The Trade Performance Index. Technical notes. May Market Analysis Section International Trade Center (ITC) Geneva, Switzerland

Transcription

1 The Trade Performance Index Technical noes May 27 Mare Analysis Secion Inernaional Trade Cener (ITC) Geneva, Swizerland 1

2 ACKNOWLEDGEMENTS The Trade Performance Index has been developed a ITC s Mare Analysis Secion by M. Mimouni, L. Fonagné (Universié de Paris I) and F. von Kirchbach, wih he assisance of K. Cone. M. Freudenberg and J.-M. Paseels have also conribued o hese echnical noes. This documen has no been formally edied by he Inernaional Trade Cenre. The designaions employed and he presenaion of maerial in his paper do no imply he expression of any opinion whasoever on he par of he Inernaional Trade Cenre concerning he legal saus of any counry, erriory, ciy or area or of is auhoriies, or concerning he delimiaion of is froniers or boundaries. Commens and suggesions for amelioraion are welcome. Please conac he Mare Analysis Secion a mas@inracen.org, el:

3 SUMMARY ITC developed he Trade Performance Index (TPI) wih he aim of assessing and monioring he muli-faceed dimensions of expor performance and compeiiveness by secor and by couny. A presen, he TPI covers 184 counries and 14 differen expor secors. The index calculaes he level of compeiiveness and diversificaion of a paricular expor secor using comparisons wih oher counries. In paricular, i brings ou gains and losses in world mare shares and sheds ligh on he facors causing hese changes. Moreover, i moniors he evoluion of expor diversificaion for producs and mares. The TPI is limied by is purely quaniaive approach, alhough i does provide a sysemaic overview of secoral expor performance and comparaive and compeiive advanages. For each counry and each secor, he TPI provides hree ypes of indicaors: a general profile, a counry posiion for he laes available year and changes in expor performance in recen years. Alogeher, he TPI maes use of around wo dozen of quaniaive performance indicaors. For ease of reference, hese indicaors are presened in absolue erms and, in addiion, raned among he 184 counries covered by he TPI. Moreover, one composie raning referring o he overall posiion of a counry and secor is calculaed. This composie raning is based on five crieria, namely he value of ne expors, per capia expors, he world mare share, he diversificaion of producs, and he diversificaion of mares. Inroducion The rade performance of individual counries ends o be a good indicaor of economic performance since well performing counries end o record higher raes of GDP growh. The maoriy of developing counries have oined he World Trade Organizaion (WTO) and have aen iniiaives aimed a opening heir economies. Neverheless, he oucome has no always been sysemaically posiive wih expor performance someimes remaining disappoining. I is difficul o esablish an all embracing definiion of successful rade performance. Trade champions conras wih cerain specialised exporers ha suffer from a deerioraion in heir erms of rade. For example, some developing counries record high growh raes by specialising in niche mares and concenraing heir expor mares, while oher developing counries record more moderae raes of growh wih a well diversified array of producs and parner counries. In oher cases, successful performance is he resul of a favourable produc or mare peneraion since he beginning. Successful performance can also be gauged in erms of a counry s abiliy o adap is expor profile o changing paerns of world demand. The las approach is he mos dynamic and demand-driven rade policy sance. The Trade Performance Index (TPI hereafer) designed by ITC aims o acle he complex and mulidimensional naure of rade paerns. This index is compued using he world s larges rade daabase, 3

4 COMTRADE (of he Unied Naions Saisics Division), covering 184 counries 1, where more han 95% of world rade in 5, producs is repored a he 6-digi level of he Harmonized Sysem (HS). Since COMTRADE capures around 95 % of world rade, he TPI is calculaed no only for counries ha repor heir own rade daa, bu also for over one hundred primarily low-income counries ha do no repor naional rade saisics. Given ha such an amoun of informaion would be overwhelming o he final user, producs are grouped ino 14 secors (see appendix 3). Calculaions are made a he produc level and resuls are presened a he secoral level and for he economy as a whole. For each counry and each secor, he TPI provides a general profile, indicaors on a counry s posiion and indicaors on changes in expor performance in recen years. The res of he paper covers he obecives, mehodology and resuls of he TPI framewor. 1- Moivaion for developing he Trade Performance Index Generally, rade performance is characerised by rough indicaors, such as he level of openness (oal rade in goods and services divided by GDP) or growh of expors over a given period (such as he World Ban s World Developmen Indicaors). Recen research on he relaionship beween rade and growh suggess ha openness alone is no a sufficien crieria for deermining high levels of growh. Oher facors, such as he ype of produc available, he level of mare and economic diversificaion, he posiioning on qualiy ladders, are also significan in explaining growh. In addiion, i is imporan o deermine he reasons for counry differences in expor growh and o deermine he redisribuive process of mare shares among compeiors. Deparing from he rough indicaors referred o above, microeconomic and generally qualiaive indicaors are used o characerise he compeiiveness of naions. In his ligh, he Microeconomic index of compeiiveness (Porer and Chrisensen, 1999), is based on he micro-foundaions of a counry s compeiiveness. Launched in 1998 as par of he Global Compeiiveness Repor, his index is based on a survey of some 4, businessmen and governmen officials in 58 counries, including OECD counries 2. Regressing income per capia on his index explains more han 8% of he variance of income in he sample. A quaniaive mehod was developed in order o complemen he qualiaive approach, which may be criicised on he ground of being limied o a small number of developing counries. I appears ha he relaive posiion of a counry or produc on he inernaional mare, and is developmen over ime, is a good indicaor of compeiiveness. Trade saisics capure hese changes. Trade saisics have he advanage of being available for a subsanial number of counries. For hose counries which do no repor rade 1 In he case of non-reporing counries, he rade is reconsiued on he basis of parner counry saisics (mirror saisics). This approach does no capure rade among non-reporing counries. 2 Indicaors range from he overall infrasrucure qualiy o adminisraive infrasrucure, informaion infrasrucure, capial availabiliy, human resources ec. 4

5 saisics, heir rade profile can be (parially) compleed by using mirror saisics. Lasly, rade daa is broen down a he indusry and produc levels, which provides a disaggregaed insigh ino rade performances. On his basis, developing counries can be raned according o heir rade performance, based on various crieria. A raning can be provided by counry, secor, or a combinaion of differen crieria. I mus be sressed ha he performance of individual counries canno be deermined on he basis of a resriced sample of counries or producs. The derivaion of he relaive expor performance is achieved by including a significan number of counries, ogeher wih a deailed produc breadown. 2- Conen of he TPI For each counry and each secor, he TPI provides indicaors on a counry s general profile, on a counry s posiion and on he decomposiion of he counry s change in world mare share. Alogeher, he TPI consiss of 22 quaniaive indicaors of rade performance. For ease of reference, hese indicaors are presened in absolue erms and, in addiion, combined o form a raning among he counries. All his informaion is grouped under hree caegories referring o general profile, curren performance and decomposiion of changes in rade performance, as illusraed in Table 1. Curren performance (Indicaors used for he compuaion of he composie index) P1. Value of ne expors P2. Per capia expors P3. Share in world mare P4. Produc diversificaion and concenraion P5. Mare diversificaion and concenraion Table 1: Groups of indicaors used General profile G1. Value of expors G2. Trend growh of expors, since 21 G3. Share in naional expors G4. Share in naional impors G5. Growh in per capia expors, since 21 G6. Level in relaive uni values G7. Maching of dynamics of world demand since 21 G8. Change of world mare share in % poins, since 21 Decomposiion of changes in world mare share since 21 C1. Relaive change of world mare share Decomposed ino: (C1a) Compeiiveness effec (C1b) Iniial geographic specialisaion (C1c) Iniial produc specialisaion (C1d) Adapaion effec 3- Daa used The raw rade daa using for calculaing he indicaors are defined a he 6-digi level of he Harmonized Sysem, 1996 ediion, which includes more han 5' produc iems. The daa are exraced from COMTRADE (hp://comrade.un.org), he Unied Naions Commodiy Trade Saisics Daabase, mainained by he Saisics Division of he UN. 5

6 Around 1 counries have repored heir rade daa sysemaically over he period in he 1996 ediion of he HS. For he oher counries (around 9), we are using mirror esimaes, which are derived from parner counries saisics. Since COMTRADE capures around 95 % of world rade, mirror esimaes give usually gives fairly reliable resuls. See Box 1 for a descripion of problems encounered using rade daa. In order o obain more robus ranings of rade performance, for each secor we have only considered counries whose expors are superior o US$ 1 million for each year of he period and whose oal expors for he same period are superior o US$ 25 million. Box 1: Foreign Trade Saisics: wha Users Should Tae ino Consideraion Foreign rade saisics provide a differeniaed picure of rade flows among counries. They are comprehensive in erms of produc coverage (more han 5, producs under he Harmonized Sysem), geographical coverage (over 1 counries covering 95 per cen of world rade) and ime series (daa under he Harmonized Sysem are available for he las decade). Moreover, hey are readily available a moderae coss. This maes hem an aracive source for mare research and he assessmen of rade performance. Agains his bacground, ITC has developed a number of ools for inernaional mareing and rade promoion, based on rade saisics. The Trade Performance Index and TradeMaps are cases in poin. All of hese ools srive o presen rade saisics in an analyical and user friendly forma. Nowihsanding he araciveness of his comprehensive source of informaion, users should facor in he following wea poins of foreign rade saisics. i) Trade daa are never complee. Smuggling and non reporing represen a serious problem in a number of counries. In addiion, rade saisics as any source of informaion are no free of misaes and omissions. ii) Mos counries include impors for re expors and re expors in heir rade saisics. A low income counry may be an exporer of airplanes simply because is naional airline has sold second hand planes. iii) According o inernaional convenions for reporing rade saisics, he expor value refers o he oal or conrac value, which may, of course, be very differen from local value added. For many processing aciviies, for insance, he local value added remains below 2 per cen of he expor value. iv) Deailed rade saisics are available only for merchandise rade and no for services, alhough he laer may accoun for a sizeable share of naional expors. v) Even a he lowes level of disaggregaion, produc groups in he rade nomenclaures do no necessarily reflec rade names and ofen conain a wide spread of differen producs. Moreover, he produc nomenclaure is someimes misleading. The labels of aggregaed produc groups are ofen very general and provide a imes only limied guidance on he leading iems wihin he group of producs concerned. 6

7 vi) Exchange raes flucuaions are no always properly recorded in inernaional rade saisics. Values are normally aggregaed over he period of one year in local currency and convered ino US dollars. vii) For counries ha do no repor rade daa o he Unied Naions, ITC uses parner counry daa, an approach referred o as mirror saisics. Mirror saisics are a second bes soluion (beer han having no daa a all). A he same ime, hey have a number of shorcomings when compared o he firs bes soluion of naionally repored daa. Firs and foremos, hey do no cover rade wih oher non reporing counries. As a resul, mirror saisics hardly cover Souh Souh rade. For an assessmen of inra African rade, for insance, mirror saisics are no a suiable source of informaion. Second, here is he problem of ransshipmens, which may hide he acual source of supply. Third, mirror saisics inver he reporing sandards by valuing expors in cif erms (i.e. including ranspor cos and insurance) and impors in fob erms (excluding hese iems). In view of he above shorcomings, rade saisics should never be he sole source of insigh bu need o be complemened by oher sources and in paricular cross checed by produc specialiss and indusry insiders. Overall, ITC's experience suggess ha rade saisics represen a very useful source of informaion and a valid poin of deparure for sraegic mare research, if analysed wih a healhy mix of scepicism and pragmaism vis à vis heir srengh and shorcomings. 4- Descripion of indicaors This secion examines he raionale and he calculaion of each indicaor enering in he TPI. General profile indicaors, posiion-relaed indicaors and change-relaed indicaors are surveyed respecively. All indicaors are calculaed for each of he 14 secors a he produc level. Original daa used in he compuaion is a he 6-digi level of he HS nomenclaure (1996 ediion), corresponding o more han 5, producs as a whole. P1- Value of ne expors: Ne expors are defined as expors less impors. A counry's ne expors are a reliable indicaor of is posiion on he world mare for wo reasons. Firsly, ne expors eliminae re-expors, which would oherwise inroduce a bias ino he raw daa. Secondly, he indicaor aes ino accoun he inernaional division of producion processes, since a large par of impored inermediae producs found wihin expors usually belong o he same secor (e.g. elecronic pars and assembled compuers). Hence, ne expors provide a very simple bu reliable correcion for dealing wih he globalisaion of producion processes and he induced verical specialisaion of counries a various sages of producion. P2- Per capia expors: The value of per capia expors indicaes he level of ouward looing of a counry and he exen o which a counry s populaion produces for he world mare. P3- Share in world mare (percenage share of world expors): he world mare share for a specific counry is he raio of oal counry expors o oal world expors. 7

8 P4- Produc diversificaion: diversificaion, measured hrough expors, is a good indicaor of producion srucures and indusry s developmen level. Diversificaion limis he dependence on a small number of producs and hence reduces a counry s vulnerabiliy o indusry-specific exernal shocs. In order o capure he degree of produc diversificaion, wo separae indicaors are calculaed: he equivalen number of producs and he spread. The spread is he inverse of he corresponding concenraion. The equivalen number (EN=1/Herfindal), is a heoreical value which represens he number of mares of idenical size ha would lead o he degree of expor concenraion exacly equal o he observed one. Because his indicaor is no highly sensiive o aciviies of relaively wea imporance, i is a measuremen ha is suied o secoral sudies. We sar by presening hese indicaors and hen urn o an example illusraing he value added of combining he wo indicaors. Calculaing produc differeniaion by means of he equivalen number disinguishes for each counry he equivalen number of expored goods of equal imporance (eiher wihin each secor or in he whole naional economy) leading o he same concenraion of expors. The increase in ran is a funcion of he increase in he level of diversificaion (boh for producs and mares). The larger he index value, he greaer he diversificaion of expors, and consequenly he beer he raning. The spread index complemens he equivalen number. Spread indices measure he dispersion beween he highes and lowes value in a given saisical series. They are calculaed using a weighed sandard error. The spread index for producs calculaes for each counry he disribuion of expor producs and compares i o he average expor value. The greaer he disribuion (i.e. spread) of expors from a counry as compared o he average, he higher he value of he index. If all counries expor all producs, one of hese indicaors would be sufficien. Since his is no he case, he combinaion of he wo indicaors is useful. The argumens for combining he wo indicaors of dispersion are illusraed in Appendix 1. In echnical erms, he equivalen number (for producs) is calculaed as in equaion (2). 1 NEicl = (2) n 2 i. = 1 i. cl wih:. he expor of produc by counry i a year. i i cl. counry i expors of all producs belonging o he cluser cl a year. i. he share of produc in oal expors of counry i in cluser cl. i. cl Turning o he index of weighed spread, equaion (3) indicaes ha he sandard deviaion divided by he number of producs imes he average value of expors for individual producs has been used. 8

9 ( i. i. cl ) cl 2 = 1 S cl = (3) N( i. cl ) wih:. counry i expors of produc o mare i in year. i i cl ( i i. ) cl. he average value of counry i expors in year for he cluser cl. cl = 1. he deviaion o he average of produc in cluser cl for counry i. ( ) 2 i. i. cl he sandard deviaion. S cl he weighed spread. P5- Diversificaion of mares: diversifying parner counries reduces a counry s dependence on a small number of expor mares and hence he vulnerabiliy o shocs wihin desinaion counries. In order o capure he degree of mare diversificaion, he same wo complemenary indicaors referred o above are used: he equivalen number of mares and he spread. The equivalen number used for calculaing mare diversificaion (equaion 4) disinguishes for each counry, he number of parner counries weighed according o heir imporance. The increase in ran is a funcion of he increase in he level of diversificaion of mares. The bigger he index value, he greaer he diversificaion of mares and consequenly he beer he raning. 1 NEi = (4) p 2 icl = 1 i. cl wih : counry i expors of all producs belonging o he cluser cl o counry in year. icl. counry i oal expors of all producs belonging o he cluser cl i cl icl i. cl he share of mare in counry i oal expors of producs belonging o he cluser cl. Spread indices measure he exising dispersion beween he highes and lowes value of a given saisical series. They are calculaed using he weighed sandard error (equaion 5). The spread index for mares compares for each counry, he share of is expors direced o differen parner counries wih he average expor value. The greaer he dispersion of expors from his counry (i.e. he greaer he spread) as compared o he average, he higher he value of he index. Concerning posiions, he raning of he 184 counries is a funcion of he degree of diffusion of expored producs (of a counry s expors o parner counries). The smaller he index, he more expored producs are evenly disribued (amongs parner counries) and he beer he raning. 9

10 ( icl ) ipcl p 2 = 1 S pcl = (5) N( ipcl ) wih: counry i oal expors o mare in cluser cl in year. icl ipcl counry i average expor o he p mares of producs belonging o he cluser cl in year cl = 1 ( ) 2 icl ipcl he sandard deviaion. In addiion o hese indicaors, he TPI includes a composie index (CI) 3, which is based on a simple average of he five ranings of indicaors P1 o P5, described previously. The composie index reflecs he posiion of a counry in a given secor for a given year, in erms of rade performance. Changes over ime of his posiion reflec improvemens or deerioraion in rade performance of he counry under analysis. A second se of indicaors aims a giving he general profile for he counry considered. However, hese indicaors are no used in he calculaion of he final raning provided by he TPI, as already menioned. G1- Value of expors: Value of oal counry expors by secor is given in million of US$ for he curren year. G2- Trend of expors: Average per annum growh of expor values since he year 21. G3 (G4)- Share in naional expors (impors): This refers o he share of expors (impors) by secor in relaion o oal counry expors (impors). G5- Change in per capia expors: The level of expors is deermined by he demand for a counry s producs on world mares and a counry s abiliy o saisfy ha demand, which can be relaed o is size. Hence, he value of per capia expors shows how ouward looing is a counry, and he exen o which he populaion produces for he world mare. The change in per capia expors reflecs changes in a counry s ouward looing sance and performance for he group of producs considered. G6- Relaive uni value: The RUV of each secor is calculaed as he raio of he average uni value of expors for a counry o he world average uni value. The reference poin or average relaive uni value is 1 (he uni value in he argeed counry equals he uni value in he world mare). If he RUV is below (above) 1, hen he counry expors is produc a a lower (higher) price han he world average uni price. 3 In he previous ediions of he TPI, his index was referred as he "Curren Index (P)". 1

11 Tradiionally, he comparison of uni values for homogeneous producs gives an indicaion of exporers relaive prices. However, according o he new heories of inernaional rade, producs are differeniaed by qualiy, which is ofen refleced by differences in price. Accordingly, prices are considered as an indirec indicaor of he qualiy of differeniaed producs: assuming ha a consumer has access o produc informaion, wo producs of differen qualiy canno be sold a he same price. However, since prices are no available for individual producs, or even for indusries, uni values (values divided by quaniies) are aen as proxies for prices. Higher uni values are considered as reflecing a higher qualiy, oher hings being equal, and no as an indicaion of poor price compeiiveness. G7- Adapaion o world demand: his index is calculaed wih a view o raning counries according o heir abiliy o adap o he dynamics of world demand. I is based on Spearman s ran correlaion beween he raning share of he exporing counries expor producs in is oal expors, and he ran of growh rends in worldwide expors of hose producs. Each counry is given a correlaion index ha aes a value beween 1 and 1. A value of 1 (-1) indicaes ha he relaive imporance of a counry s expored goods is in full accordance (discordance) wih he raning of world expor growh raes for he same goods. The counry raning is dependen on he ran correlaion index. The closer he index is o 1, he beer he counry raning under analysis. G8- Change of world mare share (in % poins) since 21: The change (variaion over ime) in a counry s world mare share is he difference in he world mare share beween ime and ime. If i is posiive, counry i has increased is world mare share. In addiion o he general profile indicaors, we also provide deailed figures on he decomposiion of he relaive change in world mare share in differen effecs. The decomposiion of he change in he world mare share provides informaion on he compeiiveness of he counry considered. The mare share variaion can be abulaed as he simple average of he ranings according o four crieria: compeiiveness, iniial geographic specialisaion, iniial produc specialisaion and responsiveness o changes in world demand. These indicaors are calculaed by decomposing changes in a counry s mare share in elemenary mares. For more informaion, see appendix 2. 11

12 Appendix 1: More on he use of differen dispersion indicaors This appendix illusraes he need of using wo differen measures of diversificaion wih an example. Le us consider he daa on 4 counries and 1 indusries displayed in Table 2. Counry A exhibis uniformiy in he level of specialisaion in is indusries, hereby achieving he highes level of diversificaion. Counry B is specialised wih equal inensiy in 5 ou of he 1 indusries. Counry C expors producs in 8 indusries and is highly specialised in indusry 7, which accouns for 35% of is expors. Lasly, counry D exhibis he same specialisaion paerns bu enfold. The choice beween he wo indicaors is no he same for counry A and B on he one hand, and B and C and he oher hand. Neiher indicaor discriminaes simulaneously beween counries belonging o each of hese pairs. Consider he counry pair A and B: he spread is zero in boh cases (indicaing uniformiy in he specialisaion in indusries) whereas he equivalen number is wice as large for counry A (indicaing ha counry A is diversified wice as much as B). The spread does no ae ino accoun he number of indusries in which a counry is acive, bu only he share of each indusry in oal expors. The equivalen number, on he oher hand, ignores he differences in each indusry s share o oal expors and only focuses on he number of indusries a counry is acive in. Hence, he spread indicaor does no disinguish any differences beween counry A and counry B, whereas he equivalen number finds differences beween hem. In he case of counries B and C, he opposie resul is obained. The equivalen number of mares of equal size is 5 in boh cases. However, since he dispersion is much larger in counry C, he spread can ran hese wo counries. In sum, counry A is he mos diversified counry, followed by B. Counries C and D are he leas diversified. Lasly, he comparison of resuls for counries C and D highlighs he advanage of using he weighed spread insead of he sandard deviaion. Using he sandard deviaion, he dispersion in counry D is en imes larger han in counry C, even hough only heir size differs. 12

13 Table 2: daa and calculaions of he measures of diversificaion Counry A Counry B Counry C Counry D indusry indusry indusry indusry indusry indusry indusry indusry indusry indusry Toal expors Equivalen number Sandard deviaion Weighed spread Ran - equivalen number Ran - weighed spread Raning

14 Appendix 2: Decomposiion of he changes in world mare share The world mare share of exporing counry i in ime is he raio beween he counry s oal expors ( i.. ) and world expors ( ). In order o decompose his change, he noion of impor mares (someimes also referred o as elemenary mares ) is useful. An impor mare is defined as he desinaion counry for a specific indusry. Examples are: Tea and ea producs in he Unied Kingdom; Machine ools in Brazil; and Cu flowers and ornamenal plans in Japan. The change (variaion over ime) in a counry s world mare share is he difference in he world mare share beween ime and ime. If i is posiive, counry i has increased is world mare share. The change in a counry s world mare share can be decomposed and expressed as he sum of he following effecs: (1) compeiiveness effec; (2) srucural effec, which in urn can be decomposed ino (2a) a srucural geographic effec and (2b) a srucural produc effec, and (3) adapaion effec. (1) The compeiiveness effec corresponds o hypoheical gains or losses of a counry s aggregae mare share ha would occur if changes were only due o variaions in he counry s mare share in impor mares (produc and imporing counry ), regardless of he srucure of he counry s expors. Formally, he variaion in he counry s mare share in impor mares is muliplied by he iniial share of impor mares in world impors (in ime ). These effecs are summed up for all impor mares. The overall effec (he weighed average of he variaion in he counry s mare share in impor mares) is posiive if posiive effecs ouweigh negaive effecs. (2) The srucural effec of iniial specialisaion on impor mares corresponds o hypoheical gains or losses in a counry s aggregae mare share ha would occur if changes were only due o he dynamism of impor mares (produc and imporing counry ), regardless of any variaions in he counry s mare shares in hese mares. Formally, he counry s iniial mare share in impor mares (in ime ) is muliplied by he variaion in he share of impor mares in world impors. These effecs are summed up over all impor mares. The overall effec (he weighed average of he variaion in he share of impor mares in world impors) is posiive if he counry is well posiioned on dynamic impor mares in he beginning of he ime period. This effec can be furher spli up ino he wo following effecs, which however are no symmeric, since i is impossible o fully disenangle hem. i i i = = i = i i * { { Counry's mare share in impor mares Share of impor mares in world expors i i * * { { { { Counry's mare share in impor mares in ime Share of impor mares in world impors in ime i i * Variaion in he counry's mare share in impor mares i { The counry's iniial mare share in impor mares { i Counry's iniial mare share in impor mares Iniial share of in impor world impors mares * Variaion in he share of impor mares in world impors = Iniial share of impor mares in world impors 14

15 (2a) The srucural effec of iniial geographic specialisaion corresponds o hypoheical gains or losses in a counry s aggregae mare share ha would occur if changes were only due o he dynamism of is parner counries, regardless of any variaions in he counry s mare shares in hese mares. Formally, he variaion in he share of parner counries in world impors is muliplied by he iniial mare share of he exporing counry in hese counries. These effecs are summed up over all impor mares. The overall effec (he weighed average of he variaion in he share of parner counries in world impors) is posiive if he counry is well posiioned on dynamic desinaion mares in he beginning of he ime period. (2b) The srucural effec of iniial produc specialisaion corresponds o hypoheical gains or losses in a counry s aggregae mare share ha are associaed wih he iniial secor specialisaion of domesic supply on producs characerised by dynamic demand. Formally, he difference beween he iniial share of he exporing counry in impor mares and he iniial mare share of he exporing counry in desinaion mares is muliplied by he change in he share of impor mares in world impors. The effec is posiive if boh go in he same direcion, i.e. if he share of an impor mare in world impors increases (declines) and he secor is over(under)- represened in he counry s expors o is parner. The effec is negaive if boh go in opposing direcions, i.e. if he share of an impor mare in world impors declines (increases) and he secor is over(under)- represened in he counry s expors o is parner. These effecs are summed up over all impor mares. The overall effec is posiive if he counry is well posiioned on dynamic producs in he beginning of he ime period. (3) The adapaion effec measures a counry s abiliy o adus is expors o changes in world demand. Formally, i muliplies wo variaions over ime. The variaion in he counry s mare share in an impor mare (produc and imporing counry ) is muliplied by he variaion in he share of he impor mare in world impors. The effec is posiive if he counry s mare share increases in a growing impor mare (+,+) or declines in a declining mare (, ). The effec is negaive if he counry s mare share increases in a declining impor mare (+, ) or declines in a growing mare (,+). These effecs are summed up for all impor mares. The overall effec is posiive if posiive effecs ouweigh negaive effecs. i... { The counry' s iniial mare in he share parner counry's impors.... * Variaion in he share of he parner counry's impors in world impors i i. * Difference beween he counry's iniial mare share in impor and mares he counry' s iniial mare in he share parner counry's oal impors Variaion in he share of impor mares in world impors i i * Variaion in he counry's mare share in impor mares Variaion in he share of impor mares in world impors 15

16 Appendix 3: Definiion of secors Secors SITC Rev.3 Producs 1 Fresh food and raw agro-based producs 1 LIVE ANIMALS 75 SPICES 11 BOVINE MEAT 121 TOBACCO, UNMANUFACTURED 12 OTHER MEAT, MEAT OFFAL 211 HIDES,SKINS(E.FURS),RAW 34 FISH,FRESH,CHILLED,FROZN 212 FURSKINS, RAW 36 CRUSTACEANS,MOLLUSCS ETC 222 OILSEED(SFT.FI VEG.OIL) 41 WHEAT, MESLIN, UNMILLED 223 OILSEED(OTH.FI.VEG.OIL) 421 RICE 231 NATURAL RUBBER, ETC. 43 BARLEY, UNMILLED 261 SILK 44 MAIZE UNMILLED 263 COTTON 45 OTHER CEREALS, UNMILLED 264 JUTE,OTH.TETL.BAST FIBR 54 VEGETABLES 265 VEGETABLE TETILE FIBRES 57 FRUIT,NUTS ECL.OIL NUTS 268 WOOL, OTHER ANIMAL HAIR 71 COFFEE,COFFEE SUBSTITUTE 291 CRUDE ANIMAL MATERLS.NES 72 COCOA 292 CRUDE VEG.MATERIALS, NES 74 TEA AND MATE 2 Processed food and agro-based producs 16 MEAT,ED.OFFL,DRY,SLT,SMK 59 FRUIT, VEGETABLE JUICES 17 MEAT,OFFL.PRPD,PRSVD,NES 61 SUGARS,MOLASSES,HONEY 22 MILK AND CREAM 62 SUGAR CONFECTIONERY 23 BUTTER,OTHER FAT OF MILK 73 CHOCOLATE,OTH.COCOA PREP 24 CHEESE AND CURD 81 ANIMAL FEED STUFF 25 EGGS,BIRDS,YOLKS,ALBUMIN 91 MARGARINE AND SHORTENING 35 FISH,DRIED,SALTED,SMOKED 98 EDIBLE PROD.PREPRTNS,NES 37 FISH ETC.PREPD,PRSVD.NES 111 NON-ALCOHOL.BEVERAGE,NES 422 RICE 112 ALCOHOLIC BEVERAGES 423 RICE 122 TOBACCO, MANUFACTURED 46 MEAL,FLOUR OF WHEAT,MSLN 411 ANIMAL OILS AND FATS 47 OTHER CEREAL MEAL,FLOURS 421 FIED VEG.FAT,OILS, SOFT 48 CEREAL PREPARATIONS 422 FIED VEG.FAT,OILS,OTHER 56 VEGTABLES,PRPD,PRSVD,NES 431 ANIMAL,VEG.FATS,OILS,NES 58 FRUIT,PRESERVED,PREPARED 551 ESSNTL.OIL,PERFUME,FLAVR 3 Wood, wood producs and paper 244 CORK,NATURAL,RAW;WASTE 633 CORK MANUFACTURES 245 FUEL WOOD, WOOD CHARCOAL 634 VENEERS, PLYWOOD, ETC. 246 WOOD IN CHIPS, PARTICLES 635 WOOD MANUFACTURES, NES 247 WOOD ROUGH,ROUGH SQUARED 641 PAPER AND PAPERBOARD 248 WOOD, SIMPLY WORKED 642 PAPER,PAPERBOARD,CUT ETC 251 PULP AND WASTE PAPER 8215 Wooden furniure 4 Yarn, fabrics and exiles 651 TETILE YARN 656 TULLE,LACE,EMBROIDRY.ETC 652 COTTON FABRICS, WOVEN 657 SPECIAL YARN,TTL.FABRIC 653 FABRICS,MAN-MADE FIBRES 658 TETILE ARTICLES NES 654 OTH.TETILE FABRIC,WOVEN 659 FLOOR COVERINGS, ETC. 655 KNIT.CROCHET.FABRIC NES 5 Chemicals 232 SYNTHETIC RUBBER, ETC. 554 SOAP,CLEANERS,POLISH,ETC 266 SYNTHETIC FIBRES 562 FERTILIZER,ECEPT GRP OTHER MAN-MADE FIBRES 571 POLYMERS OF ETHYLENE 511 HYDROCARBONS,NES,DERIVTS 572 POLYMERS OF STYRENE 512 ALCOHOL,PHENOL,ETC.DERIV 573 POLYMERS,VINYL CHLORIDE 513 CARBOYLIC ACIDS,DERIVTS 574 POLYACETAL,POLYCARBONATE 514 NITROGEN-FUNCT.COMPOUNDS 575 OTH.PLASTIC,PRIMARY FORM 515 ORGANO-INORGANIC COMPNDS 579 PLASTIC WASTE, SCRAP ETC 516 OTHER ORGANIC CHEMICALS 581 PLASTIC TUBE,PIPE,HOSE 522 INORGANIC CHEM.ELEMENTS 582 PLASTIC PLATE,SHEETS,ETC 523 METAL.SALTS,INORGAN.ACID 583 MONOFILAMENT OF PLASTICS 524 OTHER CHEMICAL COMPOUNDS 591 INSECTICIDES, ETC. 525 RADIO-ACTIVE MATERIALS 592 STARCHES,INULIN,ETC. 16

17 531 SYNTH.COLOURS,LAKES,ETC. 593 EPLOSIVES,PYROTECHNICS 532 DYEING,TANNING MATERIALS 597 PREPRD ADDITIVES,LIQUIDS 533 PIGMENTS, PAINTS, ETC. 598 MISC.CHEMICAL PRODTS.NES 541 MEDICINES,ETC.EC.GRP MATERIALS OF RUBBER 542 MEDICAMENTS 625 RUBBER TYRES,TUBES,ETC. 553 PERFUMERY,COSMETICS,ETC. 629 ARTICLES OF RUBBER, NES 6 Leaher and leaher producs 611 LEATHER 831 TRUNK,SUIT-CASES,BAG,ETC 612 MANUFACT.LEATHER ETC.NES 851 FOOTWEAR 613 FURSKINS,TANNED,DRESSED 7 Meal and oher basic manufacuring 661 LIME,CEMENT,CONSTR.MATRL 681 SILVER,PLATINUM,ETC. 662 CLAY,REFRCT.CONSTR.MATRL 682 COPPER 663 MINERAL MANUFACTURES,NES 683 NICKEL 664 GLASS 684 ALUMINIUM 665 GLASSWARE 685 LEAD 666 POTTERY 686 ZINC 67 REST OF 67 NOT DEFINED 687 TIN 671 PIG IRON,SPIEGELEISN,ETC 689 MISC.NON-FERR.BASE METAL 672 INGOTS ETC.IRON OR STEEL 691 METALLIC STRUCTURES NES 673 FLAT-ROLLED IRON ETC. 692 CONTAINERS,STORAGE,TRNSP 674 FLAT-ROLLED PLATED IRON 693 WIRE PRODUCTS ECL.ELECT 675 FLAT-ROLLED, ALLOY STEEL 694 NAILS,SCREWS,NUTS,ETC. 676 IRON,STL.BAR,SHAPES ETC. 695 TOOLS 677 RAILWAY TRACK IRON,STEEL 696 CUTLERY 678 WIRE OF IRON OR STEEL 697 HOUSEHOLD EQUIPMENT,NES 679 TUBES,PIPES,ETC.IRON,STL 699 MANUFACTS.BASE METAL,NES 8 Non-elecric machinery 711 STEAM GENER.BOILERS,ETC. 731 METAL REMOVAL WORK TOOLS 712 STEAM TURBINES 733 MACH-TOOLS,METAL-WORKING 713 INTRNL COMBUS PSTN ENGIN 735 PARTS,NES,FOR MACH-TOOLS 714 ENGINES,MOTORS NON-ELECT 737 METALWORKING MACHNRY NES 716 ROTATING ELECTRIC PLANT 741 HEATNG,COOLNG EQUIP,PART 718 OTH.POWR.GENRTNG.MACHNRY 742 PUMPS FOR LIQUIDS,PARTS 721 AGRIC.MACHINES,E.TRACTR 743 PUMPS NES,CENTRIFUGS ETC 722 TRACTORS 744 MECHANICAL HANDLNG EQUIP 723 CIVIL ENGINEERING EQUIPT 745 OTH.NONELEC MCH,TOOL,NES 724 TETILE,LEATHER MACHINES 746 BALL OR ROLLER BEARINGS 725 PAPER,PULP MILL MACHINES 747 TAPS,COCKS,VALVES,ETC. 726 PRINTNG,BOOKBINDNG MACHS 748 TRANSMISSIONS SHAFTS ETC 727 FOOD-PROCESS.MCH.NON DOM 749 NON-ELECT MACH.PARTS,ETC 728 OTH.MACH,PTS,SPCL INDUST 9 Compuers, elecomm; cons. Elecronics 751 OFFICE MACHINES 752 AUTOMATC.DATA PROC.EQUIP 762 RADIO-BROADCAST RECEIVER 759 PARTS,FOR OFFICE MACHINS 763 SOUND RECORDER,PHONOGRPH 761 TELEVISION RECEIVERS ETC 764 TELECOMM.EQUIP.PARTS NES 1 Elecronic componens 771 ELECT POWER MACHNY.PARTS 772 ELEC.SWITCH.RELAY.CIRCUT 775 DOM.ELEC,NON-ELEC.EQUIPT 773 ELECTR DISTRIBT.EQPT NES 776 TRANSISTORS,VALVES,ETC. 774 ELECTRO-MEDCL,RAY EQUIP 778 ELECTRIC.MACH.APPART.NES 11 Transpor equipmen 781 PASS.MOTOR VEHCLS.E.BUS 782 GOODS,SPCL TRANSPORT VEH 786 TRAILERS,SEMI-TRAILR,ETC 783 ROAD MOTOR VEHICLES NES 791 RAILWAY VEHICLES.EQUIPNT 784 PARTS,TRACTORS,MOTOR VEH 792 AIRCRAFT,ASSOCTD.EQUIPNT 785 CYCLES,MOTORCYCLES ETC. 793 SHIP,BOAT,FLOAT.STRUCTRS 12 Clohing 841 MENS,BOYS CLOTHNG,-KNIT 842 WOMEN,GIRL CLOTHNG,KNIT 845 OTHR.TETILE APPAREL,NES 843 MENS,BOYS CLOTHING,KNIT 846 CLOTHING ACCESSRS,FABRIC 844 WOMEN,GIRLS CLOTHNG.KNIT 848 CLOTHNG,NONTTL;HEADGEAR 13 Misc. manufacuring 811 PREFABRICATED BUILDINGS 885 WATCHES AND CLOCKS 17

18 812 PLUMBNG,SANITRY,EQPT.ETC 891 ARMS AND AMMUNITION 813 LIGHTNG FITURES ETC.NES 892 PRINTED MATTER 871 OPTICAL INSTRUMENTS,NES 893 ARTICLES,NES,OF PLASTICS 872 MEDICAL INSTRUMENTS NES 894 BABY CARRIAGE,TOYS,GAMES 873 METERS,COUNTERS,NES 895 OFFICE,STATIONERY SUPPLS 874 MEASURE,CONTROL INSTRMNT 896 WORKS OF ART,ANTIQUE ETC 881 PHOTOGRAPH APPAR.ETC.NES 897 GOLD,SILVERWARE,JEWL NES 882 PHOTO.CINEMATOGRPH.SUPPL 898 MUSICAL INSTRUMENTS,ETC. 883 CINE.FILM EPOSD.DEVELPD 899 MISC MANUFCTRD GOODS NES 884 OPTICAL GOODS NES 14 Minerals- o be excluded 272 FERTILIZERS, CRUDE 289 PREC.METAL ORES,CONCTRTS 273 STONE, SAND AND GRAVEL 321 COAL,NOT AGGLOMERATED 274 SULPHUR,UNRSTD.IRON PYRS 322 BRIQUETTES,LIGNITE,PEAT 277 NATURAL ABRASIVES, NES 325 COKE,SEMI-COKE,RET.CARBN 278 OTHER CRUDE MINERALS 333 PETROLEUM OILS, CRUDE 281 IRON ORE, CONCENTRATES 334 PETROLEUM PRODUCTS 282 FERROUS WASTE AND SCRAP 335 RESIDUAL PETROL.PRODUCTS 283 COPPER ORES,CONCENTRATES 342 LIQUEFIED PROPANE,BUTANE 284 NICKEL ORES,CONCTR,MATTE 343 NATURAL GAS 285 ALUMINIUM ORE,CONCTR.ETC 344 PETROLEUM GASES, NES 286 URANIUM,THORIUM ORES,ETC 345 COAL GAS,WATER GAS, ETC. 287 ORE,CONCENTR.BASE METALS 351 ELECTRIC CURRENT 288 NON-FERROUS WASTE,SCRAP 667 PEARLS,PRECIOUS STONES Excluded 269 WORN CLOTHING,TETL.ARTL 911 MAIL NOT CLASSED BY KIND 961 COIN NONGOLD NONCURRENT 931 SPEC.TRANSACT.NOT CLASSD 971 GOLD,NONMONTRY ECL ORES 18