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Exploring Global Competitiveness

Explore trade competitiveness among regions and countries — and see how regional trade and integration impacts economies

GLOBAL COMPETITIVENESS SCORECARDS

A wide range of indices – developed by international organizations, think tanks, and researchers – measure economic freedom and global competitiveness. These traditional measures offer important insights into their respective fields, but the networked and globalized economy of the 21st century has created a new environment in which economies and firms must simultaneously compete and cooperate.

With this new environment in mind, the George W. Bush Institute-SMU Economic Growth Initiative synthesized respected third-party sources – which rate countries on indicators ranging from business startup costs and the macroeconomic environment to technological readiness and the rule of law – to create a composite score for each country. The criteria for incorporating indices into the Bush Institute-SMU Economic Growth Initiative Scorecard required that each index:

  • Reflect important components of economic growth or quality of life
  • Offer accessible data that are necessary to compare individual countries in North America, Latin America, Europe, and Asia
  • Provide ratings for at least 14 years in order to show a trend over time

REGIONAL ECONOMIC INTEGRATION AS A GROWTH STRATEGY

To achieve cost efficiencies while increasing quality and staying ahead on the innovation curve, companies often rely on a mix of materials and services from suppliers around the world. As more countries have opened their economies to trade and investment, suppliers of specific components and inputs have become linked through ever-growing and evolving global supply networks.

Regional economic integration has emerged as a policy strategy to pursue growth and job creation objectives, while enabling manufacturers to better meet consumer demands. As firms leverage global differences and complementary resources, they are incentivized to focus on countries in geographic proximity. Policy arrangements like free trade agreements, investment agreements, and other forms of deeper informal or formal economic integration are intended to capture as much manufacturing value-added as possible within the region while strengthening the ability of regionally-made products to compete globally.

In this section, we analyze the approaches to macroeconomic integration in North America, the European Union, the Asia-Pacific Economic Cooperation (APEC), and the Central America Free Trade Agreement (U.S.-DR-CAFTA) to discern the impact on each region’s global competitiveness.

We believe that, done right, regional economic integration promotes growth, per capita growth, global trade, and job creation – but we invite you to engage with the data and reach your own conclusions.

SOURCES

Four indices meet these criteria and were selected for inclusion in the Scorecard:

INDEX OF ECONOMIC FREEDOM

Published by the Wall Street Journal and the Heritage Foundation, this index rates countries in four areas: Rule of Law, Limited Government, Regulatory Efficiency, and Open Markets. See here for a description of the methodology used to construct this index.

GLOBAL COMPETITIVENESS INDEX

Produced by the World Economic Forum, this index rates countries in 12 areas: Institutions, Infrastructure, Macroeconomic Environment, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labor Market Efficiency, Financial Market Development, Technological Readiness, Market Size, Business Sophistication, and Innovation. See here for a description of the methodology used to construct this index.

ECONOMIC FREEDOM OF THE WORLD

Produced by the Fraser Institute in Canada, the Economic Freedom of the World index rates countries in five areas: Size of Government, Legal System and Property Rights, Sound Money, Freedom to Trade Internationally, and Regulation. See here for a description of the methodology used to construct this index.

DOING BUSINESS

A product of the World Bank, Doing Business ranks 189 countries on the basis of the ease of doing business. This index first defines the best “frontier” condition and then calculates the distance of the country’s conditions for doing business from that effective frontier. See here for a description of the methodology used to construct this index.

METHODOLOGY

CALCULATING THE SCORES

Bush Institute-SMU Economic Growth Initiative Scorecard ratings are available for the 101 countries with complete and consistent data for the past 14 years across all four source indices. Scorecard ratings for trade groups are created by averaging the ratings of member countries.

The raw data from each index is accessible in the downloadable file on this page. However, because indices have dissimilar scales, the Bush Institute-SMU Economic Growth Initiative converts raw scores from the indices to comparable percentile ranks. Percentile ranks range from 0 to100, with a higher percentile rank indicating better performance. For example, a percentile rank of 90 means an economy scores in the 90th percentile, and its performance is better than or equal to 90 percent of the economies measured.

After averaging an economy’s overall percentile rank on each of the four indices to create one overall score, Scorecard “letter grades” are assigned using an A to F scale. The grading scale for assigning letter grades to average percentile ranks is as follows:

LETTER GRADE AVERAGE PERCENTILE RANK / BUSH INSTITUTE SCORE
A+ 100 – 95
A 94.9 – 85
A- 84.9 – 80
B+ 79.9 – 75
B 74.9 – 65
B- 64.9 – 60
C+ 59.9 – 55
C 54.9 – 45
C- 44.9 – 40
D+ 39.9 – 35
D 34.9 – 25
D- 24.9 – 20
F Below 20

BUSH INSTITUTE CROSS-INDEX METRICS

The Bush Institute-SMU Economic Growth Initiative Scorecard also compares countries and trade groups on six key cross-index metrics:

  • business environment,
  • legal system and property rights,
  • investment environment,
  • macroeconomic environment,
  • trade environment, and
  • health and education.

The Scorecard assigns all of the indicators from the four source indices to one of the six cross-index metrics. When grouped together, each set of indicators offers a balanced and comprehensive evaluation of an economy’s competitiveness in each of the key metrics. The Scorecard averages together the percentile ranks on the selected indicators to create a composite score for each metric. To see a list of the indicators that are selected to create each cross-index metric, refer to tab 4 of the Scorecard data file, available for download on this page.

OTHER FACTORS CONSIDERED IN DEVELOPING THE SCORECARD

  • Duplication of data
    There is some duplication of data among the indices. In certain cases, data from one of the four indices is incorporated into another of the four. The Bush Institute-SMU Economic Growth Initiative believes that the result of such duplication is not detrimental to the results, and, in fact, reinforces the most important determinants of economic competitiveness. The duplication of data results in more emphasis being placed on regulation, property rights, the legal system and institutions. However, even if those indicators are weighted less, the results are consistent.
  • Weighting
    In developing the Bush Institute-SMU Economic Growth Initiative Scorecard, ratings from the four indices were weighted equally. The Bush Institute-SMU Economic Growth Initiative determined that assigning “weight” to the selected indices would have required making judgments that one index is more important than the other and should count more toward the assessment of competitiveness. To avoid this bias, equal weights were assigned to the four indices.

    However, as a point of comparison, the Bush Institute-SMU Economic Growth Initiative did calculate regional scores after weighting countries by their GDP and by their population, rather than simply averaging the different countries’ scores. This resulted in the countries with the largest GDP or population exerting greater influence on the score of the entire region.

    For example, the United States accounts for roughly 88 percent of the total North America GDP. Therefore, 88 percent of the North America grade, when weighted by GDP, is determined based upon the U.S. performance on the four indices. Mexico’s performance carries less weight because its GDP only accounts for five percent of the total North America GDP. Combining the grades using a simple average yields a 2020 grade of B+ (76.3). After weighting by GDP, North America’s 2020 grade improves to an A (90.5).

    There is a similar result in the EU scores. After weighting based on GDP, the 2020 EU grade improves from B (68.9) to B (73.2) because relatively strong countries such as Germany and France account for a larger share of the EU GDP.

ACKNOWLEDGEMENTS

The Bush Institute-SMU Economic Growth Initiative would like to acknowledge the expert contributions of the following scholars to this project. They reviewed the methodology and results and provided their professional feedback. The Bush Institute-SMU Economic Growth Initiative thanks them for their assistance:

Simeon Djankov
Visiting Fellow, Peterson Institute for International Economics, Washington D.C.

Joshua Hall
Associate Professor of Economics and Co-Director of the Center for Free Enterprise, West Virginia University

Robert A. Lawson
Jerome M. Fullinwider Endowed Centennial Chair in Economic Freedom and Director, O’Neil Center for Global Markets and Freedom, SMU Cox School of Business

José Torra A.
Head of research and content, Caminos de la Libertad

 

The Bush Institute is grateful for the generous support of the Peter G. Peterson Foundation.

DOWNLOAD THE COMPETITIVENESS SCORECARD DATA

REGIONAL ECONOMIC INTEGRATION

The Integration section analyzes the extent of economic integration within NAFTA, EU, APEC, and U.S.-DR-CAFTA, as well as the impact of that integration on the growth, prosperity, and competitiveness of these regions. To measure integration, we analyze data for trade in goods and services and inward foreign direct investment, broken down by partner and as a percentage of the reporting country’s GDP. To quantify the extent of integration within the group and the effect of integration on global competitiveness, we present partner share percentages and volumes of trade within groups and with the rest of the world. To measure the economic benefits of integration, we analyze growth in GDP, GDP per capita, GDP per employed person, total employment, and private vs. public employment (as available).

DATA SOURCES

Data for trade in goods come from the IMF Direction of Trade Statistics.

Data for North American trade in services come from OECD.Stat. U.S. data from 1990 to 1998 are according to the Extended Balance of Payments Services (EBOPS) classification 2002, and U.S. data from 1999 to 2018 are according to EBOPS 2010. Canadian data for all years are according to EBOPS 2010. Data for Mexico are derived from the reports of partner countries, since no partner country data for trade in services is reported by Mexico. For example, Mexico’s exports to Australia are derived from Australia’s reported imports from Mexico.

Data for European Union trade in services come from Eurostat, the statistical arm of the European Commission. Data from 1990 to 2009 are according to EBOPS 2002 and the 5th edition of the IMF Balance of Payments and International Investment Position Manual (BPM5). Data from 2010 onwards are according to EBOPS 2010 and BPM6. For years prior to 2010, gaps in the data for some European countries prevent the calculation of aggregate growth in European services trade.

Unfortunately, services trade data at the partner country level are not available for many of the members of APEC, including Asian members like China and Vietnam. This prevents the inclusion of services trade data in the APEC presentation.

Services trade data for Central America and the Dominican Republic at the partner level are not available. However, other data for U.S.-DR-CAFTA come from the same sources as for other trade groups.

Services trade data are notoriously imprecise and difficult to collect. Currently, no international agency provides a comprehensive breakdown of trade in services between individual countries. Although the total volume of international trade in services is dwarfed by the volume of trade in goods, the importance of trade in services continues to grow in the modern, digital global economy. For this reason, the Bush Institute-SMU Economic Growth Initiative calls attention to the need for national and international agencies to collect and publish services trade data at the partner-country level.

  • Data for foreign direct investment (FDI) come from the United Nations Conference on Trade and Development (UNCTAD) statistical database.
  • Unless otherwise indicated, GDP data come from the World Bank World Development Indicators database. Total GDP data are reported in constant 2010 U.S. dollars, and GDP per capita data are reported in constant 2017 international dollars at purchasing power parity (PPP). In cases where the World Bank does not report GDP data for a country, GDP data are drawn from the IMF World Economic Outlook October 2020 database.
  • Data for total employment come from the World Bank World Development Indicators database and the IMF World Economic Outlook October 2020 database. Data for total private and public employment in the U.S. come from the U.S. Bureau of Labor Statistics (BLS). Data for total private and public employment in Canada come from Statistics Canada. Data for total private and public employment in Mexico come from International Labour Organization labor force surveys.
  • All data are adjusted for inflation using the GDP deflator inflation rate reported by the World Bank World Development Indicators database. Unless otherwise indicated, data are presented in constant 2019 U.S. dollars in order to track real gains in trade, investment, and output.