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Trade Intensity Index

Trade Intensity Index (TII) is a method of trade research in deciding the right market for interested product. Just knowing the major markets trends will not suffice. The relations between the two countries in terms of trade relations or socio political relations is an area of immense importance to be analyzed in the export plan since it may result into a complete embargo or stringency in regulations for an exporting country resulting into poor competitive position vis a vis other competing suppliers.

Trade Intensity Index is based on an actual observation of bilateral trade flow, and it measure that intimacy of the trading relationship between any given two countries. Higher is the Trade Intensity Index, better will be our export possibility and therefore an exporter should choose the market with high TII values. The Trade Intensity Index is defined as the share of on country's export going to a partner divided by the share of world imports going to the partner.


    

       
   

   

Where s is the set of countries in the source, d is the destination, w and y represent the countries in the world, and X is the bilateral flow of total exports. In words, the numerator is the export share of the source region to the destination; the denominator is export share of the world to the destination.
      

A high value of TII indicates a better bilateral strength between the trading partners and therefore is an indication of better acceptability of the product in question in that export market. Hence an exporter should choose to export into the market where the TTI value is high.

Right export market

The decision of the right export market is based on TII .For this purpose two kinds of trends have been analyzed the trend in exports from GMS country to these markets and (ii) trend in imports from the World into these markets.


The result shown can be described according to the situation below:


            Situation
       

            Exports from GMS country
       

            Imports from the World
       

            Interpretation
       
            Situation 1             Rising             Rising Best combination
           Situation 2             Rising             Declining Understanding that the import demand in these markets is declining, GMS exporter should consider diversifying from these markets to newer ones.
            Situation 3             Declining             Rising Understanding that the import demand in these markets is rising, GMS exporter should consider diversifying into these markets. 
            Situation 4             Declining             Declining Worst combination
       

 

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