Trade openness
Also called: Trade-to-GDP ratio · Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Beyond NCERT
Meaning
Trade openness shows how closely an economy is linked to world trade. It adds up exports and imports and divides the total by GDP.
Trade openness = (Exports + Imports) ÷ GDP
A higher ratio means trade plays a bigger part in the economy.
Example
India's trade in goods and services has recently been about 45–50% of GDP. In 1990–91 it was about 15%, which shows how much India opened up after the 1991 reforms.
Don't confuse with
- Trade balance: this is exports minus imports, and it shows a surplus or a deficit. Trade openness adds the two together, so it measures how much a country trades, not whether it earns more than it spends.
Related concepts
- Free trade
- Protectionism
- Trade barrier
- Infant industry argument
- Strategic trade policy
- Beggar-thy-neighbour policy
- Trade liberalisation
- Export promotion
- Countertrade