#StatsTradeEvent. The Changing Shape of Trade and Investment in the UK Jil Matheson National...

#StatsTradeEvent

The Changing Shape of Trade and

Investment in the UK

Jil Matheson

National Statistician

24th September 2013

#StatsTradeEvent

£100m

£100

£100m

£100m

£100m

£407bn goods

£119bn services

9.5%

11.0%

7.5%

UK – a key global trading nation

3.5% 6th place

#StatsTradeEvent

Source: ONS Balance of Payments; UNCTAD

Share of W rld Trade in 2012

Total value of UK trade in 2012 £1 trillion

4#StatsTradeEvent

0%

10%

20%

30%

40%

50%

60%

70%

80%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

Source: ONS Value of GDP and Trade data; Value of Goods and Services imports and export

Total trade to value of GDP ratio, UK

Source: Annual Business Survey

Proportion of exporting and importing registered businesses, GB, 2011

#StatsTradeEvent

Data Collection

#StatsTradeEvent

Trade and investment statistics users…

Source : Google images

#StatsTradeEvent

#StatsTradeEvent

Inward FDI in the UK – (some of) what we know and what we would like to

know

ByRichard Harris

© Richard Harris

Evidence paper by Driffield et. al. (2013) to the Foresight Project on the Future of manufacturing in the UK

Motivation• TFP is widely recognised as the key driver of long-

run economic growth • being foreign owned is associated with higher levels

of TFP– Effects cover:

• Direct effects: FO plants are themselves more productive

• Indirect effects: there are (potential) spillovers to domestic plants from FO plants

• Overall the UK economy benefits from inward FDI even though there are issues of control and the destination of profits

11

OverviewWhat do we know

– Run through some statistics available mostly based on micro-level UK datasets covering FO shares of:

• GVA• Gross output• R&D

– Look at some examples of the analysis that can be done covering:

• Links between FO and R&D/absorptive capacity• Contribution of FO plants to overall UK productivity growth

What would we like to know– Show how spillover estimates are obtained

• Note the incompleteness of our knowledge• Outline the needs for more information (new statistics)

Source: ARD

Real GVA in top 32 SIC92 industries by foreign-ownership, 2009 (£m 2000 prices)

Software consultancy and supply

Other retail of new goods in specialised stores

Telecommunications

Legal, accounting, consultancy

Miscellaneous business activities

Post & courier services

Manufacture of motor vehicles

Wholesale of household goods

Architectural & engineering & technical consultancy

Wholesale of intermediate productsManufacture of refined petroleum products

Retail in non-specialised stores

Real estateOther wholesaleAdvertisingLabour recruitment & personnel

Source: ARD

Source: BERD matched into ARD

Source: Harris (2013) – based on CIS data

Source: Harris and Moffat (2013) – using ARD

Evidence on spillover benefits• Does the ‘presence’ of IFDI increase the

productivity of non-FDI plants?– First need to establish that generally IFDI plants

have higher productivity– Then need to establish the ‘channels’ through

which ‘spillovers’ can occur– Lastly need evidence on such spillovers

• Current based on ‘association’– If high ‘presence’ of IFDI in same industry (upstream or

downstream) and/or same locality is correlated with higher TFP in domestic plants – taken as evidence of spillovers

• Need direct evidence – to establish and better understand nature of spillovers

Distribution of plant-level labour productivity in 2005

Source: FAME

What we don’t know on spillovers

• Need evidence on linkages between FO and domestic plants in terms of:– actual sales/purchases

• This also requires understanding of ‘global’ value chain activities of IFDI firms (e.g. why are they located in UK?)

– actual ‘knowledge’ linkages• Information shared with other firms and sectors• Cooperation undertaken• Hiring of labour

Conclusions• IFDI is very important to UK economy

– Concentrated here on productivity side but also jobs (covered next)

– It’s a large component of marketed output– Its more productive

• Directly and and almost certainly indirectly (through spillovers)

• But indirect effects are imprecisely measured and direct of causation is consequently unclear

– Hence need more statistical information on linkages in order to understand and measure better spillover effects

Acknowledgement

This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of these data does not imply the endorsement of the data owner or the Secure Data Service at the UK Data Archive in relation to the interpretation or analysis of the data. This work uses research datasets which may not exactly reproduce National Statistics aggregates

#StatsTradeEvent

44 1 Presentation title - edit in the Master slide1 Presentation title - edit in the Master slide

The Changing Shape of Trade and Investment in the UK

UKTI priorities and evidence needs

Crispin Simon, Director Trade: UKTI 22nd September 2013

With Thanks to Economists at HM Government FCO and UKTI


There is no such thing as bad weather, only unsuitable clothing

Ranulph Fiennes


Capacity Building Passport to Export Advice for the new exporter

Export Vouchers For Passport graduates

Export Reviews Comms advice & mkt research resource

3G and MSB Programmes For more experienced exporters

Open 2 Export Web community for exporters

Getting Out There Webinars Low cost personal input

Market Visit Support Grant-supported country visits

Trade Show Access Programme Grant-supported trade show presence

Missions to Markets Sector-focused country missions

In Market OMIS Research Introductory service

OMIS Facility Embassy facility use

Business Opportunity Scheme E-mail alerts from FCO Posts

High Value Opportunities Additional resource, supply chain focus


Trade target is £1 trillion UK exports by 2020

Leverage points at firm level:

• More companies

• More companies being formed

• More companies surviving

• More companies exporting (100k by 2020)

• Exporting companies exporting more

• Gaining share in current markets

• Entering new markets

• Raising UK content of overseas sales


Trade target is £1 trillion UK exports by 2020

Leverage points at macro level:

• More UK Geographic Market Share

• More UK market share in mature geographic markets

• More UK market share in high growth geographic markets

• More growth where UK has high market share

• More UK Sector Market Share

• More UK market share in mature sectors

• More UK market share in high growth sectors

• More growth where UK has high sector share


UK share of key export markets in 2010

52

History continues to play a role in the pattern of UK trade. The UK tends to capture a larger market share in its former colonies than other markets.

Source: IMF, ONS and FCO Economics Unit Calculations

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%M

exic

o

Viet

nam

Indo

nesi

a

Phili

ppin

es

Kore

a

Chin

a

Thai

land

Arg

entin

a

Colo

mbi

a

Mal

aysi

a

Japa

n

Chile

Hon

g Ko

ng

Braz

il

Cana

da

Russ

ia

Mor

occo

Iraq

Indi

a

Sing

apor

e

Om

an

Turk

ey

New

Zea

land

Kaza

khst

an

Egyp

t

Saud

i Ara

bia

UA

E

USA

Kuw

ait

EU

Aus

tral

ia

Bahr

ain

Nig

eria

Sout

h A

fric

a

Qat

ar

UK Share of total import market (includes goods and services)

Former British Colonies


UK versus EU-3 – goods export performance

53

On average the UK captures about 2.5% of foreign goods markets, versus 3% for the EU-3. The UK outperforms the EU-3 in the Gulf, but for many other emerging markets the EU-3 are

ahead. In some cases, notably Russia, Brazil, Turkey and China, the EU-3 are significantly further ahead.

Source: UNCTAD Statistics, ONS and FCO Economics Unit Calculations

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%M

exic

o

Indo

nesi

a

Viet

nam

Phili

ppin

es

Kore

a

Iraq

Chin

a

Colo

mbi

a

Kaza

khst

an

Arg

entin

a

Japa

n

Thai

land

Mal

aysi

a

Hon

g Ko

ng

Cana

da

Sing

apor

e

Chile

Braz

il

Indi

a

New

Zea

land

Russ

ia

Aus

tral

ia

Mor

occo

Turk

ey

USA

Bahr

ain

Om

an

UA

E

Saud

i Ara

bia

Egyp

t

Nig

eria

Kuw

ait

EU

Sout

h A

fric

a

Qat

ar

UK EU-3 Benchmark

Share of goods import market


UK versus EU-3 – services export performance

55

On average the UK captures around 6% of foreign services markets, versus about 3% for the EU-3. The UK significantly outperforms the EU-3 benchmark in almost all markets. Notable exceptions are Morocco, Chile, Argentina, Mexico and Brazil.

Source: UNCTAD Statistics, ONS and FCO Economics Unit Calculations

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%Th

aila

nd

Kore

a

Phili

ppin

es

Chin

a

Indo

nesi

a

Braz

il

Indi

a

Arg

entin

a

Chile

Mor

occo

Mex

ico

Viet

nam

Mal

aysi

a

Russ

ia

Om

an

Japa

n

Colo

mbi

a

Kuw

ait

Hon

g Ko

ng

Egyp

t

Sing

apor

e

Cana

da

Saud

i Ara

bia

Iraq

UA

E

New

Zea

land

Kaza

khst

an EU

Qat

ar

Turk

ey

Nig

eria

USA

Sout

h A

fric

a

Aus

tral

ia

Bahr

ain

UK EU-3 Benchmark

Share of services import market

56 1 Presentation title - edit in the Master slide1 Presentation title - edit in the Master slide 56

• In pound terms, it is the largest economies that account for the biggest rise in import demand.

• The increase in Chinese import demand is especially large, dwarfing all other emerging markets. This reflects both China’s size and its growth potential.

• Increasing market share in these large markets will result in bigger gains for the UK, but may be more difficult to achieve because of greater competition.

Source: IMF World Economic Outlook October 2012 and FCO Economics Unit CalculationsData refer to the expected increase in goods & services imports into a given market, expressed in nominal terms.

0

500

1,000

1,500

2,000

2,500EU USA

Japa

n

Cana

da

Aus

tral

ia

New

Zea

land

Bahr

ain

Qat

ar

Mor

occo

Om

an

Egyp

t

Colo

mbi

a

Kuw

ait

Phili

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Chile

Nig

eria

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h A

fric

a

Arg

entin

a

Iraq

Sing

apor

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UA

E

Turk

ey

Viet

nam

Indo

nesi

a

Mal

aysi

a

Braz

il

Thai

land

Mex

ico

Russ

ia

Hon

g Ko

ng

Indi

a

Kore

a

Chin

a

Change in import demand between 2010 and 2020 (£ Billion)

'Established'Markets

Emerging Powers

Note: EU figure includes intra-EU trade


Meeting the £1Trillion Export Target

57

Given the weak global economic outlook, hitting the £1 trillion target will be difficult. Maintaining market share will not be enough. We need to gain market share.

Comparing the UK’s performance against our European competitors allows us to see where we might make up ground and offers a way to benchmark our performance.

Catching the EU-3 in the fastest growing emerging economies would represent a significant contribution to hitting the £1tn target.

£1 Trillion Target

2010 UK Exports

Gains from maintaining market share in all markets

Gains from catching the EU-3 in the emerging powers

Gains from catching the EU-3 in emerging Europe

500

800

300

400

100

200

0

600

700

900


Emerging Conclusions

• £1 Trillion Exports target looks less demanding than 100k New Exporters

• Market share gains will be required

• Greatest evidence need is more insight of the market conditions (size/share/customer needs) within the geographic/sector segments (eg China/automotive; Saudi-Arabia/professional services) where we must win

The Changing Face of Scottish Trade

The Changing Face of Scottish Trade

Jonathan SlowScottish Development International

Jonathan SlowScottish Development International

The Scottish Government

SummarySummary• Scottish Exports have grown

• But growth has not been steady • Major sectoral change has take place

• Geographic composition has remained broadly similar

• The Global Connections Survey has assisted policy focus

• Scottish Exports have grown

• But growth has not been steady • Major sectoral change has take place

• Geographic composition has remained broadly similar

• The Global Connections Survey has assisted policy focus


Source: The Scottish Government

The Global Connections SurveyThe Global Connections Survey

• Annual voluntary business export survey

• Covers all sectors in Scotland

• Covered by National Statistics guidelines

• Provides estimates of sales to Rest of World and Rest of UK

• Provides destination information

• Annual voluntary business export survey

• Covers all sectors in Scotland

• Covered by National Statistics guidelines

• Provides estimates of sales to Rest of World and Rest of UK

• Provides destination information


Source: The Scottish Government

International Growth 2002-2011International Growth 2002-2011


Source: GCS 2011

Sectoral Changes 2002-2011Sectoral Changes 2002-2011


Source: GCS 2011

Top 5 Sectors 2002-2011Top 5 Sectors 2002-2011


Source: GCS 2011

20022002 20112011

Ranking Sector Est. Sales (£m)1 Computers/Electronic/Optical 5,5702 Food & Drink 2,345

of which whisky & other distilling 1,8603 Chemicals/Coke Manufacture 2,0204 Machinery & Other Equipment 1,0205 Wholesale/Retail Trade 930

Ranking Sector Est. Sales (£m)1 Food & Drink 4,205

of which whisky & other distilling 3,5302 Chemicals/Coke Manufacture 3,6703 Computers/Electronic/Optical 1,4304 Financial Services 1,4155 Legal/Business Services 1,390

Market Changes 2002-2011Market Changes 2002-2011


Source: GCS 2011

20022002 20112011

Ranking Destination Est. Sales (£m)1 USA 2,1452 Netherlands 1,8653 France 1,7854 Germany 1,7855 Italy 9356 Eire 8457 Spain 8208 Belgium 6709 Sweden 615

10 Norway 560

Ranking Destination Est. Sales (£m)1 USA 3,5252 Netherlands 2,6653 France 1,9354 Germany 1,3655 Belgium 9806 Eire 7807 Norway 7658 Spain 7109 Switzerland 64010 Italy 610

Evidence Informing PolicyEvidence Informing Policy

• Used in developing sector strategies

• Understanding barriers to doing more international activity

• Assessment of company requirements

• Used in developing market strategies

•Driving an approach to increased international engagement

• Used in developing sector strategies

• Understanding barriers to doing more international activity

• Assessment of company requirements

• Used in developing market strategies

•Driving an approach to increased international engagement


Source: GCS 2011

Measuring Trade in Value Added, and Beyond

The Changing Shape of Trade and Investment in the UK

London, September 2013

[email protected]

mailto:[email protected]

Background – Global Production today

• A world of increasing international fragmentation of production– Explosion of trade in intermediates as firms

specialise in stages (tasks) of production

• Gross trade flows increasingly embody components (and so value) created elsewhere

70

71

A simple example – the iPod

Distribution of the value added

• 299 US$– 75$ profit to US (Apple)– 73$ whls/retail US (Apple)

The Apple iPod = 299$ of Chinese ‘exports’ to US

http://blogs.computerworld.com/node/5724

– 75$ to Japan (Toshiba)– 60$ 400 parts from Asia– 15$ 16 parts from the US– 2$ assembly by China

A slightly more complicated example – the Dreamliner

72

Escape slides: Air Cruisers (USA)

Horizontal Stabiliser:Alenia Aeronautica (Italy)

Centre fuselage: Alenia Aeronautica (Italy)

Final assembly: BoeingCommercial Airplanes (USA)

Vertical Stabiliser: BoeingCommercial Airplanes (USA)

Landing gear: Messier-Dowti (France)Electric brakes: Messier-Bugatti (France)Tires: Bridgestone Tires (Japan)

Doors & windows:Zodiac Aerospace (USA)PPG Aerospace (USA)

Tools/Software: Dassault Systemes (France)Navigation: Honeywell (USA)Pilot control system: Rockwell Colins (USA)Wiring: Safran (France)

Centre wing box:Fuji Heavy Industries (Japan)

Engines: GE Engines (USA),Rolls Royce (UK)

Wing box: Mitsubishi Heavy Industries (Japan)Wing ice protection: GKN Aerospace (UK)

Engine nacelles: Goodrich (USA)Aux. power unit: HamiltonSundstrand (USA)

Flight deck seats:Ipeco (UK)

Lavatories:Jamco (Japan)

Cargo doors: Saab (Sweden)

Forward fuselage:Kawasaki Heavy Industries (Japan)Spirit Aerosystems (USA)

Raked wing tips: Korean AirlinesAerospace division (Korea)

Passenger doors:Latécoère Aéroservices (France)

Prepreg composites:Toray (Japan)

Rear fuselage:Boeing South Carolina (USA)

So?

Gross trade statistics increasingly ‘multiple count’ flows in intermediates as the production process develops over several countries…

73

AB

C

Gross exports (110)

Value-added (10)

Value-added (100)

Country

Country Country

Gross exports (intermediates) (100)

………

…meaning that gross trade statistics may create ‘misleading perceptions’ and imperfect policies

74

For example….

• Where are our export markets? • Which sectors create most value and jobs? • Does protectionism work? Is it counter-

productive– Are there costs on importers of intermediates,

particularly when they are significant exporters.

– What about those firms further upstream providing inputs to the imports?

• How should we interpret bilateral trade balances?

75

How can we respond?

• By measuring the value that is added by individual firms in the production process

76

AB

C

Gross exports (110)

Value-added (10)

Value-added (100)

Country

Country Country

Gross exports (intermediates) (100)

How do we measure TiVA?

• Using a global IO table

77

What are we doing?

• Using database on national IO tables to create a global IO table.

• OECD: IO tables for 58 economies and 37 industries for 1995/2000/2005/2008,2009, (more than 95% of world GDP)

• Bilateral trade data for the flows;

• Collaborating closely with: – other institutions/initiatives: USITC, IDE-JETRO, WIOD;

MOFCOM and forging closer links with others including Eurostat.

Launched OECD-WTO TiVA database in January 2013

78

A database on OECD.Stat

• With a number of indicators………….– Decompositions of gross exports by industries into their

domestic and foreign content, with the domestic content split into three (direct, indirect and re-imported) components and the foreign content broken down by source country;

– The services content of gross exports by exporting industry (broken down by foreign/domestic origin);

– Bilateral trade balances based on flows of value-added embodied in domestic final demand;

– Intermediate imports embodied in exports, as a per cent of total intermediate imports.

79

What does the first release tell us? Domestic content of exports

80

0%

20%

40%

60%

80%

100%

LUX

SVK IRL KOR

HUN CZE ISL NL

D BEL

SVN FIN SWE EST

CHN PRT

DNK

AUT ISR MEX

CHE

POL

DEU FRA

GRC IND

TUR ESP ITA CA

NCH

LNZ

LGB

R ZAF

NOR JPN IDN

AUS

USA

BRA

RUS

2009 1995

Exports require imports foreign content of exports - UK

81

0%5%

10%15%20%25%30%35%

Agricul

ture Mining

Food pr

oducts Textiles

& app

arel

Wood &

paper

Chemic

als &

minera

lsBas

ic metal

s

Machine

ryEle

ctrical

equipm

entTra

nsport

equipm

entOth

er man

ufacture

sWh

olesale

& reta

ilTra

nsport &

tele

coms

Financ

e & insu

rance

Busines

s serv

icesOth

er servi

ces

Total

2009 1995

Imports and competitiveness

Per cent of total sector growth in value-added driven by exports 1995-2009

82

Import content growing

Import content decreasing

Exports and Imports (i)

83

Exports and Imports (ii)

84

With hubs playing an important role

85

And a significant share of total intermediate imports is used in exports - UK

86

0%

20%

40%

60%

Agricu

lture

Mining

Food

produc

ts

Textil

es & a

pparel

Wood

& pape

rCh

emica

ls &

minera

lsBa

sic me

tals

Machi

nery

Electri

cal

equipm

entTra

nsport

equipm

entOth

er ma

nufact

ures Utilitie

s

Whole

sale &

retail

Transp

ort &

telecom

sFin

ance &

ins

urance

Busin

ess se

rvices

Other s

ervice

s Total

2009 1995

Particularly in sectors with high fragmentation

87

VA figures reveal significant and increasing export dependencies

88

Around and over 2/3rds in many sectors And over half for

all manufacturing

Services matterServices Value-Added: % of exports, 2009

89

And have a high content in goods - UK

90

0%

10%

20%

30%

40%

Agricu

lture

Mining

Food

produ

cts

Textil

es & a

ppare

l

Wood

& pap

er

Chem

icals &

min

erals

Basic

metals

Machi

nery

Electri

cal

equip

ment

Transp

ort

equip

ment

Other

manu

factur

es

Foreign service contents Domestic service contents 1995 Total

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

91

0

10

20

30

40

50

2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995

FRA DEU ITA JPN KOR MEX SVK ESP SWE GBR USA BRA CHN IDN

Foreign Domestic

Trade patterns change - UK

92

0.0

5.0

10.0

15.0

20.0

25.0

USA DEU FRA ITA ESP IRL NLD JPN CHN CAN BEL SAU CHE AUS IND

Gross exports (EXGRSH) Domestic value added in foreign final demand (FDDVASH)

0.0

5.0

10.0

15.0

20.0

USA DEU FRA CHN ESP ITA NLD NOR JPN IRL BEL RUS CAN POL CHE

Gross imports (IMGRSH) Foreign value added in domestic final demand (FDFVASH)

-30,000

-20,000

-10,000

0

10,000

20,000

USA SAU IRL AUS SGP CHE FRA NLD ESP DEU NOR CHN

2009 Gross Trade surplus/deficit (TSGR) 2009 Value Added surplus/deficit (TSVAFD)

Significantly for some countries - China

93

0.0

5.0

10.0

15.0

20.0

25.0

30.0

USA JPN DEU GBR FRA CAN KOR RUS ITA AUS IND ESP MEX NLD HKG

Gross exports (EXGRSH) Domestic value added in foreign final demand (FDDVASH)

0.0

5.0

10.0

15.0

USA JPN DEU KOR AUS SAU TWN RUS BRA FRA IND ITA GBR CAN MYS

Gross imports (IMGRSH) Foreign value added in domestic final demand (FDFVASH)

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

USA GBR MEX FRA NLD VNM THA JPN BRA MYS TWN KOR

2009 Gross Trade surplus/deficit (TSGR) 2009 Value Added surplus/deficit (TSVAFD)

And throughout Factory Asia

94

0

5

10

15

20

25

30

35

40

2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995 2009 1995

Chinese Taipei

Japan Korea Malaysia Thailand Hong Kong, China

Singapore Philippines India Indonesia Viet Nam Cambodia Brunei Darussalam

Value-Added Gross

Exports to China: Gross and Value-added terms, % of total

Who trades with who? Japan’s trade balances

95

In general – the more distant the countries the more likely that gross trade statistics underestimate the relationship

Change in trade shares based on Value-Added in

96

-6

-4

-2

0

2

4

6

8

10

TWN

KOR

PHL

JPN MYS AU

STH

ASA

URU

SEU

27 IDN

TUR

ARG

BRA IND

CHN ZAF

VNM ISR

KHM CAN

MEX

Exports Imports

-3.5

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

PHL

TWN THA

MYS JPN KOR ISR AUS

USA

RUS

EU27 ZA

FIND IDN CA

NVN

M MEX

TUR

CHN

KHM CH

LAR

G

Exports Imports

BrazilUnited States

98

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.

But it is important to stress

• That this is a work in progress and that results are

estimates• But they are robust enough to already begin to highlight

– the need for policies to account for GVCs

• But perhaps more importantly, they highlight

– the importance of capacity building and better statistics

• Improving data quality is essential

– Coherent estimates of trade in goods and services

– A new approach to Supply-Use Tables?

• With a focus on stages and trade rather than industries, per se, to better reflect firm heterogeneity (particularly MNEs).

• Import/export intensities, factoryless firms, processors, ownership99

What can be done now?

• Improved GROSS trade data•Import flow matrices•Better bilateral trade statistics

(integrated with SU tables) and globally consistent

• Intelligent confidentiality rules (suppress 6 digit not 2 digit HS)

•Re-export data•Second hand goods, scrap and waste.•SERVICES –EBOPS 2012.

100

Examples of current inconsistencies in bilateral trade statistics (Services 2009)

101

What else can be done…..now?• Capitalise on existing data to create new

indicators on exporting and importing firms• Beyond TEC: Linking trade registers, business

registers and SBS• OECD Workshop on linking business and trade statistics: 25-26 October

2012

• Exploring feasibility of creating new indicators based on export (and

import) intensities, ownership and size.

• And also provides stepping stone for trade in icnome related to investment

• Changes to classification systems to better reflect globalisation:– Factoryless producers (UNECE Task Force on Global

Production)102

Extensions

• Trade in jobs and skills

– But requires

• Coherent employment and value-added data

– Also important for productivity estimates

• And significant improvement in skills data (and occupations)

Jobs embodied in foreign final demand - % of total

103

Extensions

• Trade in Income related to Investment: Ownership matters: – Because value added does not always stick (compensation for use of knowledge based

assets – where increasingly registration is determined by tax environment)

– And because flows for use of IPPs are often recorded as property income and not trade in services.

– 30% of total business sector VA in 2009 in the UK generated by foreign owned firms, 15% of GDP. Accounting for the underlying flows could further change trade relationships, even though differences between GNI and GDP are small.

– In Japan for example Primary income flows (GNI minus GDP) were equivalent to about one-quarter of total TiVA flows.

• Need better FATS data, particularly on value-added and employment.

– MSITS 2010 Compilers Guide

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Summary – What’s needed

• New thinking on SU tables

• Better gross trade data

• Links to microdata

• Income, Ownership and FATS

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Further information

• www.oecd.org/trade/valueadded

• Video: http://www.youtube.com/watch?feature=player_embedded&v=RZKX-0SK41U

• OECD Workshop on Measuring TiVA 5-6 December 2013

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http://www.oecd.org/trade/valueadded





The Changing Nature of the UK’s Involvement in Global Value Chains

prepared for the Business Statistics User Event:

The Changing Nature of Trade and Investment in the UK

24th September 2013

Dr. Michael GasiorekCARIS, University of Sussex

& InterAnalysis

[email protected] www.tradesift.com

mailto:[email protected]

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What are the issues....• The last 10-15 years have seen the increasing

integration of firms in value chains or supply chains.• Firms increasingly purchase and sell goods and

services as intermediate inputs internationally. • This process has become known as the

fragmentation of the supply chain. • Conventional wisdom suggests this has enabled a

finer degree of “within industry” specialisation, leading to increased productivity & competitiveness.

• Also resulted in greater inter-dependance between countries

CARIS

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What are the issues....• Looking at gross exports may be misleading. Need to

be able to identify the value added in those exports. • To do so, need to identify the intermediates that are

used by each industry and where the intermediates come from: domestic v imported input-output tables.

• Two recent data-sets (TiVA & WIOD) have been released which provide this information and allow these issues to be explored:

• Important for policy and for understanding the changes that have taken place in the UK economy

CARIS

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TiVA and WIOD - overview• TiVA (trade in value added)

– Produced by the OECD– Indicators for 18 sectors – manufacturing and services– 57 economies (OECD + others) – 1995, 2000, 2005, 2008, 2009

• WIOD (world Input Output Database)– Produced by – Provides detailed (input-output) tables for 36 sectors – covers 27 EU countries + 13 other countries – period 1995-2009. – Includes information on the employment by skill type (high

medium & low) embodied in trade and production CARIS

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Every picture tells a story….

CARIS

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Domestic value added in gross exports• Chart shows that for the UK, the share of domestic

VA in exports has gone up (from 79% to 83%)• Interestingly for the others we see the reverse trend

– China: 88% 67%– India: 90% 78%– Germany: 81% 73%

• This would appear to suggest that the UK may be engaging less in international value chains, while competitors are engaging more.

• Important to understand this and to consider the extent to which this “matters”.

CARIS

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Possible explanations1. Within industries the UK is producing more of the

value chain (MVC) - supplying more intermediates2. Within industries UK is now producing a higher

value part of the value chain eg. moving up the value chain (UVC)

3. No compositional changes but within industries the price of UK intermediates relative to the price of the final goods it exports has gone up

4. Changes in the structure of the UK economy – Decline of sectors with a low domestic value chain share – growth of sectors with a high domestic value chain share

CARIS

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Possible explanations• (1) and (2) suggest that the UK is becoming more

competitive in the intermediates it supplies for use in the final goods that the UK then exports

• (3) suggests that the UK is becoming less competitive in the intermediates it supplies

• Assessing competitiveness in the intermediates is tricky – and cannot be done with TiVA data directly

• TiVA gives revealed comparative advantage for 9 manufacturing sectors

• This does not identify the intermediates used in those sectors, however if the UK was more competitive in the intermediates might also expect this to be the case for the final goods too.

CARIS

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Ag, for fish

Food, Bev, & Tob

Wood, Paper, prntng

Chem Basic metals

Machry.

Elect & Opt.

TranspEquip

Manuf nes

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Possible explanations

• Each of (1), (2) and (3) Producing more of the value chain (MVC) Producing higher up the value chain (UVC) Increasing price of UK intermediates

...imply changes taking place within industries, so we would expect to see a higher share of domestic value added within industries

CARIS

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Wood, Paper, prntng

Chem TranspEquip

Ag, for fish

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For Chemicals and Transport Equip: RCA , domestic VAsh For these competitiveness may be related to more international fragmentation as opposed to less

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Ag,For. & Fishg, and Wood, Paper & Printing: RCA, dom Vash Therefore may be consistent with explanations 1,2 or 3

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Overall

• There are 10 industries where the UK value added share has gone up,

– five are service industries accounting for 21% of the UK’s exports.

– five of these in manufacturing comprising 28% of the UK’s exports in 2009;

– No clear pattern between competitiveness and domestic value added share – but this is at a very aggregate level

CARIS

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What do the graphs suggest?1. There are four sectors where the UK’s revealed

comparative advantage has gone up: – food, beverages and tobacco; – wood, paper, printing and publishing;– Chemicals and non-metallic mineral products– Transport equipment

2. In only two of the sectors which saw a rise in the UK’s domestic share of value added, is there evidence of the RCA rising.

3. Note also little difference at this aggregate level between the RCA using gross exports and value added exports. This is unsurprising.

CARIS

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What about inter-sectoral compositional shifts?

CARIS(Note: Excluding industries with a 2009 share less than 2.5%)

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Some significant changes here

• Indicative of substantial compositional shifts• Decline in the share of all manufacturing sectors.• growth in the importance of “financial

intermediation” (65-67) from 4.9% of value added exports to 18%

• Growth in “real estate, renting and business activities” (70-74) from 8.7% to 16.7%.

CARIS

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So what is the story?• Post 1995 restructuring of the economy towards financial &

business services. These sectors have a higher value added share in exports, so this is driving the aggregate results

• Decline in manufacturing in the UK, though not necessarily by UK firms. Production and exports shifted to 3rd countries.

• In contrast (possibly) Germany shifted source of intermediates to third countries. China and India changes driven more by the opening up of their economies

• May have been exacerbated by overvalued exchange rate. On the one hand this makes imported intermediates cheaper (encouraging their use; on the other hand makes exports more expensive. Net effect unclear

• However, hard to see in detail what is happening to trade

CARIS

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For that you need more detailed trade data...• Out of 4696 goods exported in 2011, the top 50 UK HS 6-

digit exports account for just under 50%.• Those 50 industries accounted for 36% of UK exports in 2001• Of those 50 industries, nearly 25% saw their revealed

comparative advantage over 2001-2011 decline. • These industries accounted for 18% of UK exports in 2001,

and 14.6% in 2011.• Out of the 50 industries the 10 which saw their RCA rise the

most, saw their share of exports over the period rise from just under 2% to 6.6%.

CARIS

Another picture, another story?

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