In which major country do exports account for the highest share of the national economy?
February 11, 2013
Most discussions about trade in the global economy focus on exports and the size of various countries’ trade surpluses or deficits. That, however, is no real indication of how important trade is to a country’s economic make-up and structure.
We wonder: In which of these major countries do exports account for the highest share of the national economy?
[toggle title_open=”A. United States is not correct.” title_closed=”A. United States”]
In terms of goods and services exports, the United States ranks last on a list of 37 major economies in terms of the value of exports relative to GDP (the overall size of the economy), based on data compiled by the OECD.
Because of the continental size of the U.S. economy, exports amounted to only 13.9% of GDP in 2012. Despite this low ratio, the total dollar volume of U.S. exports is still quite large — at $2.2 trillion.
Japan has long been thought of as a nation fixated on shipping goods abroad. However, as is the case with the United States, its exports account for only a surprisingly small share of GDP (15.2%).[/toggle]
[toggle title_open=”B. China is not correct.” title_closed=”B. China”]
China is often in the headlines because of its outsized trade surplus, which reached $230 billion in 2012. Despite the largeness of that number, China’s exports now account for less than 30% of its GDP. China’s exports-to-GDP ratio reached almost 40% in 2006.
The reason why China’s trade intensity has declined is only partially related to the global economic crisis. It is also due to the country’s increasing focus on domestic demand.
China, a nation of 1.35 billion people, has a vast urban population that has benefited from rapid income gains in recent years. That has triggered strong growth in China’s domestic consumption, which in turn means that the relative significance of exports in China’s economy is bound to decline.[/toggle]
[toggle title_open=”C. Germany is correct.” title_closed=”C. Germany”]
Exports account for 50.2% of Germany’s GDP. That is three and a half times the level in Japan — and four times the U.S. level. For an economy of its size, that is a very large percentage. Usually, such high percentages are reached only in smaller economies, such as Malaysia or Hong Kong, where trade can easily gain an outsized share of the economy.
Among other large European countries, the export intensity of France and Italy is about half as large as Germany (at 27% and 28% of GDP, respectively). The United Kingdom is quite a bit more export-oriented — and is on a rising trend (currently at 32.5% of GDP).
However, Germany’s high ratio of exports to GDP does not mean that half of all economic activity in the country is devoted to exports. A significant part of that percentage reflects the trade of intermediate goods — manufactured goods used as an input in a final product, such as steel for a car — into and out of Germany from neighboring countries such as Poland, Slovakia and the Czech Republic.[/toggle]
[toggle title_open=”D. South Korea is not correct.” title_closed=”D. South Korea”]
At 56.2% of GDP, South Korea’s exports of goods and services account for the largest share relative to the size of the overall economy among major industrialized nations.
The country, with its almost 50 million people, is now the world’s 15th largest economy. Home to Samsung, Hyundai and many other major global exporters, South Korea has come a long way over the past six decades.
Korea’s emergence as an industrial power and exporter was not universally expected. Some of the experts who examined the country’s economic potential after the Korean War ended in 1953 believed that South Korea possessed the technical and managerial talent to build a vibrant and self-sufficient economy. But no one could have predicted the globe-spanning success the country went on to achieve.[/toggle]
Editor’s note: To listen to The Globalist’s Stephan Richter discuss this quiz with Marketplace Morning Report host Jeremy Hobson, click here to open a pop-up media player.