Laboratory Work 3

International Trade

INDICATORS OF TRADE STRUCTURE

Prepared by
Eka Puspitawati, PhD

Department of Economics
Universitas Pertamina
2019
Sectoral Structure of Trade
• Today Lab we will learn indicators which reveal changes in commodity
structure of trade
• They are most useful for:
1. preparation of negotiating positions in trade negotiations
2. formulation of development strategis since they reflect
directly/indirectly the competitive ability of a country’s/ region’s
economic sectors or activities
Sectoral Structure of Trade
1) Competitiveness
2) Major Export Category
3) Sectoral Hirschmann
4) Intra Industry Trade (IIT)
5) Revealed Comparative Advantage (RCA)
6) Export Product Dynamic (EPD)
7) Trade Specialization Index (TSI/ISP)
8) Constant Market Share Analysis (CMSA)
9) Market Potential Index (MPI)
10) Michelaye Index
11) Export Similarity
12) Regional Orientation
13) etc
 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
Australia China Korea India Sri Langka ROW Total

Primary 25474 12544 670 4569 936 593865 638058 • Example:

Products
Food 9422 9977 2055 4554 116 289570 315694 The competitiveness index
Products
Textiles 844 107040 16284 15103 2661 300870 442802
for China in Textiles is
and
Apparel
therefore
Others 25831 315877 141038 29271 1070 3984273 4497360 $107040/$442802x100 =
Manufactures

Total 61571 445438 160047 53497 4783 5168578 5893914

24.2 per cent
 Competitiveness
Export Indonesia USA China Brazil Singapore Malaysia ROW Total
Values
Cocoa and
cocoa
Preparations
Other
commodities
Total

• Using WITS data (https://wits.worldbank.org/) for 2016 and HS 2012 of

Cocoa and cocoa Preparations, fill the data above!
• Interprate the competitiveness index for Indonesia in Cocoa!
• Report your work in an excell file!
 Major Export Category
• Major export category is a simple measure of the extent diversification of exports
across sectoral categories.
• If no single category accounts for 50 per cent or more of total exports, the
economy is classified as diversified.
• Identification of dominating products in country’s trade is valuable for both trade
policy and adjustment management.
• The index is the value of the largest of sectoral export share in total exports of
given economy
Australia China Korea India Sri Langka ROW Total • Example:
Primary
Products
25474 12544 670 4569 936 593865 638058
The sectoral export share is
Food
Products
9422 9977 2055 4554 116 289570 315694 therefore $2661/$4783x100
Textiles 844 107040 16284 15103 2661 300870 442802 = 55.6 per cent
and
Apparel
Others 25831 315877 141038 29271 1070 3984273 4497360
Manufactures

Total 61571 445438 160047 53497 4783 5168578 5893914

 Major Export Category

Export Indonesia USA China Brazil Singapore Malaysia ROW Total

Values
Cocoa and
cocoa
Preparations
Other
commodities
Total

• Using WITS data (https://wits.worldbank.org/) for 2016 and HS 2012 of

Cocoa and cocoa Preparations, fill the data above!
• Interprate the export share sector of Cocoa for Indonesia!
• Report your work in an excell file!
 Sectoral Hirschmann σ𝑑 𝑥𝑖𝑠𝑑
2
𝐻𝐼 = ෍
• The sectoral Hirschmannn index (HI) is a measure of the sectoral 𝑖 σ𝑑 𝑋𝑠𝑑
concentration of a region’s exports
• It shows the degree to which a region or country’s exports are • s is country
dispersed across different economic activities • d is set of all countries in
the world
• High concentration levels are sometimes interpreted as an indication • i is sector of interest
of vulnerability to economic changes in a small number of product
markets • x is commodity export flow
• X is total export flow
• HI is defined as the square root of the sum of the square shares of
exports of each industry in total exports for the region under study
Australia China Korea India Sri Langka ROW Total

Primary 25474 12544 670 4569 936 593865 638058 • Example:

Products
Food 9422 9977 2055 4554 116 289570 315694 The export shares for
Products
Australia are 0.41, 0.15, 0.01,
Textiles 844 107040 16284 15103 2661 300870 442802
and and 0.42 (in raw order).
Apparel
Others 25831 315877 141038 29271 1070 3984273 4497360
Squaring each term and
Manufactures
summing yields 0.37. The
Total 61571 445438 160047 53497 4783 5168578 5893914
square root is 0.6 → HI
 Sectoral Hirschmann
Export Indonesia USA China Brazil Singapore Malaysia ROW Total Share Squaring
Values
Cocoa and
cocoa
Preparations
Other
commodities
Total

• Using WITS data (https://wits.worldbank.org/) for 2016 and HS 2012 of

Cocoa and cocoa Preparations, fill the data above!
• Interprate the HI of Cocoa for Indonesia!
• Report your work in an excell file!
 Intra Industry Trade (IIT)
• 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)
• Based on IIT, a country can reduce the number of similar goods it produces, and
benefit from scale economies
• Higher IIT ratios suggest these resources of gains are being exploited. It may also
indicate that adjustment costs would be lower with trade expansion
• IIT index is calculated by Grubel Lloyd index:

 (X + M ) −  X − M  X −M
IIT = x 100 or 1− x100
 (X + M )  (X + M )
X = Nilai ekspor komoditi i dari negara j ke negara k

M = Nilai impor komoditi i dari negara j ke negara k

IIT Classification
• Nilai Grubel Lloyd index berkisar antara 0 sampai 100. Jika jumlah
yang diekspor sama dengan jumlah yang diimpor untuk suatu produk,
maka indeksnya akan bernilai 100. Sebaliknya apabila perdagangan
suatu negara hanya melibatkan satu pihak saja (ekspor atau impor
saja) maka nilai indeksnya adalah 0.

* No trade flow (Tidak terdapat aliran perdagangan)

0.00 No integration (Tidak ada integrasi (perdagangan satu arah))
>0.00-24.99 Weak integration (Integrasi lemah)
25.00-49.99 Intermediate integration (Integrasi sedang)
50.00-74.99 Strong integration (Integrasi kuat)
75.00-99.99 Very strong integration (Integrasi sangat kuat)
Intra Industry Trade (IIT)
• Using WITS data (https://wits.worldbank.org/) for all years provided
and HS 2012 of Cocoa and cocoa Preparations, fill the data in the
attached excell file!
• Interprate the IIT!
• Report your work in an excell file!
• Submit to e-learning! You have 2 excell files must be submitted
• Give file name by “your name_NIM_Task3_indexes” and “your
name_NIM_Task3_IIT”
• Due: Before the end of the lab class
• Penalty mark who is late to submitt
The end

THANK YOU