Characteristics of globalisation: increase in trade as a proportion of GDP
This is A Level (IA2) content, examined in Unit 4, Developments in the global economy (paper WEC14).
It assumes the AS units: how GDP is measured and compared, net exports as a component of aggregate demand, and specialisation and the division of labour.
Globalisation is the opening topic of Unit 4 and the backdrop to all of it: in WEC14 it has been the case study for a whole Section B data-response question, with a 2-mark calculation on a trade ratio and an 8-mark Examine on the factors behind globalisation, and its ideas run through essays on trade, exchange rates and development.
- Paper: 2 hours, 80 marks answered. Section A: six multiple-choice questions, 1 mark each, key only (no working or explanation marks). Section B: one data-response question on a Source Booklet: (a) Calculate 2 and (e) Discuss 14 always, with Explain 4, Analyse two 6 and Examine two 8 between them in any order. Section C: two 20-mark Evaluate essays from three.
- Point-marked parts print a split line (for example Knowledge 2, Application 2, Analysis 2, Evaluation 2): one mark per (1), labelled (1K), (1AN), with "/" between alternative wordings. Application needs one data point from each source the stem names, or two from one named source.
- Calculate 2: one mark for the method line, one for the answer with its currency and magnitude word (billion, trillion); digits alone, or a % sign, earn 1.
- No evaluation marks on 4- and 6-mark parts. Examine 8 has two: "2+0 or 1+1" (one developed comment or two brief ones). Solutions are not evaluation.
- Discuss 14: levels, KAA 8 (1-3, 4-6, 7-8) and Evaluation 6 (1-2, 3-4, 5-6); no judgement required. Evaluate 20: KAA 12 (1-3, 4-6, 7-9, 10-12) and Evaluation 8 (1-3, 4-6, 7-8); the top evaluation level needs an informed judgement.
- Essay caps (KAA no higher than Level 3, 9 marks): no country of the type the question asks for (developed, developing, or of your choice); only one half of a two-part term. No WEC14 item ever requires a diagram; a correct, used diagram is credited as one KAA element.
- Best two points: examiners level each paragraph and reward the best two developed points, each followed by its own evaluation; answer causes, effects or policies exactly as asked.
The idea: the world economy is becoming one market
Globalisation describes the way national economies have become more closely tied together.
Fifty years ago most of what a household bought was made in its own country, most firms sold only at home, and money and people rarely crossed borders.
Today a phone is designed in one country, assembled in a second from parts made in a dozen others, financed by investors in a fourth and sold everywhere.
What happens in one economy (a factory closure, a harvest failure, a rise in interest rates) is felt quickly in others.
Why should you care?
Because globalisation changes the answers to almost every question in economics.
It changes which goods are cheap, which jobs exist and where, how much tax governments can collect, how fast poor countries can grow and how widely incomes are spread.
Globalisation is described by three characteristics, three things you can see and measure: more trade relative to output (this section), more TNCs and FDI (next section), and more migration (the section after).
Trade as a proportion of GDP: what it measures
The first characteristic is an increase in trade as a proportion of GDP.
The usual measure is the trade-to-GDP ratio, sometimes called a country's openness:
- trade as a proportion of GDP = (exports + imports) ÷ GDP × 100
Some sources use exports alone (exports ÷ GDP × 100) or imports alone.
Read the label on any chart, because the three measures give very different numbers.
Why divide by GDP?
Because a big economy trades more simply because it is big.
Dividing by GDP removes the effect of size and asks the real question: what share of the economy's activity is tied to other countries?
If trade grows faster than GDP, the ratio rises, and the economy has become more integrated with the rest of the world.
That is why the measure is a ratio and not the value of trade: the value of world trade rises every year with inflation and population growth, but the ratio only rises when trade grows faster than output.
How far has it risen?
The chart below shows world exports plus imports of goods and services as a percentage of world GDP, from World Bank data.
Read it in three stages.
1. 1970 to 2008: rapid globalisation. The ratio rose from 25.8% in 1970 to 50.1% in 2000 and 60.3% in 2008. For most of this period trade grew faster than world output. Lower tariffs, the opening of China and the former Soviet bloc, container shipping and the internet all played a part (the causes are taught later in this unit).
2. 2009: the financial crisis. World trade collapsed faster than world GDP, and the ratio fell to 51.9%. Trade in cars, machinery and components is very sensitive to the business cycle, because firms postpone investment and run down stocks in a recession.
3. Since 2008: a plateau. The ratio has moved around without a clear upward trend: 55.6% in 2015, 55.8% in 2019, 51.9% again in the pandemic year 2020, a peak of 62.1% in 2022 and 56.7% in 2024. The 2022 peak owes a lot to very high energy and food prices, which raised the value of trade without any rise in its volume. The Economist popularised the word "slowbalisation" in January 2019 for this slowdown in trade, investment and supply chains relative to GDP.
So "an increase in trade as a proportion of GDP" describes the period up to 2008 very well, and the last fifteen years much less well.
That difference is good evaluation material: globalisation is a process that can slow, pause or partly reverse.
Countries differ enormously
The world ratio hides big differences between countries.
Country (World Bank income group)
Trade as % of GDP
What it shows
Singapore (high income)
313.3% (2024)
a trading hub: it imports goods, adds value and re-exports them
Viet Nam (upper-middle income)
111.4% (2000), 173.9% (2024)
export-led growth through electronics assembly and FDI
Germany (high income)
79.1% (2024)
a large manufacturing exporter inside the EU single market
Mexico (upper-middle income)
26.2% (1993), 75.4% (2024)
integration with the US after NAFTA came into force in 1994
India (lower-middle income)
15.5% (1990), 45.9% (2024)
opening up after the 1991 reforms
China (upper-middle income)
38.1% (2001), peak 63.6% (2006), 38.0% (2024)
trade grew fast after WTO entry, then domestic spending grew faster
Two lessons come out of the table.
- A ratio above 100% is possible. GDP measures value added, but exports and imports are measured at their full value. Singapore imports components worth a lot, adds a little value, and exports the finished goods at their full price, so the same value crosses its border twice. Trade can therefore be several times GDP.
- A falling ratio does not mean a country is "de-globalising". China's ratio fell from 63.6% to 38.0% while its exports kept rising, because its GDP grew even faster as households and the government spent more at home. Large economies also tend to have lower ratios than small ones, because more of what they need can be produced inside their own borders.
Why a rising trade share matters
The economic reason trade grows faster than output is specialisation.
As barriers fall, each country concentrates on what it produces at the lowest opportunity cost and trades for the rest (comparative advantage, taught in trade and the global economy).
Production is also split into stages: a component may cross several borders before the final good reaches a shop.
The OECD estimates that about 70% of international trade now involves global value chains.
Each crossing counts as trade, so the ratio rises even if final output does not.
A higher ratio has two sides, which is why it is a favourite source of evaluation:
- Gains: access to larger markets, economies of scale, cheaper imports, faster growth through export demand (net exports are a component of AD).
- Exposure: a recession, a tariff or a supply shock abroad hits the economy harder. Mexico, with three-quarters of its GDP linked to trade and most of it with the US, feels every change in US demand or US trade policy.
- Characteristics of globalisation: Increase in trade as a proportion of GDP.
- Globalisation: the growing integration and interdependence of the world's economies, through trade, flows of capital, the movement of people and the spread of technology.
- Trade as a proportion of GDP: the value of a country's exports plus imports of goods and services divided by its GDP, times 100.
- Percentage-point change: the difference between two percentages (from 50.1% to 60.3% is a rise of 10.2 percentage points).
Learn the definition of globalisation in two parts, as above: integration and interdependence of economies (the first knowledge mark), then the channels it works through (the second).
A WEC14 "explain what is meant by" item gives the two knowledge marks for those two halves.
The calculations: learn them
WEC14 Section B always opens with a 2-mark calculation, and every one so far has been a percentage-of-a-total step: one number in a lead-in sentence, the other from a Figure or a line of Extract A. No formula is printed on the paper. Learn these:
- Share (%) = part ÷ total × 100
- Total = part ÷ share × 100 (a total from a part and its share)
- Part = share ÷ 100 × total (a part from a total and its share)
- Answer: money, with the currency and the magnitude word (billion, trillion). In WEC14 the right digits without "billion" or "trillion", or written with a % sign, earn 1 mark of 2.
In 2025 a country exported goods and services worth $48.6 billion and imported $52.2 billion. Its GDP was $168 billion.
Calculate its trade as a proportion of GDP.
1. Trade = exports + imports = 48.6 + 52.2 = $100.8 billion.
2. Trade as a proportion of GDP = 100.8 ÷ 168 × 100 = 60.0%.
Answer: 60.0% of GDP.
The country is about as open as the world average in the 2020s: six dollars of trade for every ten dollars of output.
If you had used exports alone you would get 28.9%, a different measure; always check which one the question asks for.
In 2025 Morvania's exports of goods and services were 38.5% of its GDP.
With reference to the second paragraph of Extract A (exports were worth $57.75 billion), calculate Morvania's GDP in 2025.
You are advised to show your working.
1. GDP = part ÷ share × 100.
2. 57.75 ÷ 38.5 × 100 (1)
3. = $150 billion (1)
Answer: $150 billion. How the marks go: "$150 billion" or "$150 000 000 000" with no working earns 2; "150" or "150%" or "$150 million" earns 1; a wrong answer with the method line 57.75 ÷ 38.5 × 100 earns 1; a wrong answer with no working earns 0.
So always write the method line.
In 2025 Tavira's GDP was $2.4 trillion.
Its imports of goods and services were 27.5% of GDP.
Calculate the value of Tavira's imports.
1. Part = share ÷ 100 × total.
2. 27.5 ÷ 100 × 2.4 = 0.66
3. = $0.66 trillion, which is $660 billion.
Answer: $660 billion (or $0.66 trillion).
Both forms earn full marks because each keeps the magnitude word.
"660" on its own earns 1.
Check the size: about a quarter of 2.4 trillion is 0.6 trillion, so 0.66 trillion is sensible.
Using the chart above, calculate the change in world trade as a proportion of world GDP between 1970 and 2024, as a percentage-point change and as a percentage change.
1. Percentage-point change = 56.7 − 25.8 = 30.9 percentage points.
2. Percentage change = 30.9 ÷ 25.8 × 100 = 119.8%.
Answer: a rise of 30.9 percentage points, which is a rise of 119.8%: the share of world output tied to trade more than doubled.
Writing "a rise of 30.9%" is wrong, and examiners mark it wrong: a change in a rate or a share is in percentage points.
With reference to Figure 1 and the first paragraph of Extract A, explain what is meant by 'globalisation'. (4)
(Figure 1 shows Kessan's trade rising from 44% of GDP in 2016 to 71% in 2025; the first paragraph of Extract A says foreign-owned firms now employ 210 000 workers in Kessan.)
- Knowledge 2: the growing integration and interdependence of the world's economies (1) through trade, capital flows such as FDI, migration and technology (1)
- Application 2: Figure 1, trade rose from 44% to 71% of GDP between 2016 and 2025 (1); Extract A, foreign-owned firms employ 210 000 workers (1)
Outcome: 4 marks.
One data point from each named source; a third figure from the chart adds nothing, and any evaluation earns nothing on a 4-mark part.
A drill: causes, effects or policies?
WEC14 reports repeat one warning above all: answer the direction of the question.
A cause offered for an effects question, or an effect for a policies question, scores 0 for that strand.
Here is the same topic asked three ways.
If the question asks for ...
it wants ...
a wrong-direction answer that scores 0
causes of the rise in trade as a proportion of GDP
why trade grew faster than output: lower tariffs, cheaper container shipping, global value chains
"so firms gained economies of scale" (an effect)
effects of the rise
what the higher ratio did: faster growth through export demand, cheaper imports, exposure to shocks abroad
"because tariffs were cut" (a cause)
policies to raise (or limit) the trade share
what a government does: join a trading bloc, cut tariffs, improve ports; or impose tariffs and quotas
"trade makes the economy vulnerable" (an effect)
From Units 1-3: trade as a proportion of GDP is built from Unit 2 tools: GDP, net exports in AD = C + I + G + (X − M), and the rate of growth.
The gains from specialisation come from Unit 1 and economies of scale from Unit 3.
- Developed: Germany, trade 79.1% of GDP (2024), a manufacturing exporter in the EU single market; Ireland, a trade and FDI hub whose modified gross national income (GNI*) was only about 57% of GDP in 2024, because so much of its measured output belongs to foreign-owned firms.
- Emerging: Mexico, trade 26.2% of GDP in 1993 and 75.4% in 2024 after NAFTA; China, trade 38.1% of GDP in 2001, 63.6% in 2006, 38.0% in 2024.
- Developing: Bangladesh (lower-middle income), trade 26.8% of GDP (2024), with ready-made garments about 80-85% of merchandise exports; Ethiopia (low income), which opened Hawassa Industrial Park in July 2016 to attract foreign garment makers producing for export.
In a WEC14 (a) calculation, write the method line (part ÷ share × 100) before the answer, and finish with the currency and the magnitude word: "$150 billion", never "150".
The reports say a large minority lost a mark by dropping "billion" or "trillion", and a wrong answer with no working scores 0.
- Dropping the magnitude word. "150" or "150%" for $150 billion earns 1 of 2. Copy the word "billion" or "trillion" from the source.
- Calling a change in a share a percentage change. From 50.1% to 60.3% is a rise of 10.2 percentage points, not 10.2%. The same rule applies to the Gini coefficient and the inflation rate.
- Reading a falling ratio as falling trade. The ratio falls when trade grows more slowly than GDP; China's exports rose while its ratio fell. Say what happened to the numerator and the denominator.
- Treating a ratio over 100% as an error. Trade is measured at gross value and GDP as value added, so re-exporting hubs such as Singapore have ratios of 300%.
- Assuming globalisation only ever increases. The world ratio has not risen clearly since 2008. Use this as evaluation, never as a reason to ignore the characteristic.
Check your understanding
1. In 2024 a country's exports of goods and services were $90 billion, its imports $110 billion and its GDP $250 billion. Which one of the following was its trade as a proportion of GDP? (1)
- A 36.0%
- B 80.0%
- C 44.0%
- D 125.0% Total [1]
2. World trade fell from 62.1% of world GDP in 2022 to 56.7% in 2024. Which one of the following can be deduced from this information? (1)
- A The value of world trade fell between 2022 and 2024
- B World trade as a proportion of GDP fell by 5.4%
- C World GDP fell between 2022 and 2024
- D World trade grew by a smaller percentage than world GDP Total [1]
3. In 2025 Kessan's imports of goods and services were $84.6 billion. With reference to Figure 1 (imports were 23.5% of GDP in 2025), calculate Kessan's GDP in 2025. You are advised to show your working. (2) Total [2]
4. Viet Nam's trade was 111.4% of its GDP in 2000 and 173.9% in 2024. Explain the difference between a percentage-point change and a percentage change, using these figures. (4) Total [4]
5. In 2024 Singapore's trade was 313.3% of its GDP. A student writes: "This figure must be wrong, because a country cannot trade more than it produces." Explain why the student is wrong. (4) Total [4]
6. World trade was 60.3% of world GDP in 2008 and 56.7% in 2024. Examine two likely reasons why trade as a proportion of world GDP has not risen since 2008. (8) Total [8]
7. Discuss whether trade as a proportion of GDP is a good measure of how globalised a country is. (14) Total [14]
Answers
1. B (1). (90 + 110) ÷ 250 × 100 = 80.0%. A is not correct because it uses exports alone (90 ÷ 250). C is not correct because it uses imports alone (110 ÷ 250). D is not correct because it divides GDP by trade (250 ÷ 200), the inverse.
2. D (1). The ratio falls when trade grows more slowly than GDP (or falls while GDP rises). A is not correct because the value of trade may have risen; it only grew less than GDP. B is not correct because the fall is 5.4 percentage points, not 5.4%. C is not correct because nothing in a ratio tells you the direction of the denominator on its own; world GDP in fact rose.
3. 84.6 ÷ 23.5 × 100 (1) = $360 billion (1). NB: "360" or "360%" earns only 1 mark; a correct answer with no working earns 2.
4. Knowledge 2, Application 2:
- a percentage-point change is the simple difference between two percentages (1)
- a percentage change measures that difference relative to the starting value (1)
- 173.9 − 111.4 = a rise of 62.5 percentage points (1)
- 62.5 ÷ 111.4 × 100 = a rise of 56.1% (1)
5. Knowledge 2, Application 2:
- GDP measures value added: only the extra value created inside the country (1)
- trade is measured at the full value of goods crossing the border, so imported components are counted again when they leave as exports (1)
- Singapore imports goods, adds a small amount of value and re-exports them, so its exports and imports together can be several times its value added, giving 313.3% (1)
- so the ratio measures how exposed the economy is to trade, not a share of output that must stay below 100% (1)
6. Knowledge 2, Application 2, Analysis 2, Evaluation 2:
- rising protectionism and trade tensions (1K): tariffs and other barriers raise the price of imports, so trade grows more slowly than output (1AN)
- firms shortening supply chains after the 2020 pandemic (1K): producing closer to home cuts the number of times components cross borders, so measured trade falls relative to GDP (1AN)
- Application, up to 2: the ratio fell from 60.3% in 2008 to 56.7% in 2024 (1); a fall of 3.6 percentage points over 16 years, against a rise of 34.5 points between 1970 and 2008 (1)
- Evaluation, up to 2 (2+0 or 1+1): the ratio was 62.1% in 2022, so part of the movement reflects swings in energy and food prices, not a lasting retreat (1); the ratio counts goods and some services but misses much digital trade, so integration may be greater than the figure shows (1)
7. Indicative content. KAA (8): the ratio shows how much of output is tied to other economies, so a rising ratio means more specialisation and interdependence; it is easy to compare over time and between countries (Viet Nam 173.9%, China 38.0% in 2024). Evaluation (6): it misses FDI, migration and technology, the other characteristics; it is distorted by country size (large economies trade less of their output) and by re-exports (Singapore); gross trade double-counts components; price swings change it without any change in integration (the 2022 energy spike); a better picture uses several measures together, such as FDI stock, migrant share and value added in trade. Level 3 on each grid needs two developed arguments in context, each weighed straight after it.