28.2. Need for external trade indices. Many users need more information than trade values by country or by commodity: they require information on prices and volumes as well. Information on the development of prices and volumes is generally presented in the form of indices. In IMTS 2010 (para. 11.1), it is recommended that all countries produce and publish, on a monthly, quarterly and annual basis, both volume (quantum) indices and either price or unit-value indices (UVIs) for their total imports and exports. Countries are also encouraged to calculate and publish such indices for commodity groups of particular importance to countries at least quarterly and annually.
28.3. Some important uses of external trade indices. External trade indices are in general used to eliminate the effects of price changes and obtain trade volume estimates. National accounts require a decomposition of measures of value into price and quantity for the calculation of its real flows. Government departments and international agencies use price indices to define, evaluate and resolve trade policy issues. They constitute a key tool for tariff and quota negotiations, as they provide an indication of the inflation of imports and exports as well as the international competitiveness of various industries and sectors. Moreover, business analysts and economists use international trade indices for analysis and research in respect of such questions as the causes of the real-economy effects that price changes have on trade.
28.4. Levels of aggregation. The level of detail required in the index numbers of imports and exports is not necessarily the same for all the purposes for which they are used, and national statistical offices need to strike a balance among the various demands of different types of users. For some purposes, no detailed information on the price changes of individual commodities is required; for others, the usefulness of the price statistics depends entirely on the commodity breakdown that can be made available. For instance, while tariff-policy decision-making and the analysis of the effects of trade on employment and productivity by industry often require highly disaggregated prices, macroeconomic studies focused on a country’s terms of trade and its balance of payments require aggregate measures of price and volume trends of exports and imports.
28.5. Macroeconomic uses. From the perspective of national accounts, price and volume indices of external trade in goods play an essential role in the estimation of macroeconomic aggregates in constant prices. Exports and imports in supply and use tables (SUTs) at current prices are deflated by foreign trade price and/or unit value indices at the product level in the process of obtaining supply and use tables in constant prices. Also, exports and imports in constant prices are a necessary input into general macroeconomic forecasting and model-building, as well as analyses of balance of payments.
28.6. Microeconomic uses. Disaggregated measures of price change are especially relevant for uses that entail the transmission of inflation across national boundaries and within those boundaries, from one sector to another. Studies that serve tariff-policy discussions also require the availability of highly disaggregated prices to an extent that could go well beyond the most detailed level of a purely statistical commodity classification. Also, there is increasing interest in understanding the relative importance of price-based versus quality-based competition. The need for detailed answers to questions like these cannot be satisfied through utilization of traditional price and value indices at the macroeconomic level.
28.7. Divergent objectives of users of external trade indices. Statistical agencies often face divergent demands for measures of price and volume changes in external trade, and it is not always clear how the different objectives of users should be ranked. In this complex situation, a statistical agency must choose among the various strategies open to it—strategies that have to do with both sources of data and methods of calculation. The choice of approach must also be pragmatic, taking into consideration resource constraints, data availability and the practical feasibility of the selected methodology. The objective is to produce, subject to the usual budgetary constraints, the “best” measures possible for changes in the prices and volume levels of both imports and exports, detailed, to the extent possible, by major commodity groups and partner countries.