<p>Since we are not trading with aliens (yet), you are right in assuming the global account balance ought to be zero. Your data contradicts this because it is collected by numerous statistical agencies who differ in their capability and their methods. Examples for different outcomes could arise from:</p>

<ul>
<li>different degrees of border control. The fact that an export is registered in country A does not mean it is registered as an import in country B.</li>
<li>different capabilities in processing and collecting data. In some development countries, a substantial share of the economy is informal, i.e. outside the scope of any authority. </li>
<li>different statistical concepts applied.</li>
</ul>

<p>There are datasets which try to overcome these difficulties by correcting them such that the global account balance is zero.</p>

CC BY-SA 4.0
2020-03-24T15:50:07.500Z
I guess you should be right, particularly the first point. Do you have any source that has the global CAB  = 0?
Mrigank Pawagi
CC BY-SA 4.0
2020-03-25T11:52:30.187Z
I think this is one of them: https://www.gtap.agecon.purdue.edu/databases/default.asp
E. Sommer
CC BY-SA 4.0
2020-03-24T07:38:30.593Z
2020-03-24T07:38:30.593Z
E. Sommer
<p>Two answers:</p>

<ol>
<li><p>How trade is recorded: exports are recorded as FOB (Free on board), whereas imports are recorded as CIF (cost, insurance and freight).</p></li>
<li><p>Re-exports. Essentially this is double counting of exports. For instance, Hong Kong and Belgium have high values of exports relative to their production, but that is because they are intermediate destinations which then export to third destinations. These exports get double counted. </p></li>
</ol>

CC BY-SA 4.0
2020-03-25T11:49:40.153Z
on the second point: this means imports are also double counted aren't they?
E. Sommer
CC BY-SA 4.0
2020-03-25T12:37:15.183Z
Not sure. That is because imports have to be declared to customs and import duties have to be paid by the importer. Given that import duties will not be paid, imports will not be counted (at least in the statistical accounts).
ChinG
CC BY-SA 4.0
2020-03-24T17:55:27.270Z
2020-03-24T17:55:27.270Z
ChinG
<p>I wondered if it was possible for all countries to have a <strong>Trade Surplus</strong> - which turns out to be impossible because the total value of imports in the world must be equal to the total value of exports in the world - because <em>one country's export is another's import, and vice-vera</em>. With this information, I can make 2 assumptions:</p>

<ul>
<li>All countries cannot have a trade surplus simultaneously.</li>
<li>The total trade surplus in the world (sum of C.A.B. of all countries with positive C.A.B.) must be equal to the total deficit. Inversely, the sum of C.A.B. of all countries must be <strong>zero</strong>.</li>
</ul>

<hr>

<p>I looked at the data for the Current Account Balance (2017 estimate) for all countries, from <a href="https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html" rel="nofollow noreferrer">CIA World Factbook</a>. However, contradictory to my assumption, here's what I observed:</p>

<ol>
<li><p>Total Surplus (excluding EU from the list) = <code>$1,469,654,370,000</code></p></li>
<li><p>Total Deficit = <code>-$1,103,897,200,000</code></p></li>
<li><p>Net Balance = Surplus + Deficit = <code>$365,757,170,000</code> </p></li>
</ol>

<p>A positive net balance should point out that the world has a <em>net trade surplus</em> - which I wouldn't expect. This can arise because of incorrect assumptions, flawed data or errors in calculation. </p>

<hr>

<p>My question is about why I make this observation, or if my assumption is wrong, why and what does the data actually mean?</p>

<balance-of-trade><surplus>
Why is the Total Current Account Balance of World positive and does it mean that the world has a net Trade Surplus?
Mrigank Pawagi
# Why is the Total Current Account Balance of World positive and does it mean that the world has a net Trade Surplus?

(Asked by: username_0 on 2020-03-23)

I wondered if it was possible for all countries to have a **Trade Surplus** - which turns out to be impossible because the total value of imports in the world must be equal to the total value of exports in the world - because *one country's export is another's import, and vice-vera*. With this information, I can make 2 assumptions:

* All countries cannot have a trade surplus simultaneously.
* The total trade surplus in the world (sum of C.A.B. of all countries with positive C.A.B.) must be equal to the total deficit. Inversely, the sum of C.A.B. of all countries must be **zero**.

---

I looked at the data for the Current Account Balance (2017 estimate) for all countries, from [CIA World Factbook](https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html). However, contradictory to my assumption, here's what I observed:

1. Total Surplus (excluding EU from the list) = `$1,469,654,370,000`
2. Total Deficit = `-$1,103,897,200,000`
3. Net Balance = Surplus + Deficit = `$365,757,170,000`

A positive net balance should point out that the world has a *net trade surplus* - which I wouldn't expect. This can arise because of incorrect assumptions, flawed data or errors in calculation.

---

My question is about why I make this observation, or if my assumption is wrong, why and what does the data actually mean?

**Tags:** balance-of-trade, surplus


---

## 2 answers

### Answer by username_1 on 2020-03-24. Score: 3

Since we are not trading with aliens (yet), you are right in assuming the global account balance ought to be zero. Your data contradicts this because it is collected by numerous statistical agencies who differ in their capability and their methods. Examples for different outcomes could arise from:

* different degrees of border control. The fact that an export is registered in country A does not mean it is registered as an import in country B.
* different capabilities in processing and collecting data. In some development countries, a substantial share of the economy is informal, i.e. outside the scope of any authority.
* different statistical concepts applied.

There are datasets which try to overcome these difficulties by correcting them such that the global account balance is zero.

> **Comments:**
> **username_0**: I guess you should be right, particularly the first point. Do you have any source that has the global CAB  = 0?  
> **username_1**: I think this is one of them: https://www.gtap.agecon.purdue.edu/databases/default.asp  

---

### Answer by username_2 on 2020-03-24. Score: 1

Two answers:

1. How trade is recorded: exports are recorded as FOB (Free on board), whereas imports are recorded as CIF (cost, insurance and freight).
2. Re-exports. Essentially this is double counting of exports. For instance, Hong Kong and Belgium have high values of exports relative to their production, but that is because they are intermediate destinations which then export to third destinations. These exports get double counted.

> **Comments:**
> **username_1**: on the second point: this means imports are also double counted aren't they?  
> **username_2**: Not sure. That is because imports have to be declared to customs and import duties have to be paid by the importer. Given that import duties will not be paid, imports will not be counted (at least in the statistical accounts).  

---

