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https://hdl.handle.net/10419/340114 Year of Publication:
2026
Series/Report no.:
WTO Staff Working Paper No. ERSD-2026-03
Publisher:
World Trade Organization (WTO), Geneva
Abstract:
In this descriptive paper, we focus on the sectoral composition of trade balances and their evolution since the 1970s, through the aggregation of millions of data points for goods and services. We use a "tree" approach, from global to regional, and from regional to sectoral and finally country balances. Balances are examined through the lens of country-world pairs, not bilateral balances, and from various angles: as a share of global and regional GDP, and in value-added terms. We find both elements of stability and change. At the aggregate and regional levels, the story is one of stability. From the mid-1980s onwards, despite some year-to-year variation, we observe an overall stability in the geography and size of aggregate surplus and deficit regions, particularly when scaled by global GDP. This means, for example, that the size of Asia's surpluses as a share of global GDP in 2024 was close to that of 1986. This is equally true of North America's deficits. That said, imbalances have grown during certain periods, mostly between 1976 and 1986, and in the run up to the global financial crisis, and have fallen at other times (1990s, 2010s). As of the mid-2020s they are on the rise, but levels are smaller than at the peak in 2005, pre financial crisis. Changes are mostly at the sector and country level. Machinery/capital goods, and the electronics sector, have become the largest sources of manufacturing trade imbalances. Country-sector pairs show a reallocation of manufacturing surpluses and deficits across countries: while Japan, Germany and Italy accounted for the eight of the ten largest sector surpluses in the mid-1980s. In 2024, China had become the source of three out of the four largest surpluses, substituting Japan in sectors such as machinery and manufactured goods. North America's consistent trade deficits have increasingly reflected manufactured goods, most recently in machinery and electronics. In Europe, pharmaceuticals have replaced machinery as the largest surplus sector. In agri-food, several regions shifted from surplus to deficit positions and vice versa. South America records persistent agri-food surpluses, but with a vastly changed product composition over time. Changes in these sectors should not obscure the fact that mineral fuels (oil and gas) have been, and remain, the single largest source of sectoral imbalances, with China the largest importer. The evolution of services trade balances highlights growing surpluses of Europe and North America. Aside from the recent, and limited, exception of the Middle East, other regions have recorded deficits, in some cases rising ones. Information, communication, and technology services are the fastestgrowing source of surpluses, while intellectual property-related services are the fastest-growing source of deficits. Transport and travel still account for large share of the level of imbalances. Adopting a value-added perspective alters the assessment of global trade balances across regions for both goods and services. This approach makes Europe's goods trade deficit larger and its services surplus smaller. It results in North America's goods trade deficit decreasing and its service trade surplus increasing, a trend which has intensified over time. It also makes Asia's goods trade surplus larger (a visible trend since 1995), while little change is observed for the services trade deficit.
Subjects:
Trade
Trade Imbalances
Empirical studies on trade
Trade Imbalances
Empirical studies on trade
JEL:
F10
F14
F
42
O57
R10
F14
F
42
O57
R10
Document Type:
Working Paper
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