Trade in value added:
concepts, methodologies and challenges
XIV International Academic Conference on Economic and Social Development
National Research University Higher School of Economics (HSE)
2-4 April 2013, Moscow
Christophe Degain, WTO
1.
Global Value Chains (GVCs) and world trade - Ins and Outs
2.
Towards a new measure of trade in value added terms
o
o
o
The statistical tools
Two main concepts
The new OECD-WTO TiVA database
3.
Implications of GVCs and trade in value added on trade policy
4.
Going forward with the OECD-WTO TiVA database
Lower applied tariffs
and trade policy incentives
Development of infrastructure
and technology
Outsourcing/Offshoring
strategies and FDI
Global Value Chains
Emergence of “Trade in tasks”:
• Predominance of trade in intermediate goods
• Development of intra-firm trade
• Increase of processing trade
Impact on statistics
Policy impact
 Revision of international statistical concepts  Need for a new angle of trade analysis
 Need to adapt trade regulation to
 Need for new measures of international
business reality
trade taking place within GVCs
Traditional statistics present some biases:
 Multiple counting of trade flows in intermediate goods and
services
 Difficult attribution of the country of origin of an imported
product
Measuring trade in value added terms allows:
 To circumvent the biases observed with traditional statistics
 To take into account the specificity of trade occurring
between the different actors of a production chain
Approach
1.
Case studies : geographical
decomposition of a product value into
the components and services used for its
production
Level of detail
Product level
Measurement
type
Not applicable
Bottom up
approach
o Examples: iPhone, iPod, iPad, Barbie doll…
2.
Trade statistics : focus on the role of
intermediates in foreign trade
o
o
o
3.
Product/sectoral /
product group level
Use of BEC or BOP (e.g. business and
computer services) classifications
Estimation of vertical specialization or shares
of parts and components in total trade
Strengthening linkage between trade and
business statistics
Input-output tables : combining national
accounts with trade statistics
o
Decomposition of gross trade into its foreign
and domestic value added contents
Top down
approach
Sectoral level
(aggregated)
Direct
measurement
(based on raw
reported data)
Indirect
measurement
(estimates)



Advantages of II-O tables
•
Identification of the origin and use of intermediate goods and services
produced and traded amongst countries and industries (intermediate
demand matrix)
•
Enable to take into account backward linkages between countries and
industries (Leontief inverse matrix)
•
Coverage of all of goods and services
Some limitations
•
Assumptions applied during the construction phase of II-O tables
(production assumption, proportionality assumption, dealing with
inconsistencies of official trade statistics)
•
Aggregated sectoral level only, not product or firm level
•
Benchmark years only (every 5 years)
Some official II-O tables available: ICIO (OECD), WIOT (WIOD project),
AIO (from IDE-JETRO), GTAP (Purdue University)
 The value added embodied in gross exports:
• Domestic value added content of gross exports
• Foreign value added content of gross exports
 The value added created by final demand:
• Domestic value added embodied in foreign final demand
• Foreign value added embodied in domestic final demand
Country A gross exports to country B - As reported in official trade statistics
Country B
(partner country)
Country A
(reporting country)
Country C
(partner country)
Source: WTO
Country A gross exports to country B - Decomposition into their value added components
... sent back to country of VA origin
3. Domestic VA exports ...
Country A
(reporting country)
Country B
(partner country)
Country C
(partner country)
Source: WTO
The rationale behind the TiVA database:
• Development of methodologies
• Regular production of trade in value added indicators to support trade policy
Access to the TiVA database: http://www.wto.org/miwi or
http://stats.oecd.org/Index.aspx?DataSetCode=TIVA_OECD_WTO
Coverage of the OECD ICIO table:
• Years: 2005, 2008, 2009
• 42 countries
• 19 aggregated sectors (ISIC Rev. 3)
Available data sets:
• Gross exports
• Value added embodied in gross exports
• Value added embodied in final demand
• Services value added content of gross exports
• Revealed comparative advantage (gross vs value added)
The concept of country of origin: attributing the entire commercial value of an
imported good to the last country of a production chain can be misleading
Source: Meng and Miroudot
The notion of comparative advantage: within GVCs, comparative advantage applies
more to tasks than to final goods. Trade in value added enables to identify new
comparative advantages, notably in the area of services. (see RCAs in the TiVA database)
Source: WTO Secretariat estimates based on WIOD data, 2007
Source: WTO Secretariat estimates based on WIOD data, 1995-2007
Added
Value
Customer services
Standardization
Innovation
Brand
R&D
Marketing
Design
Logistics
Manufacture
Services
Assembly
Goods and services
Services
Manufacturing
process
Source: WTO, based on Shih S. , Business Week (May 16, 2005)
Shares of domestic and foreign sectoral contributions in Russia exports of manufacturing products, 2008
Source: WTO estimates based on OECD ICIO table
Sources: WTO estimates based on OECD ICIO table 2008
Statistical challenges
• Extending TiVA database coverage: countries, sectors, years and indicators
• Improving data quality:
 Trade statistics required for the construction of II-O tables (bilateral trade in
services, inconsistencies of “Mirror” merchandise trade flows)
 Standardization and development of national I-O tables and Supply-Use tables
 Including official processing trade data in the II-O tables (e.g. for China, Mexico)
• Further methodological developments
• More trade in value added indicators
Fostering the use of Input-Output modeling to assist trade policy-making and reveal
the impact of trade and GVCs:
 Trade and employment
 Trade and environment
 GVCs’ role in the propagation of macro economic shocks
Link to the OECD-WTO TiVA database: http://www.wto.org/miwi or
http://stats.oecd.org/Index.aspx?DataSetCode=TIVA_OECD_WTO
Two publications for further details and analysis of GVCs and trade in value added.
Free download from the MIWI website at http://www.wto.org/miwi
WTO/IDE-JETRO joint publication:
“Trade Patterns and Global Value Chains in
East Asia: from trade in goods to trade in
tasks” (2011)
WTO/French Senate conference proceedings:
“Globalization of industrial production chains and
measurement of trade in value added” (2010)
Contacts and questions: christophe.degain@wto.org or tiva.contact@oecd.org or miwifeedback@wto.org