Abstract
International trade in goods and services is a principal channel of economic integration. A convenient way to measure the importance of international trade is to calculate the share of trade in GDP. International trade tends to be more important for countries that are small (in terms of geographic size or population) and surrounded by neighboring countries with open trade regimes than for large, relatively self-sufficient countries or those that are geographically isolated and thus penalised by high transport costs. Other factors also play a role and help explain differences in trade-to-GDP ratios across countries, such as history, culture, trade policy, the structure of the economy (especially the weight of non-tradable services in GDP), re-exports and the presence of multinational firms, which leads to much intra-firm trade.
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