Global trading blocs through the lens of ICP 2017 results

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New results from the ICP including purchasing power parities (PPP), price level indexes and PPP-based expenditures for reference year 2017 are now available at icp.worldbank.org. This blog series, edited by Edie Purdie, covers all aspects of the ICP and explores the use made of these data by researchers, policymakers, economists, data scientists and others. We encourage users to share their data applications and findings in this blog series via [email protected].

Global trade has increased more than fivefold over the last thirty years with the volume of worldwide exports growing from $4.3 trillion in 1990 to $24.8 trillion in 2019. This trade is facilitated through an intricate web of bilateral, multilateral and Regional Trade Agreements (RTAs) recognized by the World Trade Organization (WTO). As of November 2020, there were 305 active RTAs in force, significantly up from 22 active RTAs in 1990. In addition, a significant portion of these are directly linked to the rise of regional trading blocs with varying degrees of integration, from loose free trade agreements to full-fledged monetary unions. The latest of these is the Regional Comprehensive Economic Partnership (RCEP), announced on November 15th, 2020, which is set to become the largest trading bloc in the world, notably by incorporating China, which was not previously part of any trading bloc. Another notable development is the African Continental Free Trade Area (AfCFTA), where trading is expected to begin on January 2021, according to the African Union.

As trading blocs become increasingly influential actors on the world stage, we can compare their composition, size and characteristics using the latest data from the International Comparison Program (ICP), which provides purchasing power parity (PPP)-based measures of GDP and its expenditure components, as well as price level indices. An alternative approach is to use market exchange rate (MER)-converted GDP estimates; however, MER-based comparisons reflect both differences in economic outputs and price levels between the countries and, as a result, the size of higher income countries is inflated, while the size of lower income countries is depressed. PPP-based comparisons, on the other hand, reflect only differences in economic outputs, as PPPs control for price level differences between the countries, hence allowing comparisons of the true size of trading blocs and their constituent countries.

Click through the data story below to explore the world’s trading blocs through the lens of the ICP 2017 results.

ICP data can be downloaded through the World Bank’s Databank and the main results are visualized on the ICP website and in the report Purchasing Power Parities and the Size of World Economies: Results from the 2017 International Comparison Program.

Authors

Rui Costa

Consultant, International Comparison Program, Development Data Group, World Bank

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