Academic journal article Journal of Southeast Asian Economies

Analysing International Trade Data in a Small Open Economy

Academic journal article Journal of Southeast Asian Economies

Analysing International Trade Data in a Small Open Economy

Article excerpt

The Case of Singapore

I. Introduction

Considerable attention has been paid in the literature on the issues of direction, composition and linkages in international trade flows, at both the bilateral and multilateral levels. However, little attention has been paid to the sources and quality of international trade data on the basis of which the above issues are analysed. The existence of discrepancies in the measurement of such data is an important factor, since it has serious implications for the results of empirical and policy research in the area of international trade. Thus, there is a need for a careful examination of the data before applying it for empirical analysis. This is particularly necessary for small open economies that are highly trade-oriented and a significant share of international trade involves entrepot trade. As such, this article analyses the issue of differences in the measurement of international trade flows at a bilateral level in the context of Singapore, a highly open economy and major reexport centre.

The focus is on Singapore's trade with some of its major trading partners in the Asia-Pacific region, viz. Australia, India and Malaysia. Although India is a relatively insignificant trading partner of Singapore compared to the other two countries, it has been included in the analysis as it has been identified as one of the major emerging markets by Singapore (Singapore Trade Development Board 1997). To test the validity of this analysis for other trading partners, it is then further extended to the case of Singapore's trade with its two major trading partners: Japan and the United States. The bilateral trade data provided by the IMF's Direction of Trade Statistics (DOTS) is used for the analysis as it is the most widely used source of international trade data and compiles bilateral trade data on most countries participating in world trade. The Trade Difference (TD) Statistic as in Blades and Ivanov (1985) is used in this article to analyse the discrepancies in the data.

The remainder of this article is organized as follows. The second section investigates the various reasons for the presence of discrepancies in the reporting of bilateral trade data. The third section uses the TD statistic for the period 1986-97 to measure the extent to which such discrepancies exists for Singapore's trade with some of its major trading partners. The fourth section investigates the possible reasons for such discrepancies that may be significantly large in magnitude. The final section concludes with a brief exploration of the main policy implications of such discrepancies in reported trade data in the context of Singapore.

II. Existence of Discrepancies in International Bilateral Trade Data

Discrepancies in international trade data may arise for any number of reasons. Some of the common ones are: differences in methods of reporting trade flows; coverage of products traded among them; measurement errors in compiling and converting import figures at current exchange rates; time lags involved in the shipment of goods traded; and ignorance of the entrepot component and its role in overall international trade flows (Blades and Ivanov 1985). The possible existence of such discrepancies due to the presence of illegal trade among the trading partners may also be important. In such cases, there is no record of the extent of the illegal trade that takes place. This results in an underestimation of the magnitude of the actual trade that takes place.

Discrepancies that are generally found to exist in the international trade data, as a result of which imports reported by one country do not equal exports reported by its trading partners, may be classified into three categories, viz. unavoidable discrepancies, differences in reporting and differences due to errors (Blades and Ivanov 1985). We elaborate on each one in the rest of this section, and extend it to analyse the case of Singapore. …

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