Title

Measuring Trade in Value Added, and Beyond

International Conference on Measurement of Trade and Economic GlobalizationAguascalientes, September/October 2014

nadim.ahmad@oecd.orgAn Interconnected World..Increasing: International Fragmentation of Production within a Global FactoryRole of MNEsTransfer pricing, Intellectual property flows, Supply Mode 3And New types of ProducersFactoryless, Processors, SPEs

Complicating our ability to measure activity

2.and Interpretable? statistics...Double counting of tradeWho trades with who? Whos creating growth? Imports: good or bad?

Double counting of FDICapital-in-transit.. Real FDI?

Blurring line between GNI and GDP3..produced with Disconnected sourcesStove pipes:Business Registers SBS, NA, FATs, TiS?, FDI?

Trade Registers Merchandise, TiS?

Interconnected world but disconnected dataWithin countriesAnd acrossWith potentially misleading results and imperfect policies4How are we responding? Interconnected economies > Interconnected (integrated) statisticsBDM4 Real FDI.. (double counting via SPEs)Linking Trade and Business Registers (TEC) and (TEC+ > ownership) to improve national coherenceTiVA to improve international coherence and provide interpretability for global phenomena

5What is TiVA: a statistical initiative A means to better reflect global interdependencies

Using a global IO table

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What is TiVA: A response to policy demandsTo name but two of many:From the G20 starting with Los Cabos, 2012And Trade Ministers (OECD MCM: strong call in both 2013-2014)7What is TiVA: A collective effortLaunched in 2013 by the OECD and WTOin close collaboration with other agencies:USITC, IDE-JETRO, MOFCOMAnd through the OECDs WP on Trade, National Accounts, Industry and Innovation and Trade Committee.with OECD co-ordinating further international institutionalisation MoU being developed with Eurostat, Formal collaboration with APEC, Active collaboration with UNESCWA and UNECLACAnd planned collaboration with African Development Bank to start in the next few weeks

Given high priority by the OECD Committee of Statistics and Statistical Policy, and mainstreamed, with significant resources, into the OECDs core statistical work programme.

8What is the output? A series of global IO tables: Currently 1995, 2000, 2005, 2008, 2009, 2010, 2011 (available Nov 2014)Updated annuallyWith a series of derived indicators available on OECD.Stat

9The current OECD Inter-Country I-O model57 economies + Row, 1995-2009, 18 sectors10OECDAll OECD 34 countriesBRIICSBrazil, China, India, Indonesia, Russian Federation, South AfricaOther EU27Bulgaria, Cyprus, Latvia, Lithuania, Malta, RomaniaOther G20Argentina, Saudi ArabiaOther South Eastern AsiaBrunei Darussalam, Cambodia, Malaysia, Philippines, Singapore, Thailand, Viet NamOther Eastern AsiaChinese Taipei, Hong Kong ChinaOtherRest of the WorldNovember 2014: Plus, Colombia, Costa Rica, Croatia, Tunisia and 2010 34 sectors released10TiVA on OECD.STAT industry list 11

Future versions more detail 11TiVA 2014 Industry ListIO IndustriesISIC Rev.3Industry101t05Agriculture, hunting, forestry and fishing210t14Mining and quarrying315t16Food products, beverages and tobacco417t19Textiles, textile products, leather and footwear520Wood and products of wood and cork621t22Pulp, paper, paper products, printing and publishing723Coke, refined petroleum products and nuclear fuel824Chemicals and chemical products925Rubber and plastics products1026Other non-metallic mineral products1127Basic metals1228Fabricated metal products except machinery and equipment1329Machinery and equipment n.e.c 1430,32,33Computer, electronic and optical products 1531Electrical machinery and apparatus n.e.c1634Motor vehicles, trailers and semi-trailers1735Other transport equipment1836t37Manufacturing n.e.c; recycling1940t41Electricity, gas and water supply2045Construction2150t52Wholesale and retail trade; repairs2255Hotels and restaurants2360t63Transport and storage2464Post and telecommunications2565t67Finance and insurance2670Real estate activities2771Renting of machinery and equipment2872Computer and related activities2973, 74Other Business Activities (incl. R&D)3075Public admin. and defence; compulsory social security3180Education3285Health and social work3390t93Other community, social and personal services3495Private households with employed persons12What does the latest release tell us13Highlights14Exports require imports

Growing fragmentationServices matter!..........China 15

Design, R&D, software etc becoming more important - Services content of transport equipment 16

Geography remains important17Trade patterns change: China18

And throughout Factory Asia 19

Exports to China: Gross and Value-added terms, % of totalIn general the more distant the countries the more likely that gross trade statistics underestimate the relationshipChange in trade shares based on Value-Added in 20

BrazilUnited StatesForeign value added in Chinese Electrical equipment, by originating region and industry, %21

Estimation?22OECD Inter-country I-O table

National I-O/SU tablesProduction linkageFinal expenditureIncome (Value-added)Import procurement info+Bilateral Trade Database by industry and end-use categories (intermediates, capital and consumption goods)61 countries, 1995-2010/11, 34 sectors, consistent with SNA2323What are the challenges? Data:AvailabilityCoherence

24Bilateral Trade statisticsAn international IO table requires high quality international trade statisticsAsymmetries & missing dataRe-exportsAdditional information on cif/fob adjustmentsRules for dealing with confidentialitySupporting Import flow matricesEstimates of non-residents and residents expenditure abroadAn ability to reconcile merchandise trade/TIS flows with National Accounts SU and IO tables.25Merchandise trade asymmetries - examples26

Services Trade asymmetries - examples27

National Supply Use and Input-Output tablesSupply-Use: Make and Use tables at Purchasers and Basic Prices.. preferably every year but if not: at the very least periodically and recent, with supporting National Accounts information on value-added and output by industry and all categories of final demandAnd supporting import flow tablesPlus periodical IO tables

28Is TiVA enough? 2930

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Whilst there are limitations to the widespread calculation of trade in value-added data, the OECD-WTO initiative is to be applauded for providing a more revealing look into global trade and integration and for paving the way for further development in this area.No.strong demand for Jobs Skills?Information by ISCO?Investment? Creating a Trade-Investment Story

32Jobs in the business sector* sustained by foreign final demand 33* Business sector = ISIC Rev.3 divisions 10 to 74)Source: OECD, Science, Technology and Industry Scoreboard, 2013 As a % of total business sector employment

But where challenges exist in measuring relative productivity between exporting and non-exporting firms and where greater coherence between jobs and value-added data is neededTentative because we assume labour productivity in exporting firms is the same as to non-exporters 33Why Investment? Because value added does not always stick (compensation for use of knowledge based assets where increasingly registration is determined by tax environment)AndStatistically, the line between trade in services and property income is becoming more blurred..distorting value-added measures.Trade in services versus mode 3?

34Value-Added of Foreign Affiliates share of national Total 2009 (ISIC B-N, ex K35Chinas hi-tech exports36Source: 36The contribution of foreign affiliates to domestic value added in exports, 2009.Source: OECD AMNE and TiVA databases37

Irelands VA to export ratios?Source: OECD illustrative estimates38Increase in US TiVA Trade balance, adjusted for US affiliate trade in Ireland, 2009 $bnSource: OECD illustrative estimates39Chinas Trade surplus with the US?40Source: OECD illustrative estimatesPlanned extensionsJobs Skills?Information by ISCO?Investment? Creating a Trade-Investment StoryImproving qualityDealing with heterogeneity

41TiVA key assumptionsThat all firms allocated to a particular industry have the same production function.That for a given product, imports by industries (firms) are sourced from the same mix of countries. 42But....We know these assumptions dont generally hold (especially with 2008 SNA). Exporting firms typically import moreAnd have higher labour productivity than non-exporters (in the same industry)Meaning that import content of export estimates are downward biasedRequiring new approach to developing SU tables that better reflects todays global production: Linking and leveraging across existing datasets

43Expert Group on Extended SU tables To create an integrated economic accounting framework for globalisation - mainstreaming-integrating FATS and TECMore detailed SU tables:IndustriesMore heterogeneity: Foreign/Domestic, Export/non-export, S/M/LImportsWith all products at fob and separate column for residents expenditure abroadImport use tables by main import partnerExportsWith non-residents expenditure and re-exports separately identifiedPLUStransparent adjustments for some non-observed items (e.g. own account agricultural production)Jobs by industry rowEmissions by industry rownew rows for property income flows: interest, distributed income of corporations, reinvested earnings on FDI, Investment income disbursements And, for BEPS: current taxes on income, wealth etc44Use Table45

With re-exports broken down, ideally, by destination (main partner countries/regions)FATSTECImport Use table46

With TEC providing info on direct importsWith separate tables made available broken down by main country or region of origin groupingsSupply Table47

Extensions?48

SummaryMuch has already been doneBut plenty more to doWith strong support and mandates from G20 and Trade Ministers and CSSP, OECD will continue to:Ensure that its WP meetings serve this agendaDevote considerable resources to achieving the broader needs of the international statistical communityLeverage its links between Policy and StatisticsDevelop the international network to mainstream global SU tables and extensions to national SU tables.For more info see: oe.cd/tiva

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