Charles Piggott analyses the results of The Banker’s second annual global trade finance ranking.

Large countries are better able to weather global economic storms than small ones, judging from changes at the top of this year’s ranking of nations’ potential for trade. Last year’s most attractive trading nation, Switzerland, has been pushed off the top spot by economic giants Japan and the US.

Japan’s 10-place climb to the top of this year’s ranking – despite its 0.4% economic contraction in 2001 – is partly due to a technical change in the way its financial statistics are calculated by the World Bank. The figure used in this year’s ranking for Japan’s domestic credit provided by the banking sector has benefited from the World Bank using a wider definition of financial institution. As a result of this revision, Japan scores the maximum 25 points in this category.

Furthermore, despite a minor deterioration of the yen’s stability against the dollar since last year’s ranking, Japan’s score for currency stability has improved relative to the average. When it comes to trade, Japan is only let down by its lack of economic growth.

The US’s climb up the ranking highlights a second anomaly contained in this year’s results. Compared with last year, the US is less politically stable, economic growth has slowed and less domestic credit has been extended by the banking sector as a percentage of GDP. And yet the country climbs two places to rank at number two.

The reason is that most countries have suffered some economic deterioration since the last ranking and the indicators show a general deterioration in the environment for global trade. Countries such as the US, Portugal, Netherlands, Austria, Canada, Spain and Belgium have risen up the ranking because they have been less severely affected by the global downturn.

Even China suffered a minor slowdown in economic growth over the period, but with GDP growth of 7.3% in 2001, it still stands out as the fastest growing economy in the top 25. Compared with other countries in the top 25, China’s indicators have shown only a minor deterioration. As a result, the country climbs 10 places to rank at number five.

Methodology

Countries were rated out of a potential maximum of 100. Each country scored between zero and 25 in four categories: political stability, GDP growth, financial infrastructure and exchange rate stability.

Political risk ratings for each country out of a potential maximum of 100 were provided by Political Risk Services (for further information see www.countrydata.com). The country with the highest political stability rating scored the maximum of 25 points and the country with the lowest stability rating scored zero. Countries in-between scored between zero and 25 on a pro rata basis.

GDP growth figures for the year 2001 are the most recent available from the World Bank. GDP figures are taken from World Bank data, except for Israel, Saudi Arabia, Singapore, Taiwan and the United Arab Emirates, for which the World Bank does not have a figure for the year 2001. These figures come from the Economist Intelligence Unit. All figures are actual except for the figure for the United Arab Emirates, which is estimated. The country with the highest GDP growth scored the maximum of 25 points and the country with the lowest growth scored zero. Countries in-between scored between zero and 25 on a pro rata basis.

Financial infrastructure was rated on the basis of domestic credit provided by the banking sector as a percentage of GDP. Figures were taken from the World Bank's World Development Report 2003. The country with the highest level of bank lending as a percentage of GDP scored the maximum of 25 points and the country with the lowest level of lending scored zero. Countries in-between scored between zero and 25 on a pro rata basis.

Exchange rate stability was scored by subtracting the lowest exchange rate against the US dollar in 2002 from the highest exchange rate in that year. This annual range of exchange rates was divided by the average exchange rate over the year, then multiplied by 100 to give a percentage figure showing the exchange rate variation. The country with the lowest variation in its exchange rate against the US dollar scored the maximum of 25 points and the country with the highest variation scored zero. Countries in-between scored between zero and 25 on a pro rata basis. Raw data was provided by www.oanda.com.

Where no data were available, countries scored zero.

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter