1
$\begingroup$

I wondered if it was possible for all countries to have a Trade Surplus - which turns out to be impossible because the total value of imports in the world must be equal to the total value of exports in the world - because one country's export is another's import, and vice-vera. With this information, I can make 2 assumptions:

  • All countries cannot have a trade surplus simultaneously.
  • The total trade surplus in the world (sum of C.A.B. of all countries with positive C.A.B.) must be equal to the total deficit. Inversely, the sum of C.A.B. of all countries must be zero.

I looked at the data for the Current Account Balance (2017 estimate) for all countries, from CIA World Factbook. However, contradictory to my assumption, here's what I observed:

  1. Total Surplus (excluding EU from the list) = $1,469,654,370,000

  2. Total Deficit = -$1,103,897,200,000

  3. Net Balance = Surplus + Deficit = $365,757,170,000

A positive net balance should point out that the world has a net trade surplus - which I wouldn't expect. This can arise because of incorrect assumptions, flawed data or errors in calculation.

My question is about why I make this observation, or if my assumption is wrong, why and what does the data actually mean?

Improve this question
$\endgroup$

2 Answers 2

Reset to default
3
$\begingroup$

Since we are not trading with aliens (yet), you are right in assuming the global account balance ought to be zero. Your data contradicts this because it is collected by numerous statistical agencies who differ in their capability and their methods. Examples for different outcomes could arise from:

  • different degrees of border control. The fact that an export is registered in country A does not mean it is registered as an import in country B.
  • different capabilities in processing and collecting data. In some development countries, a substantial share of the economy is informal, i.e. outside the scope of any authority.
  • different statistical concepts applied.

There are datasets which try to overcome these difficulties by correcting them such that the global account balance is zero.

Improve this answer
$\endgroup$
2
  • $\begingroup$ I guess you should be right, particularly the first point. Do you have any source that has the global CAB = 0? $\endgroup$
    – Mrigank Pawagi
    Commented Mar 24, 2020 at 15:50
  • $\begingroup$ I think this is one of them: gtap.agecon.purdue.edu/databases/default.asp $\endgroup$
    – E. Sommer
    Commented Mar 25, 2020 at 11:52
1
$\begingroup$

Two answers:

  1. How trade is recorded: exports are recorded as FOB (Free on board), whereas imports are recorded as CIF (cost, insurance and freight).

  2. Re-exports. Essentially this is double counting of exports. For instance, Hong Kong and Belgium have high values of exports relative to their production, but that is because they are intermediate destinations which then export to third destinations. These exports get double counted.

Improve this answer
$\endgroup$
2
  • 1
    $\begingroup$ on the second point: this means imports are also double counted aren't they? $\endgroup$
    – E. Sommer
    Commented Mar 25, 2020 at 11:49
  • $\begingroup$ Not sure. That is because imports have to be declared to customs and import duties have to be paid by the importer. Given that import duties will not be paid, imports will not be counted (at least in the statistical accounts). $\endgroup$
    – ChinG
    Commented Mar 25, 2020 at 12:37

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.