PATTERN OF

TRADE:

Trade Intensity

12 ATAR Economics
 What is trade intensity?

Trade intensity measures an economy's

integration with the world economy.

A higher trade intensity means an economy is more

susceptible to external shocks in the world economy.

Higher trade intensity also indicates the importance

of international trade to a country.

Note: Trade intensity figures (ratios) may also be

called the trade openness ratio.

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 Calculating Trade Intensity
Trade Intensity = (X + M) / GDP x 100

Trade intensity is expressed as a percentage and represents the percentage of GDP

international trade accounts for.
EG. Australia has a 44% trade to GDP ratio (2018).

HOWEVER, remember that this does not mean that 45% of Australia’s GDP is made
up of international trade. WHY?

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 Factors affecting
trade intensity
• Relative size of the economy (GDP) and
GDP per capita
• Population size
• Location relative to foreign markets
• Extent of barriers to trade
• Strength of international relations
 “
Do you expect that
Australia has a
relatively high or
relatively low
trade intensity
ratio?

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 Australia’s Relative Trade Intensity
Other Trade to GDP ratios (2018)
➢ Australia 45%
➢ US 26%
➢ Netherlands 160%
➢ Japan 32%
➢ Germany 86%
➢ UK 62%
➢ China 38%
➢ Hong Kong 377%
➢ OECD Average 54%

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 Why is Australia’s Trade Intensity Relatively
Low?
‘Tyranny of Distance’
Distance from other countries
and trading partners.
Increases costs of trade,
countries may look for closer,
cheaper substitutes.
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Trade blocs
Australia isn’t part of a large
regional trade bloc (like ASEAN
or EU).
Trade blocs reduce trade
restrictions and encourage trade
among bloc members.
Why might the
US and China
have low trade
intensity ratios?

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 TASK

https://data.worldbank.org/indicator/NE.TRD.GNFS.ZS?loc
ations=AUhttps://data.worldbank.org/indicator/NE.TRD.GN
FS.ZS?locations=AU

Access the link above, outline the trend in Australia’s trade

intensity and describe time periods of significance over the
graph period.

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ADDITIONAL READING

10 Source: RBA
ADDITIONAL READING

11 Source: RBA
ADDITIONAL READING

Source: RBA

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