QDR methodology: Understanding trade flows in the EU

Trade asymmetry is a well-known fact and there are extensive reports and literature about the causes for those asymmetries. There is also a recognised effort made by trade statisticians to mitigate trade asymmetry over time. Notwithstanding the positive achievements that have been made so far, in order to build inter-country supply, use and input-output tables (IC-SUIOT) we need more than low levels of trade asymmetry: in fact, we need no trade asymmetry at all. The European statistical system (ESS) has a wide-ranging and rich amount of trade data and considerable resources are devoted to measuring trade flows. Nevertheless, the customs union of the EU adds another challenge regarding statistics on trade in goods: EU Member States may declare imports/exports for customs or tax purposes without having acquired ownership of the goods concerned, in other words, the declaration of quasi-transit trade. While relevant for physical trade flows, quasi-transit trade and re- exports distort the geographical distribution of trade among Member States and may be economically relevant. This paper proposes a new methodology called QDR (quasi-transit, domestic and re-export estimation) to address on the one hand trade asymmetries and, on the other, to provide estimates for quasi-transit trade, domestic trade and re-exports. This QDR methodology was used in the Figaro project and was revealed to be useful for identifying trade patterns between countries.