Trading up

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Globalisation may have accelerated, but how big is international trade in a country’s income? For some major countries, the answer is not much bigger than before.
In 2005, the unweighted average of the trade-to-GDP ratios for all OECD countries was 45% but this hides the fact that international trade tends to be greater for smaller countries, particularly those neighbouring trade-minded partners, than for those with relatively large domestic markets. Belgium’s goods and services trade stood at 86% of GDP in 2005, for instance. Hungary and the Czech Republic each saw their trade share expand rapidly. Ireland’s share climbed by over 18 points to nearly 75% of its GDP between 1992 and 2005, but trade in two of its main trading partners, the UK and France, expanded by just five or six points to reach 28.3% and 26.6% of GDP respectively. Trade in the US accounted for just 13.4% of the nation’s GDP, up from slightly over 10% in 1992; Japan’s share rose some five percentage points to 13.6%. Germany breaks the mould for the G7. Its trade expanded faster than the OECD average increase of 12.7 percentage points, from 24.3% of GDP to 38.1% in 2005. Sometimes geographical isolation and high transport costs do not help, which may in part explain why New Zealand’s trade to GDP ratio slipped by a percentage point to some 29.1% of GDP in 2005. ©OECD Observer N° 261, May 2007

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