#StatsTradeEvent
The Changing Shape of Trade and
Investment in the UK
Jil Matheson
National Statistician
24th September 2013
#StatsTradeEvent
UK – a key global trading nation
Total value of UK trade in 2012£100
£1 trillion
m
£100of W
£100
Share
rld Trade in 2012
m
£100
11.0%
£100
m 9.5% m
7.5%
£119bn
services
£407bn goods
3.5% 6th place
Source: ONS Balance of Payments; UNCTAD
#StatsTradeEvent
Total trade to value of GDP ratio, UK
2012
2009
2006
0%
2003
0%
2000
10%
1997
10%
1994
20%
1991
20%
1988
30%
1985
30%
1982
40%
1979
40%
1976
50%
1973
50%
1970
60%
1967
60%
1964
70%
1961
70%
1958
80%
1955
80%
Source: ONS Value of GDP and Trade data; Value of Goods and Services imports and export
4
#StatsTradeEvent
Proportion of exporting and importing registered
businesses, GB, 2011
Source: Annual Business Survey
#StatsTradeEvent
Data Collection
#StatsTradeEvent
Trade and investment statistics users…
Source : Google images
#StatsTradeEvent
#StatsTradeEvent
Inward FDI in the UK – (some of) what
we know and what we would like to
know
By
Richard Harris
© Richard Harris
Evidence paper by Driffield et. al. (2013) to the Foresight
Project on the Future of manufacturing in the UK
Motivation
• TFP is widely recognised as the key driver of longrun economic growth
• being foreign owned is associated with higher levels
of TFP
– Effects cover:
• Direct effects: FO plants are themselves more
productive
• Indirect effects: there are (potential) spillovers to
domestic plants from FO plants
• Overall the UK economy benefits from inward FDI
even though there are issues of control and the
destination of profits
11
Overview
What do we know
– Run through some statistics available mostly based on
micro-level UK datasets covering FO shares of:
• GVA
• Gross output
• R&D
– Look at some examples of the analysis that can be done
covering:
• Links between FO and R&D/absorptive capacity
• Contribution of FO plants to overall UK productivity growth
What would we like to know
– Show how spillover estimates are obtained
• Note the incompleteness of our knowledge
• Outline the needs for more information (new statistics)
Source: ARD
Source: ARD
Real GVA in top 32 SIC92 industries by foreign-ownership, 2009 (£m 2000 prices)
Labour recruitment & personnel
Advertising
Other wholesale
Real estate
Retail in non-specialised stores
Manufacture of refined petroleum products
Wholesale of intermediate products
Architectural & engineering & technical consultancy
Post & courier services
Wholesale of household goods
Miscellaneous business activities
Legal, accounting, consultancy
Manufacture of motor vehicles
Telecommunications
Other retail of new goods in specialised stores
Software consultancy and supply
Source: ARD
Source: BERD matched into ARD
Source: Harris (2013) – based on CIS data
Source: Harris and Moffat (2013) – using ARD
Evidence on spillover benefits
• Does the ‘presence’ of IFDI increase the
productivity of non-FDI plants?
– First need to establish that generally IFDI plants
have higher productivity
– Then need to establish the ‘channels’ through
which ‘spillovers’ can occur
– Lastly need evidence on such spillovers
• Current based on ‘association’
– If high ‘presence’ of IFDI in same industry (upstream or
downstream) and/or same locality is correlated with higher TFP
in domestic plants – taken as evidence of spillovers
• Need direct evidence
– to establish and better understand nature of spillovers
Distribution of plant-level labour productivity in 2005
Source: FAME
What we don’t know on spillovers
• Need evidence on linkages between FO and
domestic plants in terms of:
– actual sales/purchases
• This also requires understanding of ‘global’ value chain
activities of IFDI firms (e.g. why are they located in UK?)
– actual ‘knowledge’ linkages
• Information shared with other firms and sectors
• Cooperation undertaken
• Hiring of labour
Conclusions
• IFDI is very important to UK economy
– Concentrated here on productivity side but also
jobs (covered next)
– It’s a large component of marketed output
– Its more productive
• Directly and and almost certainly indirectly (through
spillovers)
• But indirect effects are imprecisely measured and direct
of causation is consequently unclear
– Hence need more statistical information on
linkages in order to understand and measure
better spillover effects
Acknowledgement
This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of
the controller of HMSO and Queen's Printer for Scotland. The use of these data does not imply the
endorsement of the data owner or the Secure Data Service at the UK Data Archive in relation to the
interpretation or analysis of the data. This work uses research datasets which may not exactly reproduce
National Statistics aggregates
#StatsTradeEvent
The Changing Shape of Trade and
Investment in the UK
UKTI priorities and evidence needs
Crispin Simon, Director Trade: UKTI
22nd September 2013
With Thanks to Economists at HM Government FCO and UKTI
1
44
Presentation title - edit in the Master slide
1
45
Presentation title - edit in the Master slide
There is no such thing as bad weather, only unsuitable clothing
Ranulph Fiennes
1
46
Presentation title - edit in the Master slide
Capacity Building
Getting Out There
In Market
1
47
Passport to Export
Advice for the new exporter
Export Vouchers
For Passport graduates
Export Reviews
Comms advice & mkt research resource
3G and MSB Programmes
For more experienced exporters
Open 2 Export
Web community for exporters
Webinars
Low cost personal input
Market Visit Support
Grant-supported country visits
Trade Show Access Programme
Grant-supported trade show presence
Missions to Markets
Sector-focused country missions
OMIS Research
Introductory service
OMIS Facility
Embassy facility use
Business Opportunity Scheme
E-mail alerts from FCO Posts
High Value Opportunities
Additional resource, supply chain focus
Presentation title - edit in the Master slide
1
48
Presentation title - edit in the Master slide
1
49
Presentation title - edit in the Master slide
Trade target is £1 trillion UK exports by 2020
Leverage points at firm level:
• More companies
• More companies being formed
• More companies surviving
• More companies exporting (100k by 2020)
• Exporting companies exporting more
• Gaining share in current markets
• Entering new markets
• Raising UK content of overseas sales
1
50
Presentation title - edit in the Master slide
Trade target is £1 trillion UK exports by 2020
Leverage points at macro level:
• More UK Geographic Market Share
• More UK market share in mature geographic markets
• More UK market share in high growth geographic markets
• More growth where UK has high market share
• More UK Sector Market Share
• More UK market share in mature sectors
• More UK market share in high growth sectors
• More growth where UK has high sector share
1
51
Presentation title - edit in the Master slide
UK share of key export markets in 2010
UK Share of total import market (includes goods and services)
10%
9%
8%
7%
Former British Colonies
6%
5%
4%
3%
2%
1%
Qatar
South Africa
Nigeria
Bahrain
Australia
EU
USA
Kuwait
UAE
Saudi Arabia
Egypt
Kazakhstan
New Zealand
Turkey
Oman
Singapore
India
Iraq
Morocco
Russia
Canada
Brazil
Hong Kong
Chile
Japan
Malaysia
Colombia
Argentina
Thailand
China
Korea
Philippines
Indonesia
Mexico
Vietnam
0%
Source: IMF, ONS and FCO Economics Unit Calculations
 History continues to play a role in the pattern of UK trade.
 The UK tends to capture a larger market share in its former colonies than other markets.
1
52
Presentation title - edit in the Master slide
52
UK versus EU-3 – goods export performance
Share of goods import market
10%
UK
EU-3 Benchmark
9%
8%
7%
6%
5%
4%
3%
2%
1%
Qatar
EU
South Africa
Kuwait
Nigeria
Egypt
Saudi Arabia
UAE
Oman
USA
Bahrain
Turkey
Morocco
Russia
Australia
New Zealand
India
Chile
Brazil
Singapore
Canada
Malaysia
Hong Kong
Thailand
Japan
Argentina
Kazakhstan
Colombia
China
Iraq
Korea
Philippines
Vietnam
Mexico
Indonesia
0%
Source: UNCTAD Statistics, ONS and FCO Economics Unit Calculations
 On average the UK captures about 2.5% of foreign goods markets, versus 3% for the EU-3.
 The UK outperforms the EU-3 in the Gulf, but for many other emerging markets the EU-3 are
ahead. In some cases, notably Russia, Brazil, Turkey and China, the EU-3 are significantly
further ahead.
1
53
Presentation title - edit in the Master slide
53
1
54
Presentation title - edit in the Master slide
UK versus EU-3 – services export performance
Share of services import market
22%
UK
EU-3 Benchmark
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
Bahrain
Australia
South Africa
USA
Nigeria
Qatar
Turkey
EU
Kazakhstan
UAE
New Zealand
Iraq
Saudi Arabia
Canada
Singapore
Egypt
Hong Kong
Kuwait
Colombia
Japan
Oman
Russia
Malaysia
Vietnam
Mexico
Chile
Morocco
Argentina
India
Brazil
Indonesia
China
Philippines
Korea
Thailand
0%
Source: UNCTAD Statistics, ONS and FCO Economics Unit Calculations
 On average the UK captures around 6% of foreign services markets, versus about 3% for the EU-3.
 The UK significantly outperforms the EU-3 benchmark in almost all markets. Notable exceptions
are Morocco, Chile, Argentina, Mexico and Brazil.
1
55
Presentation title - edit in the Master slide
55
Change in import demand between 2010 and 2020 (£ Billion)
2,500
'Established'
Markets
Emerging
Powers
2,000
1,500
1,000
500
China
India
Korea
Hong Kong
Russia
Mexico
Thailand
Brazil
Malaysia
Vietnam
Indonesia
Turkey
UAE
Singapore
Saudi Arabia
Iraq
Argentina
Kazakhstan
South Africa
Nigeria
Chile
Kuwait
Philippines
Colombia
Egypt
Oman
Morocco
Qatar
Bahrain
Australia
New Zealand
Canada
Japan
EU
USA
0
Note: EU figure includes intra-EU trade
Source: IMF World Economic Outlook October 2012 and FCO Economics Unit Calculations
Data refer to the expected increase in goods & services imports into a given market, expressed in nominal terms.
•
In pound terms, it is the largest economies that account for the biggest rise in import demand.
• The increase in Chinese import demand is especially large, dwarfing all other emerging markets. This reflects both China’s size
and its growth potential.
• Increasing market share in these large markets will result in bigger gains for the UK, but may be more difficult to achieve because
of greater competition.
1
56
Presentation title - edit in the Master slide
56
Meeting the £1Trillion Export Target
500
400
2010 UK Exports
300
Gains from maintaining
market share in all markets
600
700
Gains from catching the EU-3
in the emerging powers
200
800
Gains from catching the EU-3
in emerging Europe
100
0
900
£1
Trillion
Target

Given the weak global economic outlook, hitting the £1 trillion target will be difficult. Maintaining market share will not be enough.
We need to gain market share.
 Comparing the UK’s performance against our European competitors allows us to see where we might make up ground and offers a
way to benchmark our performance.

1
57
Catching the EU-3 in the fastest growing emerging economies would represent a significant contribution to hitting the £1tn target.
Presentation title - edit in the Master slide
57
Emerging Conclusions
• £1 Trillion Exports target looks less demanding than 100k New
Exporters
• Market share gains will be required
• Greatest evidence need is more insight of the market conditions
(size/share/customer needs) within the geographic/sector
segments (eg China/automotive; Saudi-Arabia/professional
services) where we must win
1
58
Presentation title - edit in the Master slide
1
59
Presentation title - edit in the Master slide
The Changing
Face of Scottish
Trade
Jonathan Slow
Scottish Development
International
The Scottish
Government
Summary
• Scottish Exports have grown
• But growth has not been steady
• Major sectoral change has take place
• Geographic composition has remained broadly similar
• The Global Connections Survey has assisted policy focus
Source: The Scottish Government
The Scottish
Government
The Global Connections Survey
• Annual voluntary business export survey
• Covers all sectors in Scotland
• Covered by National Statistics guidelines
• Provides estimates of sales to Rest of World and Rest of UK
• Provides destination information
Source: The Scottish Government
The Scottish
Government
International Growth 2002-2011
30,000
23,915
25,000
21,250
20,000
15,000
19,495
18,695
18,270
17,860
18,530
21,570
19,450
14,430
13,280
12,405
11,525
11,555
22,350
12,225
13,190
12,750
13,540
14,675
10,000
Manufacturing
5,000
Total Exports
0
2002
2003
2004
2005
2006
2007
2008
Source: GCS 2011
The Scottish
Government
2009
2010
2011
Sectoral Changes 2002-2011
25,000
20,000
15,000
Services
Production & Construction
Agriculture, Forestry & Fishing
10,000
5,000
0
2002
2003
2004
2005
2006
2007
2008
Source: GCS 2011
The Scottish
Government
2009
2010
2011
Top 5 Sectors 2002-2011
2002
2011
Ranking
Sector
Est. Sales (£m)
1 Computers/Electronic/Optical
5,570
2 Food & Drink
2,345
of which whisky & other distilling
1,860
3 Chemicals/Coke Manufacture
2,020
4 Machinery & Other Equipment
1,020
5 Wholesale/Retail Trade
930
Ranking
Sector
Est. Sales (£m)
1 Food & Drink
4,205
of which whisky & other distilling
3,530
2 Chemicals/Coke Manufacture
3,670
3 Computers/Electronic/Optical
1,430
4 Financial Services
1,415
5 Legal/Business Services
1,390
Source: GCS 2011
The Scottish
Government
Market Changes 2002-2011
2011
2002
Ranking
1
2
3
4
5
6
7
8
9
10
Destination
USA
Netherlands
France
Germany
Italy
Eire
Spain
Belgium
Sweden
Norway
Est. Sales (£m)
2,145
1,865
1,785
1,785
935
845
820
670
615
560
Ranking
1
2
3
4
5
6
7
8
9
10
Source: GCS 2011
The Scottish
Government
Destination
USA
Netherlands
France
Germany
Belgium
Eire
Norway
Spain
Switzerland
Italy
Est. Sales (£m)
3,525
2,665
1,935
1,365
980
780
765
710
640
610
Evidence Informing Policy
• Used in developing sector strategies
• Understanding barriers to doing more international activity
• Assessment of company requirements
• Used in developing market strategies
•Driving an approach to increased international engagement
Source: GCS 2011
The Scottish
Government
Measuring Trade in Value Added, and
Beyond
The Changing Shape of Trade and
Investment in the UK
London, September 2013
nadim.ahmad@oecd.org
Background – Global Production today
• A world of increasing international
fragmentation of production
– Explosion of trade in intermediates as firms
specialise in stages (tasks) of production
• Gross trade flows increasingly embody
components (and so value) created elsewhere
70
A simple example – the iPod
Distribution of the value added
The Apple iPod = 299$ of Chinese
‘exports’ to US
• 299 US$
– 75$ profit to US (Apple)
– 73$ whls/retail US (Apple)
–
–
–
–
75$ to Japan (Toshiba)
60$ 400 parts from Asia
15$ 16 parts from the US
2$ assembly by China
http://blogs.computerworld.com/node/5724
71
A slightly more complicated example – the
Dreamliner
Wing box: Mitsubishi Heavy Industries (Japan)
Wing ice protection: GKN Aerospace (UK)
Centre fuselage: Alenia Aeronautica (Italy)
Escape slides: Air Cruisers (USA)
Rear fuselage:
Boeing South Carolina (USA)
Vertical Stabiliser: Boeing
Commercial Airplanes (USA)
Forward fuselage:
Kawasaki Heavy Industries (Japan)
Spirit Aerosystems (USA)
Lavatories:
Jamco (Japan)
Doors & windows:
Zodiac Aerospace (USA)
PPG Aerospace (USA)
Flight deck seats:
Ipeco (UK)
Raked wing tips: Korean Airlines
Aerospace division (Korea)
Horizontal Stabiliser:
Alenia Aeronautica (Italy)
Centre wing box:
Fuji Heavy Industries (Japan)
Aux. power unit: Hamilton
Sundstrand (USA)
Passenger doors:
Latécoère Aéroservices (France)
Cargo doors: Saab (Sweden)
Prepreg composites:
Toray (Japan)
Landing gear: Messier-Dowti (France)
Electric brakes: Messier-Bugatti (France)
Tires: Bridgestone Tires (Japan)
Engines: GE Engines (USA),
Rolls Royce (UK)
Engine nacelles: Goodrich (USA)
Tools/Software: Dassault Systemes (France)
Navigation: Honeywell (USA)
Pilot control system: Rockwell Colins (USA)
Wiring: Safran (France)
Final assembly: Boeing
Commercial Airplanes (USA)
72
So?
Gross trade statistics increasingly ‘multiple count’
flows in intermediates as the production
process develops over several countries…
73
………
…meaning that gross trade statistics may create
‘misleading perceptions’ and imperfect policies
74
For example….
• Where are our export markets?
• Which sectors create most value and jobs?
• Does protectionism work? Is it counterproductive
– Are there costs on importers of intermediates,
particularly when they are significant exporters.
– What about those firms further upstream providing
inputs to the imports?
• How should we interpret bilateral trade
balances?
75
How can we respond?
• By measuring the value that is added by
individual firms in the production process
76
How do we measure TiVA?
• Using a global IO table
77
What are we doing?
• Using database on national IO tables to create a global IO
table.
• OECD: IO tables for 58 economies and 37 industries for
1995/2000/2005/2008,2009, (more than 95% of world GDP)
• Bilateral trade data for the flows;
• Collaborating closely with:
– other institutions/initiatives: USITC, IDE-JETRO, WIOD;
MOFCOM and forging closer links with others including Eurostat.
Launched OECD-WTO TiVA database in
January 2013
78
A database on OECD.Stat
• With a number of indicators………….
– Decompositions of gross exports by industries into their domestic and
foreign content, with the domestic content split into three (direct,
indirect and re-imported) components and the foreign content broken
down by source country;
– The services content of gross exports by exporting industry (broken
down by foreign/domestic origin);
– Bilateral trade balances based on flows of value-added embodied in
domestic final demand;
– Intermediate imports embodied in exports, as a per cent of total
intermediate imports.
79
LUX
SVK
IRL
KOR
HUN
CZE
ISL
NLD
BEL
SVN
FIN
SWE
EST
CHN
PRT
DNK
AUT
ISR
MEX
CHE
POL
DEU
FRA
GRC
IND
TUR
ESP
ITA
CAN
CHL
NZL
GBR
ZAF
NOR
JPN
IDN
AUS
USA
BRA
RUS
What does the first release tell us?
Domestic content of exports
100%
2009
1995
80%
60%
40%
20%
0%
80
35%
30%
25%
20%
15%
10%
5%
0%
Total
Other services
Business
services
Finance &
insurance
Transport &
telecoms
2009
Wholesale &
retail
Other
manufactures
Transport
equipment
Electrical
equipment
Machinery
Basic metals
Chemicals &
minerals
Wood & paper
Textiles &
apparel
Food products
Mining
Agriculture
Exports require imports
foreign content of exports - UK
1995
81
Imports and competitiveness
Per cent of total sector growth in value-added driven by exports 1995-2009
Import content
growing
Import content
decreasing
82
Exports and Imports (i)
Transport equipment: Import content of exports, $US million, 2009
34%
Germany
17%
United States
Japan
14%
France
40%
Korea
36%
United Kingdom
31%
China
33%
Canada
36%
Mexico
33%
Italy
23%
Spain
31%
0
50000
Foreign Content
100000
150000
200000
Domestic Content
250000
83
Exports and Imports (ii)
Electronic equipment: Import content of exports, $US million, 2009
China
43%
United States
13%
Japan
18%
Korea
47%
25%
Germany
Chinese Taipei
45%
Mexico
57%
Thailand
Foreign Content
55%
Singapore
61%
United Kingdom
25%
Malaysia
56%
0
50000
Domestic Content
100000
150000
200000
250000
300000
350000
400000
450000
500000
84
With hubs playing an important role
Asia, 4.4%
Rest of the
world, 5.1%
OtherEurope,
14.8%
Asia, 3.4%
Rest of the
world, 4.4%
OtherEurop
e, 16.3%
France, 2.1%
UK, 2.4%
Italy, 3.2%
Domestic,
60.7%
US, 3.6%
Domestic,
69.1%
US, 2.4%
Germany,
8.2%
Germany: Motor vehicles, 2009
France: Motor vehicles, 2009
Other Asia,
6.8%
Rest of the
world, 6.1%
Europe, 7.4%
Japan, 9.4%
Other Asia,
8.3%
Rest of the
world, 9.9%
Europe,
5.6%
Domestic,
40.6%
Japan, 4.1%
Chinese
Taipei, 4.7%
Domestic,
55.4%
China, 9.6%
US, 20.1%
China, 12.1%
Mexico: Electronics, 2009
Korea: Electronics, 2009
85
0%
Total
Other services
Business services
Finance &
insurance
Transport &
telecoms
2009
Wholesale & retail
Utilities
Other
manufactures
Transport
equipment
Electrical
equipment
Machinery
Basic metals
Chemicals &
minerals
Wood & paper
Textiles & apparel
Food products
Mining
Agriculture
And a significant share of total intermediate
imports is used in exports - UK
1995
60%
40%
20%
86
Particularly in sectors with high fragmentation
Intermediate imports embodied in exports, 2009
% of total intermediate imports
90
Total
Electronics
Transport equipment
80
70
60
50
40
30
20
10
0
United
States
Japan
Mexico
Germany
China
United
Kingdom
Korea
Czech
Republic
Hungary
87
VA figures reveal significant and increasing export
dependencies
Around and
over 2/3rds in
many sectors
And over half for
all
manufacturing
88
Services matter
Services Value-Added: % of exports, 2009
Foreign
Domestic
90
80
70
60
50
40
30
20
10
0
89
0%
Other
manufactures
Domestic service contents
Transport
equipment
Electrical
equipment
Machinery
Basic metals
Foreign service contents
Chemicals &
minerals
Wood & paper
Textiles & apparel
Food products
Mining
Agriculture
And have a high content in goods - UK
1995 Total
40%
30%
20%
10%
90
Design, R&D, software etc becoming more important Services content of transport equipment
50
Foreign
Domestic
40
30
20
10
0
2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995
FRA
DEU
ITA
JPN
KOR
MEX
SVK
ESP
SWE
GBR
USA
BRA
CHN
IDN
91
Trade patterns change - UK
Gross exports (EXGRSH)
25.0
Domestic value added in foreign final demand (FDDVASH)
20.0
15.0
10.0
5.0
0.0
USA
DEU
FRA
ITA
ESP
IRL
Gross imports (IMGRSH)
NLD
JPN
CHN
CAN
BEL
SAU
CHE
AUS
IND
Foreign value added in domestic final demand (FDFVASH)
20.0
15.0
10.0
5.0
0.0
USA
DEU
FRA
CHN
ESP
ITA
NLD
2009 Gross Trade surplus/deficit (TSGR)
NOR
JPN
IRL
BEL
RUS
CAN
POL
CHE
2009 Value Added surplus/deficit (TSVAFD)
20,000
10,000
0
-10,000
-20,000
-30,000
USA
SAU
IRL
AUS
SGP
CHE
FRA
NLD
ESP
DEU
NOR
CHN
92
Significantly for some countries - China
Gross exports (EXGRSH)
30.0
Domestic value added in foreign final demand (FDDVASH)
25.0
20.0
15.0
10.0
5.0
0.0
USA
JPN
DEU
GBR
FRA
CAN
Gross imports (IMGRSH)
KOR
RUS
ITA
AUS
IND
ESP
MEX
NLD
HKG
Foreign value added in domestic final demand (FDFVASH)
15.0
10.0
5.0
0.0
USA
JPN
DEU
KOR
AUS
SAU
TWN
RUS
2009 Gross Trade surplus/deficit (TSGR)
BRA
FRA
IND
ITA
GBR
CAN
MYS
2009 Value Added surplus/deficit (TSVAFD)
250,000
200,000
150,000
100,000
50,000
0
-50,000
-100,000
USA
GBR
MEX
FRA
NLD
VNM
THA
JPN
BRA
MYS
TWN
KOR
93
And throughout Factory Asia
40
Exports to China: Gross and Value-added terms, % of total
35
Value-Added
Gross
30
25
20
15
10
5
0
2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995
Chinese
Taipei
Japan
Korea
Malaysia
Thailand
Hong Kong, Singapore Philippines
China
India
Indonesia
Viet Nam
Cambodia
Brunei
Darussalam
94
Who trades with who?
Japan’s trade balances
Gross Trade Balance
Value Added Trade Balance
40000
30000
20000
10000
0
-10000
-20000
Rest of the World
Australia
Indonesia
Russian
federation
United Kingdom
Germany
Canada
India
Korea
China
United States
95
In general – the more distant the countries the more likely that gross
trade statistics underestimate the relationship
Change in trade shares based on Value-Added in
United States
Brazil
10
Exports Imports
0.5
0
6
-0.5
4
PHL
TWN
THA
MYS
JPN
KOR
ISR
AUS
USA
RUS
EU27
ZAF
IND
IDN
CAN
VNM
MEX
TUR
CHN
KHM
CHL
ARG
8
1
-1
2
-1.5
-2
-4
TWN
KOR
PHL
JPN
MYS
AUS
THA
SAU
RUS
EU27
IDN
TUR
ARG
BRA
IND
CHN
ZAF
VNM
ISR
KHM
CAN
MEX
0
-2
-2.5
-3
Exports Imports
-6
-3.5
96
97
Whilst there are limitations to the
widespread calculation of trade in
value-added data, the OECD-WTO
initiative is to be applauded for
providing a more revealing look
into global trade and integration
and for paving the way for
further development in this
area.
98
But it is important to stress
• That this is a
work in progress and that results are
estimates
• But they are robust enough to already begin to highlight
– the need for policies to account for GVCs
• But perhaps more importantly, they highlight
– the importance of capacity building and better statistics
• Improving data quality is essential
– Coherent estimates of trade in goods and services
– A new approach to Supply-Use Tables?
• With a focus on stages and trade rather than industries, per se, to better
reflect firm heterogeneity (particularly MNEs).
• Import/export intensities, factoryless firms, processors, ownership
99
What can be done now?
• Improved GROSS trade data
• Import flow matrices
• Better bilateral trade statistics (integrated with
SU tables) and globally consistent
• Intelligent confidentiality rules (suppress 6 digit
not 2 digit HS)
• Re-export data
• Second hand goods, scrap and waste.
• SERVICES –EBOPS 2012.
100
Examples of current inconsistencies in
bilateral trade statistics (Services 2009)
101
What else can be done…..now?
• Capitalise on existing data to create new indicators on
exporting and importing firms
• Beyond TEC: Linking trade registers, business
registers and SBS
• OECD Workshop on linking business and trade statistics: 25-26 October
2012
• Exploring feasibility of creating new indicators based on export (and
import) intensities, ownership and size.
• And also provides stepping stone for trade in icnome related to
investment
• Changes to classification systems to better reflect
globalisation:
– Factoryless producers (UNECE Task Force on Global
Production)
102
Extensions
• Trade in jobs and skills
– But requires
• Coherent employment and value-added data
– Also important for productivity estimates
• And significant improvement in skills data (and occupations)
Jobs embodied in foreign final demand - % of total
%
60
2008
1995
50
40
30
20
10
0
103
Extensions
• Trade in Income related to Investment: Ownership matters:
– Because value added does not always stick (compensation for use of knowledge based
assets – where increasingly registration is determined by tax environment)
– And because flows for use of IPPs are often recorded as property income and not trade
in services.
– 30% of total business sector VA in 2009 in the UK generated by foreign owned firms,
15% of GDP. Accounting for the underlying flows could further change trade
relationships, even though differences between GNI and GDP are small.
– In Japan for example Primary income flows (GNI minus GDP) were equivalent to about
one-quarter of total TiVA flows.
• Need better FATS data, particularly on value-added and employment.
– MSITS 2010 Compilers Guide
104
Summary – What’s needed
• New thinking on SU tables
• Better gross trade data
• Links to microdata
• Income, Ownership and FATS
105
Further information
• www.oecd.org/trade/valueadded
• Video:
http://www.youtube.com/watch?feature=player
_embedded&v=RZKX-0SK41U
• OECD Workshop on Measuring TiVA 5-6
December 2013
106
The Changing Nature of the UK’s
Involvement in Global Value Chains
prepared for the Business Statistics User Event:
The Changing Nature of Trade and
Investment in the UK
24th September 2013
Dr. Michael Gasiorek
CARIS, University of Sussex
& InterAnalysis
m.gasiorek@sussex.ac.uk
www.tradesift.com
What are the issues....
• The last 10-15 years have seen the increasing
integration of firms in value chains or supply chains.
• Firms increasingly purchase and sell goods and
services as intermediate inputs internationally.
• This process has become known as the
fragmentation of the supply chain.
• Conventional wisdom suggests this has enabled a
finer degree of “within industry” specialisation,
leading to increased productivity & competitiveness.
• Also resulted in greater inter-dependance between
countries
CARIS
1.109
What are the issues....
• Looking at gross exports may be misleading. Need to
be able to identify the value added in those exports.
• To do so, need to identify the intermediates that are
used by each industry and where the intermediates
come from: domestic v imported  input-output
tables.
• Two recent data-sets (TiVA & WIOD) have been
released which provide this information and allow
these issues to be explored:
• Important for policy and for understanding the
changes that have taken place in the UK economy
CARIS
1.110
TiVA and WIOD - overview
• TiVA (trade in value added)
–
–
–
–
Produced by the OECD
Indicators for 18 sectors – manufacturing and services
57 economies (OECD + others)
1995, 2000, 2005, 2008, 2009
• WIOD (world Input Output Database)
–
–
–
–
–
Produced by
Provides detailed (input-output) tables for 36 sectors
covers 27 EU countries + 13 other countries
period 1995-2009.
Includes information on the employment by skill type (high
medium & low) embodied in trade and production
CARIS
1.111
Every picture tells a story….
CARIS
1.112
Domestic value added in gross exports
• Chart shows that for the UK, the share of domestic
VA in exports has gone up (from 79% to 83%)
• Interestingly for the others we see the reverse trend
– China:
– India:
– Germany:
88%  67%
90%  78%
81%  73%
• This would appear to suggest that the UK may be
engaging less in international value chains, while
competitors are engaging more.
• Important to understand this and to consider the
extent to which this “matters”.
CARIS
1.113
Possible explanations
1. Within industries the UK is producing more of the
value chain (MVC) - supplying more intermediates
2. Within industries UK is now producing a higher
value part of the value chain eg. moving up the
value chain (UVC)
3. No compositional changes but within industries the
price of UK intermediates relative to the price of the
final goods it exports has gone up
4. Changes in the structure of the UK economy 
–
–
Decline of sectors with a low domestic value chain share
growth of sectors with a high domestic value chain share
CARIS
1.114
Possible explanations
•
•
•
•
•
(1) and (2) suggest that the UK is becoming more
competitive in the intermediates it supplies for use
in the final goods that the UK then exports
(3) suggests that the UK is becoming less
competitive in the intermediates it supplies
Assessing competitiveness in the intermediates is
tricky – and cannot be done with TiVA data directly
TiVA gives revealed comparative advantage for 9
manufacturing sectors
This does not identify the intermediates used in
those sectors, however if the UK was more
competitive in the intermediates might also expect
CARISto be the case for the final goods too.
this
1.115
Ag,
for
fish
Food,
Bev, &
Tob
Wood,
Paper,
prntng
Chem
Basic
metals
Machry
.
Elect
& Opt.
Transp
Equip
Manuf
nes 1.116
Possible explanations
•
Each of (1), (2) and (3)
 Producing more of the value chain (MVC)
 Producing higher up the value chain (UVC)
 Increasing price of UK intermediates
...imply changes taking place within industries, so we
would expect to see a higher share of domestic
value added within industries
CARIS
1.117
1.118
Ag,
for
fish
Wood, Chem
Paper,
prntng
Transp
Equip
1.119
For Chemicals and Transport Equip: RCA , domestic VAsh 
For these competitiveness may be related to more international
fragmentation as opposed to less
1.120
Ag,For. & Fishg, and Wood, Paper & Printing: RCA, dom Vash 
Therefore may be consistent with explanations 1,2 or 3
1.121
Overall
•
There are 10 industries where the UK value added
share has gone up,
–
–
–
five are service industries accounting for 21% of the UK’s
exports.
five of these in manufacturing comprising 28% of the
UK’s exports in 2009;
No clear pattern between competitiveness and domestic
value added share – but this is at a very aggregate level
CARIS
1.122
What do the graphs suggest?
1. There are four sectors where the UK’s revealed
comparative advantage has gone up:
–
–
–
–
food, beverages and tobacco;
wood, paper, printing and publishing;
Chemicals and non-metallic mineral products
Transport equipment
2. In only two of the sectors which saw a rise in the
UK’s domestic share of value added, is there
evidence of the RCA rising.
3. Note also little difference at this aggregate level
between the RCA using gross exports and value
added exports. This is unsurprising.
CARIS
1.123
What about inter-sectoral
compositional shifts?
CARIS
(Note: Excluding industries with a 2009 share less than 2.5%)
1.124
What about inter-sectoral
compositional shifts?
CARIS
(Note: Excluding industries with a 2009 share less than 2.5%)
1.125
What about inter-sectoral
compositional shifts?
CARIS
(Note: Excluding industries with a 2009 share less than 2.5%)
1.126
Some significant changes here
•
•
•
•
Indicative of substantial compositional shifts
Decline in the share of all manufacturing sectors.
growth in the importance of “financial
intermediation” (65-67) from 4.9% of value added
exports to 18%
Growth in “real estate, renting and business
activities” (70-74) from 8.7% to 16.7%.
CARIS
1.127
So what is the story?
•
•
•
•
•
Post 1995 restructuring of the economy towards financial &
business services. These sectors have a higher value added
share in exports, so this is driving the aggregate results
Decline in manufacturing in the UK, though not necessarily
by UK firms. Production and exports shifted to 3rd countries.
In contrast (possibly) Germany shifted source of
intermediates to third countries. China and India changes
driven more by the opening up of their economies
May have been exacerbated by overvalued exchange rate.
On the one hand this makes imported intermediates
cheaper (encouraging their use; on the other hand makes
exports more expensive. Net effect unclear
However, hard to see in detail what is happening to trade
CARIS
1.128
For that you need more detailed trade
data...
•
•
•
•
•
Out of 4696 goods exported in 2011, the top 50 UK HS 6digit exports account for just under 50%.
Those 50 industries accounted for 36% of UK exports in 2001
Of those 50 industries, nearly 25% saw their revealed
comparative advantage over 2001-2011 decline.
These industries accounted for 18% of UK exports in 2001,
and 14.6% in 2011.
Out of the 50 industries the 10 which saw their RCA rise the
most, saw their share of exports over the period rise from
just under 2% to 6.6%.
CARIS
1.129
Another picture, another story?
1.130