Implications of globalised value chains in the ... EGS.pdf · Upgrading in GVCs and the...
Transcript of Implications of globalised value chains in the ... EGS.pdf · Upgrading in GVCs and the...
Implications of globalisedvalue chains in the environmental industry for trade policy
Przemek KowalskiSenior Economist, Trade and Agriculture Directorate, OECD
Value of the Environmental Goods Agreement25 October , 2016St. Regis Hotel, Beijing,
2Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
1st Unbundling 2nd Unbundling
Geographical separation of production and consumption across international borders (traditional trade)
Separation of production segments: unpacking of factories across international borders
Spurred by: reductions in transportation costs
Spurred by: reductions in ICT and coordination costs
Trade policy: mainly about selling (market access)
Trade policy: mainly about producing or connecting factories (trade-investment-service-knowledge-IP)
What is really new with GVCs?
Baldwin (2012)
Two waves of globalisation
3Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
GVCs’ development since the early 1990s
GVC Index: ratio of imports of intermediate products to final demand, 1995=100, Source: Haugh et al. (2016)
4Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
The globalised solar PV panel supply chain
Source: Trina Solar
5Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Average foreign value content in exports by sector
>80% of HS codes on the OECD Combined List of Environmental Goods (CLEG)
6Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Upgrading in GVCs and the “smiley” curve
Environmental Goods and Services (?)
Mundabi (2008) for EGS
In some EGS value chains, like those for PV-solar and wind-energy, most of the value added is concentrated in downstream activities.
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Silicon PV system cost breakdown
Source: OECD (2015)
Permitting costs, legal costs, engineering, financing, distribution, and post-module value-chain mark-up
8Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Silicon PV system cost breakdown (2)
Source: OECD (2015)
9Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Region by region trade weighted trade costs (AVE)
Trade costs remain significant, although tariffs account only for up to 1/10th
Source: OECD (2015) after Arvis et al. (2013) using the trade cost measure proposed in Novy (2010). Trade weighted average costs of trade by region for the year 2010.
E28 ECA ESA LAT MEN NAM PAC SAS SEA WCAE28 35ECA 67 62ESA 112 146 104LAT 110 159 189 94MEN 76 108 93 135 50NAM 66 102 125 92 72 15PAC 90 141 148 149 70 73 8SAS 95 139 162 184 61 89 107 92SEA 88 118 155 129 69 72 80 104 69WCA 108 165 94 128 115 105 143 100 162 104
10Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Trade costs are amplified in fragmented production systems
The final price of a product with value added of 100, where n Is the number of border crossing , by different import tariff rates
Source: OECD (2013).
11Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
And they are often concentrated upstream
Note: “Tiers” refer to the different stages of production, with "Tier 1" representing the immediate inputs to the producer of the final good, "Tier 2" representing the inputs to the production of "Tier 1" inputs, "Tier 3" representing the inputs to the production of "Tier 2" inputs, etc.
Sour
ce: O
ECD
2016
, aft
er M
iroud
otet
al.,
201
3.
Decomposition of cumulative tariffs in EGS-related sectors
12Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Effective tariffs are higher due to foreign content
Sour
ce: O
ECD
(201
3).
13Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• Possibility to specialise in segments of value chains without mastering the whole process
• Engaging in GVCs requires a co-ordinated reduction of fragmentation-related costs of production (tariffs, NTBs, infrastructure, etc.)
• Engaging in GVC requires co-ordination of trade, investment, services, competition and innovation and IP policies
• Less clear whether and, if so how, to influence the nature of participation?
What have GVCs changed for policy making?
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• It is about accessing inputs: EGA’s plurilateralliberalisation extended on an MFN basis
• Tariffs can be low but their effects can add up along the value chain and because of foreign content
Key questions:
• To what extent will the EGA go beyond end-use or final products to include intermediates?
• What is the possibility of including NTMs?• What is the possibility of including relevant
services?
Some implications for EGA negotiations
151515Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
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We look forward to hearing from you!Contact: [email protected]
Thank you!
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• Development of the OECD Trade in Value Added Database
• Additional countries, additional refinements (factors of production, ownership, firm size, etc.)
• Mapping participation GVCs• Countries, sectors, regional, global, inter-regional, inter-sector links
• GVC implications for specific issues and polices• Trade policy implications (tariff, NTM escalation, RoO)• Innovation and knowledge based capital development• Investment policy implications (restrictions and FDI promotion)• Labour market implications (skills, regulations, inequality)
• Country-specific analysis and advise• TiVA country notes, GVCs Diagnostics
OECD’s work on GVCs
17Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Foreign sourcing is one of the key determinants of domestic value added embodied in exports
Dependent variable is the domestic value added in exports. Estimations are in changes (country-sector fixed effects). Period of analysis is 1995-2011
18Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Foreign sourcing is determined by structural characteristics, commercial policies…
Source: estimations based on OECD TiVA Database, 2015, Kowalski et al. (2015)
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High income Developing Total
-0.15 -0.10 -0.05 0.00 0.05 0.10 0.15
Logistics Performance Index (customs)
Intellectual property protection (index)
Infrastructure, availability and quality
Broadband subscription (per '000)
Tax rate (total)
Quality of Electricity supply (index)
FDI restrictiveness Index (net)
R&D expenditure
Institutional quality
Tertiary graduates (share of workforce)
Access to loans (index)
Technical occupations (share)
Product Market Regulation
Services Trade Restrictiveness Index
.. and certain trade-related domestic policies
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20Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
backward and forward GVC linkages as % of gross exports
Understanding the differences in GVC integration across countries
5944
47 4845
42 42 4133
4436 34
1735 33
4032
3539 37
29 29 2836
2014
2432 33
25 2437
3223
2620
1522
254
3227
2419
328
2514
2012
25 24 23 2615
218 11
2017
14
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21 20 20 26 16 23 23 41 23 24 17 23 20 15 17 25 24 25 16 32 38 27 18 18 24 25 12 16 25 21 27 33 26 22 43 15 20 23 26 42 17 19 30 23 31 18 19 19 15 25 17 3024 14 17
16
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Backward Forward
Source: OECD TiVA Database, 2015
21Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
What are EGS ?
>80% of HS codes on the OECD CLEG
22Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
• Relatively new and fast growing market (esp. core EGS)• Significant role of state as a consumer, regulator and
investor (R&D)• Some segments require geographical proximity (e.g.
certain wind turbine components)• Some markets segments vertically integrated (solar, PV)• Contrary to popular belief, only some segments capital
and knowledge-intensive• Distinguished shape of the “smiley” curve
Interesting characteristics of EGS in GVC context
23Trade and Agriculture Directorate | Organisation for Economic Co-operation and Development (OECD) | www.oecd.org/tad | [email protected]
Vertical integration and production volume to gross margin in the solar industry
Source: China Greentech Initiative, 2011.