How trade really adds up
Inaccurate calculations create a distorted, damaging picture of trade flows, which do not reflect the true value of exports to countries
Forget calculus, algebra and simple arithmetic.
When it comes to calculating trade, you need a whole new understanding of value to make the mathematics work in a world where a notional US$425 export from China is, in fact, worth only US$21 to the country.
Fail to figure out how, and you end up with a badly distorted picture of trade realities.
The potential for increased political friction in the global trade arena means the need to spread the knowledge of how trade really adds up - largely the preserve of a select network of nerds until now - is becoming urgent.
It is not enough to know that trade boosts income and growth through specialisation, allows producers to benefit from economies of scale and provides consumers with more choice at lower prices.
Knowing where the value is created by trade – and how much is generated – is crucial
Nor is it sufficient to understand that the diffusion of technology and knowledge that strengthens economic interdependency reduces the scope for conflict.