Trade in the Shadows

Accurate, timely and reliable statistics on international trade in goods and services are of considerable academic and policy relevance. A major source of illicit financial flows (IFFs) out of developing countries accrues from the under-invoicing of commodity exports. Researchers have highlighted the critical importance of reliable trade data to estimate the magnitude of IFFs and the related channels and drivers which erode the tax base of resource-rich low-income countries, and hence their capacity to mobilise domestic resources for development. Yet, data flaws and methodological weaknesses represent obstacles to identify the drivers and magnitude of the phenomenon, limiting the ability of developing countries to effectively curb IFFs. Drawing on six-year interdisciplinary research on commodity trade-related IFFs, this article examines the weaknesses of existing trade data repositories, notably, with regard to data aggregation, quality and consistency as well as missing data. We discuss the scope for improved data generation and transparency required to inform evidence-based policy debates and action. This, together with global taxation reform, can greatly contribute to effectively enhancing domestic resource mobilisation in developing countries.