Global value chains (GVCs):

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Benedict Harper
5 years ago
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1 Global value chains (GVCs): A dominant feature of today s global economy. Internationally fragmented production, driven by technological progress, cost, access to resources and markets, and trade policy reforms, challenges our conventional wisdom on how we look at and interpret trade statistics and, in particular, the policies that we develop around them. Traditional measures of trade, that record gross flows of goods and services each and every time they cross borders, may not accurately reflect modern trade patterns. 1

Wing box: Mitsubishi Heavy Industries (Japan) Wing ice protection: GKN Aerospace (UK) Vertical Stabiliser: Boeing Commercial Airplanes (USA) Centre fuselage: Alenia Aeronautica (Italy) Rear fuselage:

2 Wing box: Mitsubishi Heavy Industries (Japan) Wing ice protection: GKN Aerospace (UK) Vertical Stabiliser: Boeing Commercial Airplanes (USA) Centre fuselage: Alenia Aeronautica (Italy) Rear fuselage: Boeing South Carolina (USA) Lavatories: Jamco (Japan) Doors & windows: Zodiac Aerospace (USA) PPG Aerospace (USA) Forward fuselage: Kawasaki Heavy Industries (Japan) Spirit Aerosystems (USA) Escape slides: Air Cruisers (USA) Flight deck seats: Ipeco (UK) Raked wing tips: Korean Airlines Aerospace division (Korea) Horizontal Stabiliser: Alenia Aeronautica (Italy) Aux. power unit: Hamilton Sundstrand (USA) Passenger doors: Latécoère Aéroservices (France) Cargo doors: Saab (Sweden) Prepreg composites: Toray (Japan) Centre wing box: Fuji Heavy Industries (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) 2

3 What is Trade in Value Added? A statistical approach used to estimate the source(s) of value (by country and industry) that is added in producing goods and services for export (and import). Recognizes that growing global value chains mean that a country's exports increasingly rely on significant intermediate imports (and, so, value added by industries in upstream countries). Traces the value added by each industry and country in the production chain and allocates the value-added to these source industries and countries. 3

4 Why is this important? Trade, growth and employment Global imbalances Trade disputes Managing macro-economic shocks 4

5 TiVA Timeline: March 15, 2012: the OECD and WTO announced a joint initiative to develop a database of Trade in Value Added indicators and to mainstream their production within the international statistics system. April 19, 2012: OECD Sec Gen Gurria s Speech to the G20 on global value chains. January 16, 2013: Release of the first TiVA Indicators. 5

6 Initial Coverage: 34 OECD countries, 6 non-members 18 industries, 2005, 2008, 2009 Indicators for each country, by industry and partner: Gross exports (with decomposition) Domestic VA embodied in gross trade Domestic VA embodied in foreign final demand Related balances, ratios and % of GDP Revealed Comparative Advantages (RCAs) in gross and VA terms 6

7 How is TiVA measured? Value added is difference between its output (in basic prices) and the sum of its intermediate inputs (in purchasers prices) of goods and services. TiVA Indicators are estimates derived from OECD inputoutput tables. Statistical quality will be refined as more countries and years are added, along with a better disaggregation of sectors and better information on services. 7

8 Dataset: Trade in Value Added OECD-WTO Industry Variable Time Partner Country Australia Czech Republic France Germany Japan Korea New Zealand United Kingdom United States TOTAL: TOTAL T05: Agriculture, hunting, forestry and fishing T14: Mining and quarrying T16: Food products, beverages and tobacco T19: Textiles, textile products, leather and footwear T22: Wood, paper, paper products, printing and publishing T26: Chemicals and non-metallic mineral products T28: Basic metals and fabricated metal products : Machinery and equipment, nec T33: Electrical and optical equipment T35: Transport equipment T55: Wholesale and retail trade; Hotels and restaurants T64: Transport and storage, post and telecommunication T67: Financial intermediation T74: Business services data extracted on 07 Jan :17 UTC (GMT) from OECD.Stat EXGR_FVASH: Foreign value added share of gross exports 2009 Total Brazil China 8

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10 Future Plans Continued improvement in quality: reconciling gross trade goods and services inconsistencies in collaboration with National Statistics Organizations. Future expansions: more countries, industries, years, indicators. MCM May 2013: Comprehensive report on policy implications of GVCs: covering trade policy, investment policies and other domestic policies aimed at drawing benefits from engagement in GVCs. Further ahead: Trade in obs and Trade in Income. 10

11 General and U.S.-Specific First Impressions 11

12 General Impression #1: Services Matter Foreign Domestic Services Value-added: % of exports, % of Valueadded exports 12

13 and represent a big part of exported goods 13

14 General Impression #2: Exports require imports Transport Equipment Electronics 14

15 with many intermediate imports going to exports. 15

16 General Impression #3: Added-value can return 16

17 Country-Specific #1: U.S. bilateral trade balances Differences in U.S. Trade balances, USD millions,

18 Country-Specific #2: U.S. exports have little foreign VA Value-added content of gross exports, by industry,

19 Country-Specific #3: U.S. exports a lot of services Services content of gross exports, by industry,

Measuring Trade in Value-Added Measuring the Effects of Globalisation Washington 1 March 2013

Measuring Trade in Value-Added Measuring the Effects of Globalisation Washington 1 March 2013 nadim.ahmad@oecd.org: Statistics Directorate The rise of GVCs: apparel, cars, toys, planes, electronics Wing