Status Setting on Uses of GVC / Value-Added Trade Statistics

Transcription

1 2014/SOM2/CTI/DIA3/004 Status Setting on Uses of GVC / Value-Added Trade Statistics Submitted by: United States Public-Private Dialogue on Building Asia Pacific Partnership Through Global Value Chains Collaboration Qingdao, China 12 May 2014

2 APEC Public-Private Dialogue on Building Asia Pacific Partnership through Global Value Chains Collaboration Dr. Robert B. Koopman Director of Operations United States International Trade Commission May 12, 2014 QingDao China The views expressed here are solely those of the presenter. This presentation 1 is not meant to represent the views of the USITC or any of its Commissioners. Global Value Chains R&D Design Production Logistics Marketing Sales Aftermarket services The value chain includes all activities by firms and workers to bring a product from its conception to its end use and beyond. Global value chains (GVCs) have become much more prevalent and complex in the past 20 years. Governments, firms, and workers in widely separated locations affect one another more than they have in the past. Traditional trade statistics (aka official trade aka gross trade ) don t capture integration well Led to development of value-added trade statistics 2 1

3 Status setting on uses of GVC/value-added trade statistics More revealing picture of global integration: Value-added analysis correctly tracks value back to the economies that generated it; official data can t do this. This can change the results of policy analysis Identifying new sources of strength: Services sectors are indirect engines of growth and exports. SMEs are also sources of key inputs to exports. Implications of trade for Incomes: Value-added trade data can provide more accurate measures of the effect of trade on income than gross trade statistics. Implications for domestic competitiveness: Access to global production networks is a source of domestic competitiveness. Competitiveness is increasingly affected by policies implemented in other economies or by domestic barriers to imported intermediate inputs. Trade Facilitation is a priority for business: Costs and delays along the supply chain can affect trade and investment more than tariffs. GVC analysis shows increasing global integration while standard statistics do not As global production has become more integrated, foreign economies increasingly add value to other economies products Domestic value added in exports has fallen over time for both developed and emerging economies This increasing integration is not reflected in trade statistics Domestic value added in exports (%) 50 Share of intermediate inputs in U.S. imports Source: Johnson and Noguera (2012) 10 Total manufacturing Motor vehicles 0 Office, accounting, and computing machinery Source: Powers (2012) 4 2

4 GVC analysis with international input-output tables International input-output (IIO) tables require Bilateral trade data for all economies and sectors National input-output tables Information on use of imported products by industry and consumers Significant challenges can come in reconciling domestic trade and national inputoutput data, and then reconciling trade data across economies. Limitations Long time lag (typically 3 years or more for the national input-output data) Available at the aggregate sector level, not product level (but results often align well with product specific analysis) Data on input-output tables and use of imported products not always available Firms can change behavior in ways not recorded in IIO tables Global effort USITC OECD and WTO Trade in Value Added (TiVA) statistics European Commission funding for World Input-Output Database UN (UNCTAD and ECLAC) Japan s Institute of Developing Economies (IDE-JETRO) Academics in the US, Europe, Japan, China, Australia, Canada, Mexico Analysis of value added in GVCs: Some applications Initial work helped demonstrate to US policy makers that much of the reported value of imports from China actually derived from upstream economies such as Japan and Korea. Sources of value in U.S. imports and production helped demonstrate that despite the large trade deficit and a widespread misperception that just about everything consumed in the US was made in China. The vast majority of US consumption is US value added. Better able to understand and analyze origin of foreign value-added in exports, by region helps identify potential natural, economic and political risks in supply chains Tsunami in Japan illustrated this well. GVC participation index helps identify where a economy is in GVCs, and with more recent research identifying role of SMEs, SOEs, and sector and economy pair decompositions. 6 3

5 U.S. Participation in Global Supply Chains Sources of value in U.S. imports, 2007 U.S. China Japan East Canada Mexico Europe Others Total Asia Total Apparel Motor vehicles Electronics Machinery Business services Source: USITC staff estimate Value added in U.S. imports RETURNED VALUE ADDED Asia contributes over 40% of the value in U.S. imports China is the single largest source of value in U.S. imports China s share of value nearly doubled from 2004 to 2007, while U.S. share held steady Returned U.S. value accounts for 7.8% of total import value Highest in motor vehicle sector; most value returns through NAFTA 7 U.S. Participation in Global Supply Chains Sources of value in U.S. production, 2007 U.S. China Japan East Canada Mexico Europe Others Total Asia Total Apparel Motor vehicles Electronics Machinery Business services Source: USITC staff estimate Value added in U.S. production 92.9% of the value of goods produced by U.S. firms is generated in the U.S. Electronics has the least U.S. value added, but domestic share is still fairly high (78%) Role of services Services have much higher domestic content (95.2%) than goods Are key inputs into domestic value chains for goods 8 4

6 Policy implications Trade costs multiply along GVCs Multiple borders generate multiple costs Tariffs are applied to gross export values, though domestic value added in exports may be small even low tariffs can have large impacts vis a vis Value Added Crossing borders multiple times can magnify tariff impacts Access to GVCs is a competitive advantage for firms Barriers to imports of intermediate inputs have greater impact on firms Trade barriers in upstream suppliers or downstream consumers affect trade even if you don t directly trade with those economies Trade liberalization boosts GVC growth 9 Multiplication of trade costs Cumulative tariffs on intermediate inputs in IT industries, 2009 Source: Miroudot, Rouzet, and Spinelli (2013) Despite low tariffs at the end of the chain due to the ITA, tariffs upstream are still non-negligible and that there are marked differences among the five industries represented. Cumulative tariffs are much higher in the TV and communication equipment industry as opposed to other industries. 10 5

7 GVC analysis at the USITC Studies for the United States Trade Representative Small and Medium-Sized Enterprises: Characteristics and Performance, 2010 Large firm DOMESTIC Value Chains draw upon SMEs for significant contributions to their GVCs from 28% to 41% of value in US exports. Import Restraints, 7 th Update: Special Topic on Global Supply Chains, 2011 Made clear that despite growing trade deficit US value is found in regional value chains particularly NAFTA, and US consumption still vast majority US value. Import Restraints, 8 th Update: Special Topic on Services Contribution to Manufacturing, 2013 Identify the important role of services in contributing indirectly to exported value. Technical assistance for USTR and Congress: Contributions to OECD, WTO, World Economic Forum, and other international organizations Numerous staff research papers 11 Do RTAs encompass major GVC trading partners? Sometimes. North America and Europe have deep RTAs that cover the main vertical intra-regional trade relationships (they have the highest correlation between RTA depth and the network trade index) Most ASEAN economies have RTAs with all their major GVC trade partners On the other hand, the large Asian economies (Japan, India, China, and Korea) have not (yet?) followed this pattern Source: Miroudot, Rouzet, and Spinelli (2013) 12 6

8 GVC participation index Identification of economies roles in GVCs Source: OECD, 2013, Interconnected Economies The US and some other large economies have relatively low international participation because more of their supply chains can be sourced domestically. 13 Trade in RTAs The share of world trade among economies that are parties to RTAs reached 50% about 2008 (Miroudot and Shepherd, 2006) These 12 economies have 36 RTAs among themselves and 41 RTAs with other economies. AUS BRN CHL CAN JPN MYS MEX NZL PER SGP USA VNM Australia X X X X X X X Brunei X X X X X X Chile X X X X X X X Canada X X X X Japan X X X X X X X Malaysia X X X X X X X Mexico X X X X X New Zeeland X X X X Peru X X X X X X Singapore X X X X X X X X USA X X X X X X Vietnam X X X X X 14 7

9 GVCs and RTAs GVCs create a new impetus for regional and multilateral trade agreements (OECD-WTO, 2013b). It is possible to design, at the domestic as well as the international level, supply chain agreements that bundle a number of policies useful to the facilitation of merchandise and services flows within GVCs, and that better link the private sector to trade and competitiveness strategies (WEF, 2013). Source: Cattaneo, Gereffi, Miroudot, and Taglioni 15 Share of intermediate inputs in APEC trade, 2012 Sector APEC exports APEC imports To APEC To RoW From APEC From RoW Total Chemical products Radio, TV, communication equip Motor vehicles Medical and precision instruments Office machinery and computers Source: USITC estimates using OECD end-use categories In 2012, overall APEC imports from APEC region had a lower share of intermediates (61.2%) than APEC imports from rest of world (66.6%) These shares have been stable since at least 2007 Only exception: office machinery and computers had higher shares of trade in intermediates in 2007 Concept of factory Asia becoming outdated? Factory World? 16 8

10 High domestic value added in APEC gross exports? Share and allocation of domestic value in gross exports, 2011 Metals Chemicals and Chemical Products Electrical and Optical Equipment Transport Equipment Machinery, Nec Textiles and Textile Products Leather and Footwear Share of Total Gross Exports DVA in final goods exports DVA in intermediates exports absorbed by direct importers DVA in intermediates re-exported to third countries Source: Wang, Wei, Zhu (2013) Note: APEC data only for Australia, Canada, China, Indonesia, Japan, Korea, Mexico, Russia, and USA. With this sample of economies all selected sectors contain two-thirds or more domestic value added as a share of gross exports. What would fully detailed APEC database show? The sectors in APEC with the highest domestic value added in final goods also provide the highest total domestic value added in gross exports. Domestic value added in final goods varies considerably depending on how goods are produced, where goods are produced, and the nature of the industry itself. Reducing supply chain barriers: Trade Facilitation Potential effects on GDP and trade China, HKC, Chinese Taipei Source: WEF,

11 GVCs now and GVCs in the future? The world will change and Total Factor Productivity has largest effect on GDP. How does GVC development affect TFP growth? Source: Fontagne, Foure, and Keck, 2014, 19 What might future look like where China is consumption led and more that consumption is services? Simulation Results from Koopman et al. 10

12 Does GVC data matter for analysis? Implications for bilateral trade using a GVC. Blue is traditional GTAP database/red bars from GTAP model reflecting GVCs 2030 net exports to US in machinery, electronics etc. much smaller in GVC based model China becomes substantial net importer of many of these goods from Japan in GVC model! China Trade balance -Could the world be this different in 17 years? How different was it 17 years ago? Need to be able to understand and analyze the development and evolution of supply chains. 11

13 Some Potential Priorities for APEC GVC analysis GVC data Help APEC economies improve domestic accounts statistics and services trade statistics Build capacity in APEC economies to collect and analyze their own data it is important for each economy to develop and analyze what its own data says about its place in global and regional supply chains. Reconciling trade data with national income data and trade flows across economies. Incorporating improved value chain data with policy data Don t re-invent the wheel APEC economies should supply data to existing international databases, such as the OECD-WTO TiVA database Regulations and NTMs Facilitate the collection of regulations and other nontariff measures (NTMs) in the Asia-Pacific to support existing efforts on NTMs at the WTO and UNCTAD Undertake case studies to quickly demonstrate the benefits of having this information NTMs on FDI Increase collection of measures affecting FDI in the APEC region Increase collection of FDI flows in the APEC region 23 12