Question

Some countries have low ratios of international trade (exports + imports) to GDP (such as the...

Some countries have low ratios of international trade (exports + imports) to GDP (such as the United States), while, in other countries, the ratio of international trade to GDP exceeds one. How is it possible for trade to exceed the value of GDP?

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Answer #1

The ratio of international trade to GDP is calculated using the following formula:

Ratio of international trade to GDP = (Import + Export)/GDP

Now, the international trade ratio to be greater than 1, import + export should be greater than GDP. Export itself cannot be greater than GDP as a country cannot export more than it can produce. However, export + import can be greater than GDP. For example, in 2016 Belarus has a GDP of USD 47.43 billion whereas its total import and export were USD 26.9 billion and USD 22.8 billion in the same year. So, in 2016, Belarus's international trade ratio was = (26.9 + 22.8)/47.43 * 100 = 49.7/47.43 * 100 = 1.05, which is greater than 1.

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