Mapping and Measuring Trade in Tasks in Global Supply Chains

Transcription

1 Workshop on Global Supply Chains and Trade in Value Added December 2013, Hong-Kong Mapping and Measuring Trade in Tasks in Global Supply Chains Hubert Escaith

2 Outline 1. Motivation 2. Concepts 3. Practical approaches 4. Towards an integrating statistical framework 5. Conclusions

3 1. Motivation 1. The nature of trade has been changing: from trade in goods to trade in tasks 2. We do not have the right data to understand the different economic and social dimensions of this new trade and business model 3. Without adequate data, decision making is uncertain What is not counted does not count Decisions based on partial understanding deliver second or third best outcomes

4 2. Starting Point No Data Without Theory Statistical Analysis & Decision Making: Data are the visible tip of a Data Generation Process What? Why? Understanding the DGP: {data; model} complementarity Models guide data compilation (why, what) Without a model, difficult if not impossible to derive policies out of evidences New evidence opens new questions and new models

5 3. Practical approaches 1. Getting the most out of traditional trade statistics 2. The macro-sectoral approach: Measuring Trade in Value-Added 3. The micro-economic approach: Developing Trade and Business

6 a. Mapping Trade Networks with Traditional Trade Statistics Old customs-based statistics do provide a lot of information when we ask them : Origin and Destination, Product Category (about 5,000 at HS6), Value, Quantity (and Unit Value) Filtering provides additional information: BEC : final demand, intermediate consumption Unit Value within each HS category: proxy for quality Technological sophistication (Lall, OECD and EUROSTAT): Market power (Rauch: homogeneous, reference priced and differentiated products)

7 Network Representation of Asia-Pacific B2B (2008) C: People s Republic of China; I: Indonesia; J: Japan; K: Korea; M: Malaysia; N: Taipei,China; P: Philippines; S: Singapore; T: Thailand; U: USA 1 Agriculture; 2 Mining quarrying; 3 Manufacturing; 4 Elect. gas water; 5 Construction; 6 Trade and transport; 7 7 Other Services).

8 Crossing the Technology and Quality Dimensions (Asia-Pacific, 2010) Based on data from OECD (2013) Figure 5.12

9 b. Measuring Trade in Value-Added - Combining trade statistics and input-output tables - Describing inter-industry linkages - Inserting trade (external sector) within the domestic industrial network - Length/strength of the value chain - Contribution of each country to the global value - Specialization of each country (revealed comparative advantages)

10 The statistical approach adopted by OECD/WTO Disentangling domestic and foreign value-added Trade flows in value-added terms can be estimated from the point of view of an exporter or of an importer Gross exports can be decomposed into: Foreign value-added Direct domestic value-added in the export industry Indirect domestic value-added generated via purely domestic transactions, broken down by all domestic industries. Indirect imported value-added (broken down by producing country and industry). Indirect domestic value-added embodied in imports (broken down by all domestic industries) Domestic value added OECD-WTO s TiVA is Work in Progress release covers period, 57 countries 10 from OECD and emerging countries.

11 Final Demand (importer) approach is simpler in an input-output model Final Demand is exogenous to the IO model while supply is endogenous Final Demand is an absorption state (Markov) while Supply (exports) are always measured at some point in an infinite loop (The Leontief is a limit when time -> ) But Supply-Side (export decomposition) is more relevant for Trade and GVC analysis Demand-Side create virtual trade flows that misrepresent the actual path of supply chains Two sides of same coin, answering different questions Export decomposition: Trade Analysis (complementarities, upgrading) Final demand: Macro-Analysis, global business cycles and governance

12 International fragmentation of Textile & Clothing: $100 Italian shirt (retail price, Japan) Design and Branding Cotton Yarns Knitted Fabrics $5 $30 Merchanting Supply-chain management $70 Consumers $15 Pattern- Cutting Sewing $20

13 Geography of VA Trade: Demand vs Supply Sides Demand Side: Map the origin of VA in Final Demand (virtual trade flows) Supply Side: Measure the domestic VA in Exports, respecting actual trade flows

14 Made in the World Initiative and OECD/WTO project to Measure Trade in Value Added What have we learnt so far? More than 50% of world trade is in intermediate goods (excluding oil and fuel) 75% to 80% of world trade is actual value-added More services are traded and more SME participation when accounting for indirect VA imbedded in manufacture exports Bilateral trade balances are significantly reshuffled (ex. the size of the China-US deficit is halved) Jobs implications of trade in tasks differ between Industrialised and Industrializing Countries

15 What do we learn? In TiVA, Services share doubles Services enter the value chains: Directly in the manufacturing process Pre- or post-manufacturing stage Post-retail services and recycling

16 Imports make Exports

17 TiVA resizes Bilateral Trade Balances

18 TiVA Revises Revealed Comparative Advantages

19 TiVA input-output Length and Strength of Supply Chains An Inter-Industrial Approach of the Regional Network Measuring Trade in Value-Added offers multiple combinations of Trade and Production (B2B) linkages North East Corner: towards longer supply chains linkages China in particular: both domestic and overseas supply chains Exceptions: USA and Chinese Taipei Japan did not change Northwest-Southeast diagonal: relative position of each economy within the regional supply chains. USA and Japan: upstream position. Korea competes now with USA China stays in the downstream segment as final assembler of the regional products. Source: Escaith and Inomata (2013) based on IDE-JETRO data 19

20 3. The Way Ahead: a wish-list Trade flows in intermediate inputs, including goods and services The glue connecting the firms participating in international supply chains. Unit Value and additional tools (BEC, etc.) to classify incoming (inputs) or outgoing (output) flows by use, technological content and quality (proxy: price). Special emphasis on services (FATS; royalties and fees or trade in ideas ). From EBOPS to CPC By sector of origin and destination. If possible, by firm s characteristics (size, ownership) Transaction costs: freight and insurance by modes of transport, border and "behind the border" costs (tariffs, cost of complying with non-tariff measures) Official sources (customs, notifications to WTO) Non official sources (survey to business and operators) Trade in tasks: Value-Added created by each industry in the value chain Disaggregated into its main components (wages, profit and taxes). Further disaggregated into resident/non-resident (i.e., profit repatriation) for Balance of Payments assessment and trade in factors Satellite accounts: Jobs and skills, if possible related within broader business functions. Capital and its ownership (tangible, intangible, technological content and intellectual property) Non-reproducible capital or inputs (natural resources, land, water) involved in production Other environmental variables (CO2 emissions, etc.).

21 Using additional information (KLEMS) Labour, Capital (skills, technology) EU: Change in GVC-related labour demand by skills, Source: based on WIOD

22 Conclusions 1 (a statistician s perspective) A lot can be achieved using existing trade statistics if They are systematically recorded in all their dimensions (HS, quantity and value, CIF / FOB) Linked with SUT and National Accounts Linked with International IO matrices More can be done if: Improved trade in services statistics (EBOPS, FATS, CPC) Linking trade and business registers (The micro dimension: trade by firms characteristics) Linking Input-Output and Social-Accounting Matrices (The macro dimension: trade and jobs) Towards an Integrating Framework: Satellite Account of the External Sector (similar to the Tourism Satellite Account)

23 CONCLUSIONS 2 A. POLICY IMPLICATIONS 1. National (Trade and Development) Policy Implications Measuring competitiveness. Competitiveness depends on (i) other domestic sectors, and (ii) inputs imported into the country. Trade Facilitation: Reducing transaction costs (tariffs, transport and communication, red tape) greatly improves competitiveness. Measuring comparative advantages. Comparative advantages are based on tasks rather than final products Designing trade policy. Effective policy making requires knowledge of where value added is located. Interdependence of countries and sectors: protectionism is useless and costly.

24 B. Multilateral Policy Implications Global Value Chains shape regional trade and regulatory policies Negotiating regional/bilateral preferential trade agreements (PTAs) is often more about harmonizing regulatory systems than tariffs. Leading to a Regulatory Spaghetti Bowl of increasing complexity Eventually, simplification of the pluri-regional systems by identifying best practices as multilateral standards. -> From Divergence to Convergence (a new role for the MTS?) The World Trade Report 2011 describes the historical development of PTAs, the current landscape of agreements and their relationship with the WTO rules.

25 2. Multilateral Policy Implications (cont.) Global Village and Economic cycles. The overlapping of production processes : highly interdependent cycles. Global Value Chains amplify and accelerate the transmission of shocks: Bullwhip effect. Improving world governance. Reassess offensive and defensive interests vis à vis Rest of the World. Deal with the global business cycle: Policy coordination (G20)