Indicator ECO1.6.2 Total estimated value of trade agreement as proportion of GDP

The total estimated value of trade agreements as a proportion of GDP refers to the value of trade covered by various agreements in relation to a country’s Gross Domestic Product (GDP). It is a measure that helps assess the significance of trade agreements in the context of a country’s overall economic output.

The concept of the total estimated value of trade agreements as a proportion of GDP is a measure that examines the value of trade covered by agreements in relation to a country’s Gross Domestic Product (GDP). It helps gauge the significance of trade agreements in the context of a nation’s overall economic output. This indicator provides insights into the potential impact of trade agreements on a country’s economy. A higher proportion suggests that a considerable share of a country’s trade is conducted under favorable conditions enabled by the agreements. This can lead to increased market access, reduced barriers to trade, and enhanced economic cooperation with partner countries.

import, export

The rationale behind considering the total estimated value of trade agreements as a proportion of GDP lies in the understanding that international trade plays a vital role in a country’s economic development. Here are some key rationales for examining this indicator:

1. Economic Integration: Trade agreements promote economic integration by establishing preferential trade arrangements among participating countries. By quantifying the value of trade covered by these agreements as a proportion of GDP, policymakers and analysts can assess the extent of economic integration and interdependence between countries. Higher proportions indicate a deeper level of integration and collaboration.

2. Market Access: Trade agreements often grant participating countries improved market access by reducing trade barriers such as tariffs, quotas, and non-tariff barriers. The higher the proportion of trade covered by agreements in relation to GDP, the greater the market access and potential for increased export opportunities for businesses in the participating countries. This can lead to expanded markets, increased sales, and economic growth.

3. Trade Diversification: Trade agreements can encourage diversification of a country’s export markets and sources of imports. A higher proportion of trade covered by agreements implies that a significant portion of a country’s trade is conducted with partner countries under favorable terms. This diversification helps reduce dependence on a limited number of trading partners and provides resilience against economic shocks.

4. Investment and Economic Growth: Trade agreements often include provisions to facilitate foreign direct investment (FDI) flows. When the proportion of trade covered by agreements is substantial relative to GDP, it signals an environment conducive to investment and economic growth. Trade agreements can attract foreign investors seeking access to larger markets and a stable business environment, thereby stimulating economic activity and creating job opportunities.

5. Competitive Advantage: The total estimated value of trade agreements as a proportion of GDP reflects the competitiveness of participating countries. A higher proportion suggests that these countries have a comparative advantage in certain sectors and industries, enabling them to capture a significant share of trade under favorable terms. This competitiveness can drive productivity, innovation, and specialization, enhancing overall economic performance.

6. Economic Stability: Trade agreements can contribute to economic stability by fostering predictable and transparent trading rules. When a substantial portion of a country’s trade is governed by stable trade agreements, it reduces uncertainty and the risk of abrupt disruptions in trade flows. This stability provides a conducive environment for businesses to plan investments, engage in long-term contracts, and drive sustained economic growth.

By examining the total estimated value of trade agreements as a proportion of GDP, policymakers, economists, and analysts can gain insights into the level of economic integration, market access, diversification, investment potential, competitiveness, and stability associated with the trade agreements. These factors are essential for formulating effective trade policies, attracting investments, and promoting sustainable economic development.

To calculate this indicator, the total estimated value of trade covered by trade agreements is divided by the country’s GDP and expressed as a percentage. The trade covered by agreements can include both imports and exports between the participating countries, which enjoy preferential terms and reduced barriers as a result of the trade agreements.

17.10 17.10.1 (Tier 1)

percentage (%)

Annual