Importing and Exporting

How can the index of openness be greater than 100?

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09/23/2010

A value greater than 100 means that the country's exports are bigger than its overall level of production (GDP or GNP). Such a situation could occur if much of the economic activity of the country in question involved the assembly and export of final products made from imported raw or partially assembled materials. The value in excess of 100 comes about from the fact that output is (always) measured in terms of value added -- the value of capital and labor services devoted in this case to the assembly of goods -- while exports are measured in terms of the total value of goods -- including the value of the imported parts. Clearly, in such circumstances it is quite likely for exports to be greater than value added. (Source: International Economics Eighth Edition)