MAPPING GLOBAL VALUE CHAINS AND MEASURING TRADE IN TASKS MOTIVATIONS AND ANNOTATED OUTLINE HUBERT ESCAITH, WTO JUNE 2013

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1 MAPPING GLOBAL VALUE CHAINS AND MEASURING TRADE IN TASKS MOTIVATIONS AND ANNOTATED OUTLINE HUBERT ESCAITH, WTO JUNE 2013

2 MOTIVATION - PROVIDE THE BIG PICTURE - LOOK AT THE ROAD MAP Why? Offer a Synthesis A lot has been achieved in the past two years; the literature is growing and becoming increasingly detailed Several projects are providing new indicators focusing on Global Value Chains and Trade in Value Added But concepts are still tentative and many data gaps remain. The paper will cover: Strong and weak points of existing approaches Their complementarity The next steps How? Integrate existing approaches into a unifying analytical framework Data are produced by a Data Generating Process which must be understood: Three theoretical approaches: Statistics; Trade theory, Management and Policy requirements Review existing approaches from their analytical/statistical relevance Provide examples focusing on Asia

3 BEHIND THE PAPER: METHODOLOGICAL APPROACH Root the statistical issue into theoretical ground No measure without a theory Dual nature of Statistics: Both a science and a practice Theoretical models: To provide a link with decision making and show the way (what, why, matching tools with objectives) To indicate the limits (mathematical/economic hypothesis behind each models) Promote an inductive/deductive dialogue: Initiating a constructive loop between theory and empirics Editorial considerations: echo the theoretical content of other papers in the volume reflect readers' mind-set

4 OUTLINE OF THE PAPER Introduction Motivation Plan Theoretical frameworks Network economics; Trade Theory; Business School Models; (Development Economics) What? Trade in intermediate, trade in Value-Added, trade in factor/income How? 1. Using Trade statistics: Mapping trade in intermediate products 2. Linking with National Accounts: International input-output approach 3. Linking trade and business statistics: trade by enterprise characteristics Conclusions: The way ahead towards an integrating framework

5 THE THEORETICAL FRAMEWORK RELEVANT MODELS 1. Network economics Networks of differentiated agents: who you are connected with is very important From graph theory (nodes, vertex, oriented graphs) to Markov or Bayesian chains. From graphs to linear algebra: IO matrices Flows indicator (strength and length) IO and National Accounts: Physical, financial and income (factor) circuits 2. Trade Theory New and new new trade: Importance of product differentiation and firm heterogeneity Limitations of the IO approach (Markovian rather than Bayesian graphs) 3. Business School Models: what is a value chain? notion of cluster (Bayesian graphs, once again) competitive vs. comparative advantages; role of services CSR: new demand for data collection; new data sources. 4. Development Economics Importance of product and functional upgrading (product classification by technological content) Importance of social upgrading (trade and employment)

6 WHAT SHOULD BE COUNTED? A proper mapping of global value chains: collecting information on Actors: Firms and households (both producers and consumers, resident and non-resident) Other relevant aspects of the Data Generation Process Flows: goods and services (intermediate, final); factors and income (valueadded disaggregation: labour content); FDI (financial flows); noneconomic costs (environment: CO2 content) Operational and governance aspects: Trade and transportation costs Other transaction costs Corporate ownership and intra-firm trade

7 HOW CAN IT BE COUNTED? 1. Mapping the flow of intermediate goods and services Revisiting traditional data with a new mind-frame Potential and Shortcomings: Understanding flows: the role of classifications: BEC (end-use), Rauch (market-power); Lall (technological content) Actors (sectors, firms): a black-box Examples (on Asia, when possible) 2. International Input-Output and trade in value-added Basic idea and practical issues Potential (macro-sectorial analytics, strength and length) and Shortcomings (aggregation issues) Recent projects; Examples 3. Trade by Firm Characteristics Linking trade and business statistics Some examples (EUROSTAT; OECD) Complementarity with Input-Output Analysis: Examples on China (from the forthcoming GVC policy forum June in Tsinghua University)

8 CONCLUSIONS: THE WAY AHEAD Searching for an integrated framework Firm heterogeneity and preference for diversity: Increasing demand for micro-data (eg: the EUROSTAT experiment) Trade and development: Increasing the coverage of existing I-IO initiatives (OECD-WTO, Eora- UNCTAD; others) linking trade with investment in physical, technological and human capital labour and environment indicators (KLEMS, other...) From trade in tasks to trade in income Linking trade in value added to financial and corporate data (FDI, Balance of Payments, intellectual property: OECD-WTO next steps) Towards a Satellite Account of the External Sector Installing the new trade statistics in the agenda of official (national and international) statistics