Bilateral reporting asymmetries in international trade data have long influenced critical statistical measures, such as trade balances, which serve as key inputs for policy decisions and economic research. However, when countries report differing figures for the same trade flows, it often signals deeper issues beyond mere data discrepancies. These gaps can highlight structural problems, such as limited data collection capacities or inconsistencies in statistical systems. In some cases, they may even point to intentional misreporting, where misclassification is used to avoid tariffs or export taxes.
For this reason, assessing the trade reporting patterns of countries has become increasingly important for customs offices, national statistical agencies, and tax authorities, helping them identify discrepancies and strengthen measures against fraud and tax evasion.
In our previous blog, we got an overview of what Discrepancy Index is; in this one, we will explore how you can use the data to obtain insights into country-specific trade reporting patterns. We will use the trade between Madagascar and France as an example to highlight how data can be used.
Madagascar and France trade discrepancies
In 2015, Madagascar reported a trade surplus of $253 million with France (Figure 1). However, France's accounts for the same period indicated a much smaller surplus of just $84 million. This significant difference raises questions about the accuracy of the trade data reported by both countries and calls for a deeper investigation into the potential causes.
A closer look at the mirror data, which compares both countries' reports of the same trade flow, reveals some interesting patterns. For instance, Madagascar's export data to France shows minor discrepancies, with most trade values having a Discrepancy Index (DI) close to zero. This suggests that Madagascar’s export figures to France are generally accurate and align well with France's import data.
In contrast, France's export data to Madagascar presents a different picture. The data shows much larger discrepancies, with a sizable portion of the trade value having a DI above 0.95. This indicates that France's reported exports to Madagascar are much higher than Madagascar's reported imports from France, suggesting either overreporting by France or underreporting by Madagascar. These discrepancies hint at underlying issues, such as misreporting or statistical errors in one or both countries' trade reporting systems.
Country Profiles: A granular look at discrepancies
When faced with discrepancies in trade data, a key question arises: should we prefer France’s export reporting over Madagascar’s import reporting? One way to approach this is by comparing France’s export reporting with Madagascar’s import reporting across multiple partners and products. The Discrepancy Index Database provides indicators of data quality for both country partnerships and country-product pairs, offering a more granular insight into reporting asymmetries.
For example, Figure 2 and Figure 3 compare the reporting patterns between Madagascar and France across their respective trading partners. The data indicates that Madagascar tends to underreport its imports across its trading partners, whereas France’s export reporting is more consistent. Similar patterns are observed when looking at Madagascar's import reporting across different HS6 product categories, compared to France's export reporting.
Figure 3. Madagascar imports reports and their CIF/FOB ratio
These granular indicators deepen our understanding of trade reporting patterns by identifying specific partnerships and products with unusually poor data quality. Such insights can help pinpoint structural misreporting, where large reporting gaps are consistent and widespread across a reporter’s trade relationships. In contrast, product-specific discrepancies, when paired with tariff data, may also reveal deliberate misreporting to avoid tariffs or other trade-related taxes.
Implications of discrepancies for trade reporting and policy
Understanding the reporting profiles of individual countries is crucial for improving the quality of global trade data. While country-level discrepancies can signal structural issues in a country's statistical capacity, more granular analyses can help identify cases of intentional misreporting or highlight partnerships where reporting quality is particularly low. In the case of Madagascar and France, the significant discrepancies observed in France's export data raise questions about the accuracy of trade reporting between the two countries and suggest potential areas for policy intervention.
For customs offices, national statistical agencies, and tax authorities, these insights are valuable for strengthening measures against fraud, tax evasion, and improving the overall integrity of trade data. By examining trade reporting patterns at both the country and product levels, authorities can better target areas where misreporting is most likely to occur and take proactive steps to address these issues.
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