Trade Data Structure and Basics of Trade

Analytics

Lecture Notes

Biswajit Nag
Indian Institute of Foreign Trade
Qutab Institutional Area
New Delhi, 110016, INDIA
biswajit@[Link]
 International Procurement Planning
and Trade Data
 What goods to be sourced
 From which countries to be sourced
 Defining price at the aggregate level of imports
 At what price to be sourced
 State of partner countries in export ranking
 State of import trend
 Concentration of exporting countries
 Tariff and other trade related issues
 Content for this lecture

 Issues in Trade Data

 Basic Trade Indicators
 Analysis for Procurements : Examples
 Issues in International Trade Data

 Data Collection Methodology

 Data Compilation Methodology
 Data Reporting (HS vs SITC Code)
 Data Dissemination points (DGCI&S, RBI, MoC)
 Data from International Sources (WITS,
Trademap, etc.)
 Data Limitation
 Issues in International Trade Data
 Problems with Trade in Services data
 Problems of State level Data
 Lack of harmonisation between industry and
trade data
 Lack of coordination between various sources
 Lack of matching of data from different reporting
sources from same database
 DGCI&S & RBI: reporting international trade
 Some Important Trade Databases and their Uses
Database Purpose Link
Export Import India’s export and import data [Link]
Database
Details of RTAs, FTAs, Comparison between select [Link]
ADB ARIC FTA provisions through a menu-driven toolkit,
Integration indicators
Trade indices, Trade Costs [Link]
UNESCAP [Link]

Market Identification, Trade Pattern, Short Time [Link]

Trade Map Series Data Analysis, Trade Indices, Generation of
Graphs, Unit Price Comparison

Market Access Map Trade barrier - Tariff, Non-Tariff, Rules of Origin [Link]

Market Identification, Structure of Trade, Trade [Link]

Pattern, Long Time Series Data Analysis, Trade
WITS
indices, Tariff and Non-Tariff Barriers, Unit Price
Comparison
World Trade Atlas Monthly, Quarterly data for countries but paid [Link]

OECD TIVA Trade in Value Added [Link]

SPS-TBT, Anti-Dumping etc. [Link]

WTO ITIP

Bound and Applied Tariff and Import Value [Link]

WTO Tariff

Commodity and Market-wise maximum residue limits [Link]

MRL Database

Understanding the restrictiveness of service trade [Link]

STRI [Link]

STRI Understanding the restrictiveness of service trade [Link]

 Coding System of HS

 How HS system works

 Evolving HS Codes
 Matching between various HS Codes of
various years (e.g. HS96, HS02, etc.)
 Snapshot from WITS

Evolving HS Codes
 Trademap Snapshot

3816
HS Concern: Absence of Harmonization below HS 6 (Case of 610990 –
T-shirts, singlets and other vests, of other textile materials, knitted)

India’s Export to US
Product code Product label 2010 2011 2012
T-shirts, singlets and other vests of textile
materials, knitted or crocheted (excl. cotton):
61099090 Other 38919 47061 70311
T-shirts, singlets and other vests of textile
materials, knitted or crocheted (excl. cotton):
61099010 Of synthetic fibres 10584 23928 29469
T-shirts, singlets and other vests of textile
materials, knitted or crocheted (excl. cotton):
61099020 Of artificial fibres 802 1517 2699

US Import from India

Product code Product label 2010 2011 2012

Women's Tanktops and Singlets, Knitted or
Crocheted, of other Textile Materials: of Man-
6109901065 made Fibers 4159 2826 3802

Women's T-shirts, Knitted or Crocheted, of

6109901050 other Textile Materials: of Man-made fibers 2620 3154 3125
Women's or Girls' Articles similar to T-shirts,
Singlets and Tank Tops of Manmade Fibers,
6109901090 Knitted or Crocheted 1511 1831 1947

Source: Constructed from Trade Map data; Unit in US $ Thousand

HS Concern: (Case of 840731 - Engines, Spark-ignition)
India’s Export to China
Product code Product label 2010 2011 2012
Spark-ignition reciprocating piston engine, of
a kind used for the propulsion of vehicles of
chapter 87, of a cylinder capacity <= 50 cm ³:
84073190 Other 0 0 14
Spark-ignition reciprocating piston engine, of
a kind used for the propulsion of vehicles of
chapter 87, of a cylinder capacity <= 50 cm ³:
84073110 For motor cycles 0 0 0

Chinese Import from India

Product code Product label 2010 2011 2012

Engines, spark-igni reciprocatng, f vehcl Ch

84073100 87, = 50cc 0 0 0
• Very often lines with zero trade are omitted by national customs rather
than reported with a zero value - problems.
• Difficult to tell true zero trade from unreported trade or entry errors.
• Sometimes the missing data can be complemented by mirroring.
• Trade data at high degrees of disaggregation is typically volatile, making
interpolation risky.

Source: Constructed from Trade Map data; Unit in US $ Thousand

HS Concern: Matching Issues with codes at disaggregated level
(example: Others 90)

Tariff Heads 1006 RICE

100610 Rice in the husk (paddy or rough)
√ 10061010 Of seed quality
√ 10061090 Other

√ 10062000 Husked (brown) rice

Semi-milled or wholly-
100630 milled rice, whether or not polished or glazed
√ 10063010 Rice, parboiled
√ 10063020 Basmati rice
√ 10063090 Other
√ 10064000 Broken rice

Different countries may have different definition of product category

‘other’ at the disaggregated level
Trade Indicators
Trade Indicators
 Some Trade Indicators
 Trade Dependence Index
The value of total trade (imports plus exports) as a
percentage of GDP.

Openness of an economy is determined by a

large number of factors, most importantly by
trade restrictions like tariffs, nontariff barriers,
foreign exchange regimes, non-trade policies
and the structure of national economies.
The share of trade transactions in a country’s
value added is a result of all these factors. It is
possible that an open and liberalized economy
has a relatively small TDI, if a large proportion of
its GDP is created by non-traded activities
supported by the domestic market. Low trade
dependence may indicate high trade restrictions
either in that country or towards that country in
overseas markets, or both.
Import Penetration
The ratio of total imports to domestic
demand, as a percentage.
Trade Intensity
The trade intensity statistic is the ratio of two export shares.
The numerator is the share of the destination of interest in
the exports of the region under study. The denominator is
the share of the destination of interest in the exports of the
world as a whole.
Export Diversification
The export diversification index is another measure of the sectoral
concentration of a region’s exports. It tells us the degree to which a region or
country’s exports are dispersed across different economic activities. Unlike
the Hirschmann index, it normalizes the export diversification pattern by
comparing it to the world average.
Definition: The sum of the absolute value of the difference between the
export category shares of the country under study and the world
as a whole, divided by two.
Where s is the country of interest, d and w are the
set of all countries in the world, i is the sector of
interest, x is the commodity export flow and X
is the total export flow.

Range of values: Values range from 0 to 1. A value of zero indicates that the
export pattern exactly matches the world average. Higher values indicate
greater dependence on a small number of products
Competitiveness
Competitiveness in trade is broadly defined as the capacity of an industry to
increase its share in international markets at the expense of its rivals. The
competitiveness index is an indirect measure of international market power,
evaluated through a country’s share of world markets in selected export
categories.

The index is the share of total exports of a given product from the region
under study in total world exports of the same product.

Where s is the country of interest, d and w are the set of all countries in the
world, i is the sector of interest, and x is the commodity export flow. In
words, it is the share of country s’s exports of good i in the total world exports
of good i.
 Revealed Comparative Advantage (RCA)
Comparative advantage underlies economists’ explanations for the observed
pattern of inter-industry trade. In theoretical models, comparative advantage is
expressed in terms of relative prices evaluated in the absence of trade. Since
these are not observed, in practice we measure comparative advantage
indirectly. Revealed comparative advantage indices (RCA) use the trade
pattern to identify the sectors in which an economy has a comparative
advantage, by comparing the country of interests’ trade profile with the world
average.
Definition: The RCA index is defined as the ratio of two shares. The numerator
is the share of a country’s total exports of the commodity of interest in its total
exports. The denominator is share of world exports of the same commodity in
total world exports. RCA takes a value between 0 and +∞. A country is said to
have a revealed comparative advantage if the value exceeds unity.

Where s is the country of interest, d and w are the set of all

countries in the world, i is the sector of interest, x is the
commodity export flow and X is the total export flow. The
numerator is the share of good i in the exports of country s,
while the denominator is the share of good i in the exports of
the world.
 Intra-Industry Trade Index
Index could be sectoral or aggregate.

The sectoral intra-industry trade (IIT) is a measure of the degree to

which trade in a particular sector represents intra-industry trade
(based on scale economies and/or market structure). By engaging in
IIT, a country can reduce the number of similar goods it produces,
and benefit from scale economies.

Higher IIT ratios suggest that these sources of gains are being
exploited. May also indicate that adjustment costs would be lower
with trade expansion

The aggregate intra-industry trade index provides us with an overall

measure of the relative importance of intra-industry trade in an
economy’s trade profile. As with sectoral IIT, higher ratios suggest
that the economies of scale and variety sources of gains are being
exploited.
Intra-Industry Trade Index
Index could be sectoral or aggregate.
Sectoral Index

Aggregate Index

Sectoral Index is calculated as One minus the ratio of the

absolute value of exports in a given product category less
imports in the same category to the sum of exports and
imports in the category. The aggregate value is the trade
weighted average of the sectoral IIT indices. The value ranges
between 0 and1
 Modeling International Trade
Computable General Equilibrium (CGE)
CGE models are numerical models based on general equilibrium theory. Their
objective is to turn abstract models of general equilibrium theory into a practical
tool for policy analysis. A number of features distinguish GE models. They are
multi-sectoral, and in many cases multi-regional, and the behavior of economic
agents is modeled explicitly through utility and profit maximizing assumptions.

In addition, economy-wide constraints are rigorously [Link] other words,

the markets in a CGE model are all linked together. Distortions in an economic
system will often have repercussions far beyond the sector in which they occur.
By linking markets, CGE techniques are effective at capturing the relevant
feedback and flow-through effects.

CGE models are explicitly dependant on number of issues such as theoretical

consistency, the ability to highlight the importance of linkages between sectors,
the ability to incorporate unique features of an economic system and the ability
to predict values for many economic variables in the system.
 Modeling International Trade
Computable General Equilibrium (CGE)
Some major limitation of CGE models are

•The data requirements of CGE models are substantial.

• The human capital investment required in building/using these models is very
high.
• There is often uncertainty over parameters, specification, and experimental
design.
• By covering all sectors in an economy, a CGE model may miss key features
of critical sectors.
• It can be difficult to know what is driving the results (the “blackbox” critique).
Gravity Model
The gravity model is perhaps the most widely used econometric model of
international trade patterns. An econometric model uses historical data to try
to estimate (and test the robustness of) a hypothesized economic
relationship. Once estimated, an econometric model may also be used to try
and extrapolate to cases outside of what has been experienced, i.e., as a
predictive policy device.

The model is very easy to set up with simple econometric tools.

Earlier, gravity model was accused of lack of theoretical foundation.

However, views are changing. The development of the ‘new’ trade theory
helped to provide stronger theoretical foundations for the specification, and it
is now recognized that a reduced form gravity equation can be derived from
most models of international trade that incorporate transportation costs
Gravity Model
In order to estimate the gravity model a double logarithmic specification is
usually used, relating the bilateral trade flows of each country pair (the
dependent variable) to the product of their GDPs and the distance between
them (the independent variables), plus an error term to capture the random
component in the data. In most applications, additional independent variables
are also often included in the model to improve the fit. These may include
measures of openness, remoteness, common language or currency, a
common border, and of course the presence or absence of a regional trading
agreement. The variables may be continuous (e.g., some measures of
openness) or qualitative measures represented by dummy variables (e.g., a
country pair is assigned a 1 if they share a common language, a 0 otherwise)

As a single equation linear model, the gravity model can be estimated easily
using ordinary least squares (OLS), although other methods (e.g.,
generalized least squares) may be helpful if the data exhibits
heteroscedasticity. If the data from which the model is estimated is a panel
(i.e., is composed of both time series and cross-sectional elements) then
pooled OLS, fixed effects or random effects models may also be used.
Example (Nag and Nandi, 2006)
 Model on India’s major trade partners and SAARC countries
 Panel Data Model
 Period of study 1990-2000
 Multiplicative interactive forms for GDP and per capita GDP
have been used to consider continuous cross influence by
sample countries.
 The model was estimated by fixed-effect panel data
estimation technique.
 Egger (2000) has justified the use of fixed effect model.
The Model continued…
 The model below, is inspired from Frankel et al.
(1995), Ghosh (2002), and Matyas (1997).

Log (Xind j t) = ind + j + t + a1 log (GDPind ∗ GDPj) +

a2 log (per capita GDPind ∗ per capita GDPj) + a3
log (distance indj)+ a4 log (nom-exchange rateind /
nom-exchange ratej) + a5 log (exp price indexind /
world exp price index) + a6 log (consumer price
indexj / consumer price indexind) + uind jt

 ind = India; j = 1, 2…16; (India’s top 10 export destinations and six SAARC
countries); t = 1, 2…11; (1990–2000); Xind = India’s total export
Example
 Constant Market Share Model
Example (Nag and Chatterjee, 2007)

Constant Market Share (CMS) analysis is a popular tool for analyzing changes
in exports of a country. It helps us to estimate the change in competitiveness of
the export basket in an importing country.

The model is indebted to work by Ichikawa (2003), Richardson (1971),

Fagerberg and Sollie (1987). It makes attempt to estimate change in
competitiveness of India and China in each other’s market

The intrinsic norm of this analysis is that a country's export share in a given
market should remain unchanged over time. The difference between the actual
export growth from a member country into a given market and the unchanging
export share implied by the ‘constant-market share norm’ is attributed to the
following three factors:
The effects of a general increase in demand for imports in the given
market.
Commodity composition.
Changes in competitiveness.
Keeping the market share constant, the model expresses the competitiveness
term as negative or positive to adjust the actual change in market share.
 The Model continued…
X(t) – X(0) = mX(0) + ∑{(mi – m) Xi(0)} + ∑{Xi(t) – Xi(0) – miXi(0)}

 X: exports of country A to country B

 Xi: commodity i exports of country A to country B
 m: Percentage increase in country B's total imports from period 0 to period t
 mi: Percentage increase in country B's imports of commodity i between period 0
to period t
 and X=∑Xi

 The right hand side can be divided into three components

 The general rise in country B's total imports
 The commodity composition of country A's exports to B in period 0, and
 An unexplained residual indicating the difference between country A’s
actual exports increase to country B and the hypothetical increase if
country A maintained its share of exports of each commodity group in
country B.
Sample Result

India’s Increase in Exports to China: Segregation of Various Effects

(2002-04)
General increase Commodity Increased
Group in imports composition competitiveness
(No of commodities)

Agriculture 247.21 -39.20 -108.01

Chemical 70.14 3.96 25.90
Inorganic 70.81 42.23 -13.04
Organic 92.29 -51.88 59.59
Pharmaceutical 71.95 -17.51 45.55
Plastic 36.51 20.93 42.56
Rubber 83.35 -25.26 41.91
Lather 12.61 -10.93 98.32
Paper -145.53 160.94 84.59