UNECA E-Training on the Compilation of SUTs
OECD-WTO Trade in Value Added (TiVA) data: introductionChristophe Degain (Senior Statistician, WTO)
Fabienne Fortanier (Head of Trade Statistics, OECD)
[email protected]@oecd.org
This course:
What is Trade in Value Added (TiVA) and why do we discuss it in a course on SUTs
What insights can TiVA indicators provide about country’s positions and activities in global value chains
Preview to next course:
How is TiVA exactly constructed and what elements of SUTs are particularly important
Towards the future: what additional analysis can be undertaken with minor extensions of SUTs E.g. the effects of GVCs for employment, or for CO2 emissions;
the role of SMEs and MNEs in your country’s involvement in GVCs
Presentation overview
BASICS ONTRADE IN VALUE ADDED AND
GLOBAL VALUE CHAINS
International consumer demand
Export processing zones
Development of infrastructure and technological progress
Lower applied tariffs and trade policy incentives
Outsourcing and offshoring strategies
Emergence of “Trade in tasks”
trade in intermediate goods
Trends in global production and world trade..
Increase of processing trade
Development of intra-firm trade
Foreign Direct Investment (FDI)
…resulting in 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
5
Escape slides: Air Cruisers (USA)
Horizontal Stabiliser:
Alenia Aeronautica (Italy)
Centre fuselage: Alenia Aeronautica (Italy)
Final assembly: BoeingCommercial Airplanes (USA)
Vertical Stabiliser: Boeing
Commercial 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: Hamilton
Sundstrand (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 Airlines
Aerospace division (Korea)
Passenger doors:
Latécoère Aéroservices (France)
Prepreg composites:
Toray (Japan)
Rear fuselage:
Boeing South Carolina (USA)
Final consumption
3
7
5
62
Final assembly
1
4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1
23
4
5
67
Value added in the country of final production
Value added by first tier suppliers
Value added by second tier suppliers
Trade in inputs (first
tier suppliers)
Trade in inputs(second tier
suppliers)
Decomposition of gross exports
From a ‘gross trade’ to a TiVA perspective
• Conventional, ‘gross’ trade statistics do not fully capture this fragmentation, creating misleading perceptions and imperfect policies
• TiVA aims to increase our understanding of the process of globalization by providing insights into the value added created by each country and industry in the production of goods and services that are traded and consumed worldwide
– How much value added is created by trade – directly and indirectly – and where?
– What is the (indirect) role of services in international trade?
– What are the risks (in GVCs) and impacts of policy measures
– How much is our economy/industry dependent upon foreign demand?
• TiVA’s work horse: Inter-Country Input-Output Table (ICIO), tracing input-output (GVC) relationships across industries AND countries.
6
National Supply and Use tables (SUTs) and/or Input-Output tables (IOTs)
Bilateral trade statistics in goods and services
Sector 1 Sector 2 Sector 3 Sector 1 Sector 2 Sector 3 Sector 1 Sector 2 Sector 3 Country A Country B Country C
Country A Sector 1
Sector 2
Sector 3
Country B Sector 1
Sector 2
Sector 3
Country C Sector 1
Sector 2
Sector 3
Taxes less subsidies on products
Cif-fob adjustments
Value added Labour compensation
Operating surplus
Taxes less subsidies on production
Output
Country A Country B Country C Final Demand
TiVA indicators
Trade in Value Added within a course on SUTs
Inter-Country Input-Output (ICIO) table
SUTs are the main building blocks, in combination with bilateral trade statistics, for constructing Inter-Country Supply and Use tables (and the ICIO), from which TiVA
indicators can be derived
New perspectives for trade analysis and policy
Gross exports ofintermediates (50)
Gross exports of final goods/services(150 = 50 + 100)
Gross vs Value Added measures of trade flows
Value added exports (50)
Value added exports (100)
: Gross trade flows
: Value added trade flows
Schematic presentation of trade in GVCs
Primary product
Upstream Downstream
1. Economy positions in production chain
3. Typical types of products
2. Examples of production tasks involved
Oil production Plastic box labelling
and packaging
(“Manu-services”)
Plastic production Final consumptionPlastic box
manufacturing
Intermediate goodIntermediate good Final good
INSIGHTS FROM TIVA ON COUNTRY’S POSITION AND ACTIVITIES IN GLOBAL VALUE CHAINS
EXPORT
Decomposing gross exports into value added components(according to the origin of value added)
EXPORT
Domestic value added
Imported (foreign) value added
Decomposing gross exports into value added components(according to the origin of value added)
Indirect domestic VA
Reimported domestic value added
Imported (foreign) value added
Direct domestic value added
This perspective opens up a range of possibilities to developnew indicators that describe the position of countries and
industries in GVCsSuch as for example the share of each component in exports, or
in total GDP (i.e. value added);Broken down by industry… and by source country (of imported
value added) … and by final destination (of exports)
Partner economies
Partner economies
Partner economies
Decomposing gross exports into value added components(according to the destination of value added)
The example of South Africa
Domestic VA exported ...
... and re-imported in South Africa ...
... f
or
furt
her
exp
ort
s…
34
mill
ion
$ (
0.0
3 %
of
gro
ss e
xp.)
South Africa gross exports 2011 (Bil. $) 119
South Africa VA exports 2011 (Bil. $) 119
of which:
Domestic VA
Sent to consumer economy 64
Sent to third economies 32
Re-imported in the economy 0
Foreign VA 23
…even if in not all countries the import content of exports has returned to pre-crisis levels, partly also reflecting domestic upgrading
TiVA highlights: Exports require imports…
14
0
10
20
30
40
50
60
LU
X
IRL
SV
K
HU
N
CZ
E
SG
P
MY
S
KH
M
KO
R
TH
A
VN
M
BE
L
FIN
TU
N
SV
N
ME
X
PO
L
NL
D
PR
T
DN
K
SW
E
CH
N
AU
T
ES
P
GR
C
CR
I
FR
A
ITA
DE
U
MA
R
PH
L
CA
N
ISR
GB
R
TU
R
CH
E
IND
ZA
F
CH
L
NO
R
JP
N
NZ
L
US
A
AU
S
RU
S
PE
R
AR
G
BR
A
IDN
SA
U
2014 1995 2008
Foreign value added as a % of exports, 1995-2014
Protectionism can be counter-productive
15
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
USA JPN GBR CHN DEU KOR MEX CZE HUN
Total Electronics Transport equipment
Imports are often embodied in exports
Intermediate imports embodied in exports as % of total intermediate imports, 2014
Examples of factors influencing import content in exports
Factor Foreign VA in exports
Domestic VA in exports
Reason
Size of economy Large economy (USA, VS = 15%)
Industrial capacity to domestically produce the inputs required for its production and exports (domestic value chains)Small economy
(Luxembourg, VS = 59%)
Industrial specialization Primary product exporter (Saudi Arabia, VS = 3%)
Position in the chain: beginningRequires less inputs (domestic/foreign) than downstream stages in the chain
High-Tech component producer(Korea, Rep. of, VS = 41%)
Position in the chain: middleImports basic inputs to produce High-Tech components and final products.Technology/High skills specialization
Assembler(Viet Nam, VS = 36%)
Position in the chain: endLast link in the chain, cumulating the VA of foreign inputs from previous production stages
Level of industrialization Low(Cambodia, VS = 27%)
Importer of inputs to export(Beginner in GVCs)
High(Japan, VS = 14%)
Producer and exporter of high VA intermediate / final goods and services
Services account for more than half of the value added embodied in exports
TiVA highlights: services matter…
17
Services value added as a % of exports, 2014
The actual contribution of industries to gross exportsThe example of South Africa
Export industry
→
Value added origin ↓
Domestic and foreign sectoral VA contributions to South Africa exports, 2011 (% share in industry’s total gross exports)
Domestic Foreign Total
Primary products
Manufactures Services Primary products
Manufactures Services
Total, of which: 24.4 18.4 37.8 8.0 4.3 7.1 100.0
Primary products61.1 5.4 21.1 2.9 3.6 6.0 100.0
Manufactures 11.8 32.2 27.7 13.8 5.6 8.9 100.0
Services 1.4 4.9 84.9 2.0 2.4 4.3 100.0
Source: OECD-WTO TiVA database
Domestic Foreign Total
Primary products
Manufactures Services Primary products
Manufactures Services
Total, of which: 24.4 18.4 37.8 8.0 4.3 7.1 100.0
Primary products61.1 5.4 21.1 2.9 3.6 6.0 100.0
Manufactures 11.8 32.2 27.7 13.8 5.6 8.9 100.0
Services 1.4 4.9 84.9 2.0 2.4 4.3 100.0
Domestic Foreign Total
Primary products
Manufactures Services Primary products
Manufactures Services
Total, of which: 24.4 18.4 37.8 8.0 4.3 7.1 100.0
Primary products61.1 5.4 21.1 2.9 3.6 6.0 100.0
Manufactures 11.8 32.2 27.7 13.8 5.6 8.9 100.0
Services 1.4 4.9 84.9 2.0 2.4 4.3 100.0
Domestic Foreign Total
Primary products
Manufactures Services Primary products
Manufactures Services
Total, of which: 24.4 18.4 37.8 8.0 4.3 7.1 100.0
Primary products61.1 5.4 21.1 2.9 3.6 6.0 100.0
Manufactures 11.8 32.2 27.7 13.8 5.6 8.9 100.0
Services 1.4 4.9 84.9 2.0 2.4 4.3 100.0
Domestic = DVC sourcing Foreign = GVC sourcing Total
Primary products
Manufactures Services Primary products
Manufactures Services
Total, of which: 24.4 18.4 37.8 8.0 4.3 7.1 100.0
Primary products61.1 5.4 21.1 2.9 3.6 6.0 100.0
Manufactures 11.8 32.2 27.7 13.8 5.6 8.9 100.0
Services 1.4 4.9 84.9 2.0 2.4 4.3 100.0
: direct VA exports
: indirect VA exports
TiVA: Who trades with who? Chinese trade balances
19
Smaller surplus with US, smaller deficits with Asian markets
Gross and Value Added Trade Balances - 2014
All you wanted to know about TiVA…
Trade in value added statistics:
Are estimates !o Not based on actual measures of the VA exchanged across countrieso Rely on complex compilation (crossing of various statistical systems, compilation assumptions like “Homogeneity of production
technology”)
Do not replace traditional trade statistics but rather complement them by providing another angle for trade analysiso Traditional statistics provide actual and detailed information (product level) on trade flows, BUT present biases (country of origin
difficult to determine, multiple counting of trade in intermediates) o Traditional statistics are used for the compilation of ICIO tables underlying TiVA
Constitute a macroeconomic approach with aggregated industries=> Not for decision-making or negotiation at product level
Are useful for trade analysts and policy makers to:o Understand current trade patterns, especially exchanges taking place within production networkso Outline the VA origins in exports and the actual contributions of economies/industries to international tradeo Provide key messages for trade policy-making, e.g.:
o Level of interconnection between economies and industries within GVCso Import to exporto Role of services in production and trade, …
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