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Governments and companies alike depend on international trade
data for reliable statistics to track the ever-shifting
marketplaces for traded goods. Because the sources for this type of
data are official government statistics offices, this data
represents one of most trusted means of gauging import and export
activity between countries for individual commodities.
However, governments also have a vested interest in balancing
the mutual aims of accuracy and transparency with the sometimes
competing needs to protect its own citizens and economy. Toward
that aim, governments sometimes employ practices known as
statistical confidentiality or suppression
schemes to mask the reporting of some otherwise important
data, limiting observers to a less than complete view of the
marketplace. While there are various methods employed to execute
such intentional obfuscation, there are also strategies observers
can use to approximate the true nature of trade despite these data
limitations.
Trade data confidentiality schemes exist because ongoing
publication of the data in question has security implications or
would cause a competitive disadvantage to parties involved in the
trade. For instance, if there are only two exporters of a
particular good in a particular country, the government's (referred
to as the "Reporter" of such data) publication of the total export
trade figures for that good would allow both of the parties
involved a window into the business of the other venture.
Competitors could simply view the overall trade volume and/or value
and subtract out the portion of their own business, thereby giving
them a view into the amounts of goods exported, foreign export
markets (referred to as the "Trade Partner" of such export data)
and even the average price that they are receiving for those goods.
This type of transparency can be viewed as putting affected
companies at a competitive disadvantage, so governments may employ
confidentiality schemes where some or all the details of the trade
of certain goods are not reported.
International trade data is published using the Harmonized
Tariff Schedule (HTS or HS) classification system which assigns a
particular code to every traded good commodity in a 2-digit chapter
system ranging from 01 through 99. The granularity of goods
increases as the HTS digits increase, with 2-, 4-, and 6-digit
codes and associated definitions acknowledged universally across
all the world's reporters. Reporters are also able to define their
own specific tariff-line codes that exceed six digits, such as at
the 8- or 10-digit level for maximum commodity granularity.
Example:
All Reporters: 02: Meat and Edible Meat
Offal
All Reporters: 0201: Meat of Bovine Animals, Fresh or
Chilled
All Reporters: 020130: Meat of Bovine Animals,
Boneless, Fresh or Chilled
US Only: 0201305085:Meat Of Bovines,
Boneless, Fresh Or Chilled, As Specified In Us Note 3, Except
Processed, Nesoi
Confidentiality schemes take different forms according to the
practices of the reporters involved. Some common variations are as
follows:
Commodity Suppression: Reporters use multiple
types of schemes to mask the commodity that they are trading. This
can include simply withholding the trade figures of a particular
product, though this is less likely as it will reduce the overall
total trade of a reporter. More frequently, reporters will mask the
trade by moving it into another HS code, a code created to
aggregate the trade of one or more commodities. By reporting
multiple codes under the same suppression code, the reporter
effectively masks the true volume and value of any one code by
diluting it along with others. These created suppression codes are
sometimes reported under a different chapter, usually chapters 00,
98, or 99 as these are not assigned in the HTS classification
system, or they are reported under the same chapter in a
"catch-all" category such as 72SS or 72MM.
Trade Partner Suppression: Reporters may also
mask the identity of the trade partner that they have imported from
or exported to. Here, the suppression method can differ as well,
including lumping the data into a single reporter designated as
something like World Suppression. In the case of the
European Union, suppressed trade with other EU members may be
aggregated under EU Suppression while such trade with
partners outside the EU aggregated under Non-EU
Suppression.
Delayed Reporting: Reporters also can delay
the reporting of trade for a period, only reporting it after that
period has elapsed. The period can range from a couple of months to
a couple of years according to the specifics of the product and the
specific confidentiality scheme.
Partial Concept Reporting: Exclusion of a
particular trade concept like withholding quantities or values from
publication.
Trade Partner Aggregation: Grouping individual
trade partners into an aggregate region such as in the grouping of
elements of coal trade within the U.S. ports of Norfolk, Virginia;
Charleston, South Carolina; and Mobile, Alabama; which obscures the
distribution of each member's contribution to the total
figure.
As effective as these suppression schemes may initially seem,
there is an important limitation: they are only applied to the data
sets of the reporters in question. These same reporters have no
control over the data reported by their trade partners, who do not
share the same concerns and considerations as the reporters
applying their own suppression schemes, which leads to a gap in
those schemes' effectiveness. This gap can be exploited by savvy
trade data users to better understand the true trade activities
despite the presence of suppression schemes.
The power of these workarounds is because, most often, these
trade partners are also independent reporters in their own right.
In other words, when Australia reports the export of iron ore to
mainland China, Australia is the reporter and mainland China is the
trade partner. Although Australia can and does invoke whatever
suppression scheme(s) it desires, mainland China also publishes its
own trade data independently that aims to capture the imports of
iron ore from Australia in a so-called "mirror trade" view. In that
latter example, mainland China is the reporter and Australia is the
trade partner. Mainland China does not share Australia's
suppression schemes, although it may employ alternate suppression
schemes itself.
Having access to an international trade platform that captures a
large number of reporters is key to this type of analysis. The Global Trade Atlas by IHS
Markit provides monthly world trade statistics for 102 reporters
representing over 98% of world trade and all traded goods
commodities, making it easy to pivot between reporters and trade
directions to access different reporters interchangeably for the
same commodity of interest.
One example of a suppression scheme at work is that of the
Australia government, who for years have used a confidentiality
scheme to eliminate some or all the details of the trade of certain
goods from the information they release. A prime example of this is
liquefied natural gas (LNG), a commodity for which Australia became
the number one exporter of in the entire world in 2020. Seeing
where Australia is exporting to and how much they are selling into
those markets could be a valuable piece of information, but LNG
exports fall under the Australian government's confidentiality
scheme resulting Australia masking the specific export destinations
for LNG, but not the overall quantity.
Trade data users limiting themselves to a view of Australian
exports for LNG find themselves without a view to where the goods
are being exported, but access to a greater range of trade
statistics helps circumvent the national confidentiality scheme. A
review of what all other available reporters have published for
imports of LNG from Australia provides us with a proxy list of
export markets for this product.
Analysis shows that using this method accounts for 98.5% of the
total exports from Australia in 2020, providing a high degree of
confidence that this method has almost fully captured the total
market and successfully circumvents the confidentiality scheme in
place.
In other cases, the scope of the coverage offered by using other
trade statistics is less easily gauged. A search of Russia trade
statistics reveals that the export and import of aircraft &
their parts (HS 88) are totally excluded in the reporting.
While the mirror trade example below captures slightly over $2B
in total exports to Russia, there is no way to estimate how much of
the total imports have been able to be accounted for due to
Russia's complete suppression. This method can, however, still be
used as a barometer for the market size and activity even if it
cannot be corroborated by the reverse trade direction.
While some nations have their suppression/confidentiality
schemes as an ongoing process, others set time limits on the
suppression of data. New Zealand has a staggered approach to their
confidentiality scheme, setting either a 3-, 12-, or 24-month
period around suppression. At the end of the period, those affected
by the suppression are contacted by Statistics New Zealand and,
depending on their feedback, the suppression may either continue or
cease. However, in the world of international trade, three months
can make the difference between useful business intelligence and
just data, so users again can turn to the statistics of the other
reporters to fill in the gap.
For instance, a review of sodium triphosphate (HS 283531), a
food preservative, shows a 3-month confidentiality lag on its
imports into New Zealand:
Though data for New Zealand is released through February 2021,
the reported data for this particular commodity ends in November
2020.
However, producing a mirror trade view of exports of sodium
triphosphate destined for New Zealand, the gap in data is easily
overcome, allowing users to circumvent the confidentiality scheme
that New Zealand employs, especially by corroborating to the known
data published November 2020 and prior.
In conclusion, despite international trade being generally
well-documented in our globalized economy, it is not entirely
exempt from intentional obfuscation as governments strive to
balance the needs of the specific market participants. A creative
approach to the available data can help observers to overcome data
limitations, such as in the case of suppression schemes and
statistical confidentiality that exist now, or ones that may be
deployed unexpectedly in the future.
