Tradeflow Study - UNDP Black Sea Trade and Investment Promotion ...

A more detailed analysis of the indicative intra-regional trade potential can be undertaken
using a trade flow analysis. The trade flow analysis computes the sub-regional exports to the
world and imports from the world for each country in the region at the most detailed level of
classification available 7 . Thus for over 5,000 product groups, the indicative trade potential has
been calculated when one country is an exporter of the product group, while another country
is an importer of that same product group. Since the level of disaggregation is relatively high,
the complementarity for trading between partner countries is considered to be relatively high.
Obviously, even at this detailed level, products may not be perfect substitutes, but are
considered to be closely approximate substitutes (see Annex 2.2 for details on the
methodology for trade flow analyses).
The indicative trade potential has been computed for the 5,000 product group and ranked
from the highest to the lowest. The twenty five products which display the highest intraregional
trade potential are given in Table 11. The comparison is also made between what is
currently traded between member states of BSEC and what the intra-regional trade potential
actually is (indicated as relative indicative trade potential). In the case of motor vehicles
(HS87421) for example, the intra-regional trade potential is calculated as US$2.2 billion.
However, the region only trades around 5% of this amount so that the relative indicative trade
potential is 95%. In the case of Copper, the intra-regional trade potential is calculated as $1.1
billion, which is mainly exported by Russia and Bulgaria. The region’s principal importers of
this product group are Turkey and Greece (see Annex 2.3 and 2.4 for detailed tables of
results for the 300 highest ranking products).
The highest indicative trade potential is primarily in the heavy and high technology
manufacturing sectors owing to the large size of trade flows in this area. Russia and Turkey
dominate intra-regional export potential while Romania and Ukraine primarily dominate intraregional
import potential. However, other smaller countries such as Serbia and Montenegro
and Bulgaria have a high indicative export potential.
Based on the results of both the gravity equation and the trade flow analysis, there appear to
be an enormous untapped intra-regional trade potential which should be the focus of efforts
by trade promotion organisations in the BSEC region.
7 The six digit level of the harmonised system of trade classification has been used
(referred to as HS6). This is the most detailed level possible for cross country comparison
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