The impact of global supply chains on trade:
Towards a measure of trade in value added
and implications for trade policy
APEC Conference “Building APEC Economies’ Capacities of Employing
Input-Output Tables for Advanced Economic Modeling”
24-25 November 2011, Singapore
Christophe Degain, WTO
International consumer
demand
Emergence of “Trade in tasks”:
Lower applied tariffs
and trade policy
incentives
Development of
infrastructure
and technological progress
Global supply chains
and world trade
Export processing
zones
Outsourcing and offshoring
strategies
and Foreign Direct Investment (FDI)
• Increase of processing
trade
• Predominance of trade in
intermediate goods
• Development of intrafirm trade
Need for new statistical
measures of international trade
Use and impact for trade
analysis and policy
economies with EPZs
(2006 or most recent year)
Sources: ILO and WTO
Billions of US$
2009 value
Sources: UNSD and WTO
US exports of private services, 1999-2010 (Millions of US$)
Source: US BOP


Traditional trade 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
Using I-O tables and 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
• To decompose the value added of exports into its domestic and
foreign contents
Source: Meng and Miroudot
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)
Source: Meng and Miroudot, based on Xing and Detert (2010)
Some evidence on the interdependency of economies within GVCs :
• Exports of manufactured goods rely on imported inputs (goods and services)
• Domestic VA is present not only in exports but also in imports (“Circular trade”)
• So called “national products” may be predominantly produced in other countries,
while products of foreign trademarks may be manufactured in the domestic market
Protectionist measures …
• Tariffs increase
• Anti-dumping measure
• “Buying national” engagement
… can have counter-productive effects on economies and enterprises they are
supposed to protect:
• Reduction of the capacity of national firms to join GVCs
• An increase of the cost of imported inputs affects national companies involved in
international production chains, as well as the functioning or competitiveness of
the chain itself !
Source: Diakantoni and Escaith, WTO (forthcoming 2012).
Preliminary data, based on WTO tariffs and IDE-JETRO input-output databases
Sectoral transmission of a supply-driven shock emanating from the Japanese industries
(selected countries and sectors, 2008)
b
China
Indonesia
Korea
Malaysia
Philippines
Chinese
Taipei
Thailand
USA
Average
(all
economies)
Chemical products
0.7
0.3
2.2
2.1
1.0
3.2
1.0
0.3
1.4
Petroleum and petro products
0.1
0.0
0.0
0.7
0.3
0.1
0.0
0.1
0.3
Rubber products
0.6
0.6
1.7
1.1
1.2
2.6
1.3
0.4
1.3
Non-metallic mineral products
0.5
0.4
0.8
1.3
0.7
1.2
1.2
0.2
0.9
Metals and metal products
1.0
1.4
2.8
4.5
2.2
3.6
2.7
0.4
2.4
Industrial machinery
1.4
4.9
2.9
3.1
2.3
5.0
7.5
0.6
3.5
Computers and electronic
equipment
3.6
1.5
3.0
4.3
7.4
5.6
5.7
0.8
3.9
Other electrical equipment
2.3
1.4
3.0
4.3
1.9
5.2
6.3
0.6
3.2
Transport equipment
1.4
1.6
2.9
3.8
2.1
3.4
5.8
1.0
2.8
Other manufacturing products
0.9
1.0
2.7
2.4
1.2
4.2
1.7
0.4
1.8
1.2
1.3
2.2
2.8
2.0
3.4
3.3
0.5
2.2
Supply shock from Japan to:
Average (all sectors)
b
a
Notes: a/ Percentage increase in sectoral domestic production costs resulting from a 30 per cent raise in
the price of intermediate inputs imported from Japan. Results higher than 2% are highlighted in red.
b/ Simple average.
Source: adapted from Escaith and Gonguet, (2011), based on IDE-JETRO Asian Input-Output tables.
• Comparative advantage: trade in value added reveals that comparative
advantage applies more to tasks than to final goods
• Trade and employment: the value added approach is relevant to
estimate the “job content” of trade
• Trade and environment: I-O tables can help estimating countries’ CO2
emissions associated with trade and their potential impact on climate
change
• Exchange rate policy: lower impact of currency revaluation on
rebalancing trade imbalances
Developing and improving the statistical tools used for trade in value added analysis
• Development of standardised National Input-Output tables
• Compilation of International Input-Output tables
• Improving trade statistics: firm-level data, Services statistics
Trade in value added
• Towards an internationally agreed methodology and the production of trade in
value added indicators to assist trade policy
• Going beyond trade in value added: an income-based approach
-----------------------------------The WTO Made In the World Initiative (MIWI) at http://www.wto.org/miwi
A place for discussion and sharing of experiences and information (working papers,
publications,…) on trade in value added for statistical issues and trade policy matters
Contact and questions: christophe.degain@wto.org