The 'Rotterdam-Antwerp Effect' in the Context of UK Trade Statistics

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The ‘Rotterdam-Antwerp Effect’ in the Context of UK Trade Statistics

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Summary

The ‘Rotterdam-Antwerp effect’ describes distortions in official trade statistics due to misreporting of commodities passing through major world ports en route to their final destination. For example, UK exports for non-EU countries through the Netherlands might be misreported as exports to the Netherlands. We evaluated the extent of the Rotterdam-Antwerp effect in the context of UK trade statistics in a project supported by the Department for International Trade (DIT) and the Department for Environment, Food and Rural Affairs (DEFRA).

Overview

The ‘Rotterdam-Antwerp effect’ is a term used to describe potential distortions in official trade statistics occurring as a result of misreporting of commodities passing through major world ports (such as Rotterdam in the Netherlands or Antwerp in Belgium) on their way to their final destination. This effect takes its name from the Dutch and Belgian ports because they are two of the largest ports in Europe, handling substantial volumes of trade in goods. However, it can occur at any transhipment port. In essence, the Rotterdam-Antwerp effect is an issue of trade data accuracy. Within the context of UK trade with the Netherlands and Belgium, it has been argued that this effect overestimates the importance of these countries (and, by extension, the EU) as trading partners for the UK and therefore underestimates UK trade with the rest of the world. This project sought to obtain more precise estimates of the extent of transit flows via the Netherlands and Belgium in the UK data, and the characteristics of these flows. This is important as the UK seeks to establish an independent trade policy outside the EU.

Methods

Our research utilised two datasets: a publicly available dataset from the National Bank of Belgium (NBB) and confidential firm-level data from Statistics Netherlands (CBS). The Foreign Trade database compiled by the NBB contains detailed information on Belgium’s imports and exports of goods at the Combined Nomenclature (CN) eight-digit product level. These data are freely available through an online download platform. Information on imports and exports is available for 9,500 products from and to around 250 partner countries. Of crucial importance to our research is that these data are recorded and available under both the ‘Community’ and the ‘National’ concepts. This means that the difference between the two can be used as a proxy measure of quasi-transit trade (or the Rotterdam-Antwerp effect).

Impact

While re-export flows are growing in importance globally, there are currently no robust estimates of re-export flows for the UK. The methodologies and estimates in this project provide a useful new resource for understanding UK trade patterns. The work was developed through discussions with ONS, HMRC, DIT, DEFRA and the Trade Remedies Authority.

This project illustrates the benefits of using rich micro data and cross-country collaboration to study UK trade patterns. It points to the potential benefits of developing new data collection methods involving HM Revenue and Customs (HMRC). The research has been possible due to collaboration with Oscar Lemmers of Statistics Netherlands, who provided a customised dataset for the purposes of this project.

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