen, J. (2016). Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity. The Review of Economic Studies, 83(1), 87-117. Available online [here](https://web.archive.org/web/20170810215533/http://bfi.uchicago.edu/sites/default/files/research/Van%20Reenen_Trade%20Induced%20Technical%20Change.pdf). Bernhofen, D., & Brown, J. (2004). A Direct Test of the Theory of Comparative Advantage: The Case of Japan. Journal of Political Economy, 112(1), 48-67. doi:1. Retrieved from http://www.jstor.org/stable/10.1086/379944 doi:1 For more information on how the COW trade datasets were constructed see: (i) Barbieri, Katherine and Omar M. G. Omar Keshk. 2016. Correlates of War Project Trade Data Set Codebook, Version 4.0. Available at [http://correlatesofwar.org](http://correlatesofwar.org) and (ii) Barbieri, Katherine, Omar M. G. Keshk, and Brian Pollins. 2009. “TRADING DATA: Evaluating our Assumptions and Coding Rules.” Conflict Management and Peace Science, 26(5): 471–491. Available at: [https://www.researchgate.net/publication/49518195_Trading_Data_Evaluating_Our_Assumptions_and_Coding_Rules](https://www.researchgate.net/publication/49518195_Trading_Data_Evaluating_Our_Assumptions_and_Coding_Rules) The OECD approach consists of four steps, which they describe as follows: "First, data are collected and organized, and imports are converted to FOB prices to match the valuation of exports. Secondly, data are adjusted for several specific large problems known to drive asymmetries. Presently these include “modular” adjustments for unallocated and confidential trade; for exports by Hong Kong, China; for Swiss non-monetary gold; and for clear-cut cases of product misclassifications. The list of modules is expected to grow over time. In the third step, adjusted data are balanced using a “Symmetry Index” that weights exports and imports. As the final step, the data are also converted to Classification of Products by Activity (CPA) products to better align with National Accounts statistics, such as in national Supply-Use tables." You can read more about it here: [http://www.oecd.org/sdd/its/statistical-insights-merchandise-trade-statistics-without-asymmetries.htm](http://www.oecd.org/sdd/its/statistical-insights-merchandise-trade-statistics-without-asymmetries.htm) In addition to the OECD, other sources also use corrections. The IMF's DOTS dataset, for example, uses a 6 percent rule for converting import valuations (in CIF) into export values (in FOB). More information can be found at [the IMF's (2018) working paper on 'New Estimates for Direction of Trade Statistics'.](https://web.archive.org/web/20220208150732/https://www.elibrary.imf.org/view/journals/001/2018/016/001.2018.issue-016-en.xml)

Trade and Globalization

Links from other tables

92 rows from sourceId in posts_gdocs_links
0 rows from gdocId in posts_gdocs_variables_faqs
10 rows from gdocId in posts_gdocs_x_images
1 row from gdocId in posts_gdocs_x_tags
1 row from gdocId in posts_unified