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

Annex 2.2. Methodological aspects of 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 9 . The
data used comes from the UNSD Comtrade Database using 2005 data. Missing country data
has been constructed using bilateral (mirror) statistics. Thus for over 5,000 product groups,
the indicative export potential has been calculated when one country is an exporter of a
product group to the world, while the rest of BSEC member countries are importers of that
same product group. The indicative import potential of a country is calculated when one
country is an importer of a product group from the world and the rest of BSEC is an exporter
of that same product group to the world. The indicative potential is calculated as the lower
value between the two. Formally, the indicator is calculated as:
I
min( X , M ) X
ik
jk
ijk
where X ik and M jk represent exports of country i and imports of
country j respectively in product k.
The trade flow analysis is used to provide an indication of the potential for trade between a
country and the rest of the region. 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 10 . The indicative trade potential has been
computed for the 5,000 product group and ranked from the highest to the lowest.
9 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
10 Helmers and Pasteels (2006) provide a study on the uses and limitations of assessing
bilateral trade potential at the Commodity level.
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