1. XIV International Academic Conference on Economic and Social Development National Research University Higher School of Economics (HSE) 2-4 April 2013, Moscow Christophe Degain, WTO Trade in value added: concepts, methodologies and challenges

2. 1. Global Value Chains (GVCs) and world trade - Ins and Outs 2. Towards a new measure of trade in value added terms o The statistical tools o Two main concepts o The new OECD-WTO TiVA database 3. Implications of GVCs and trade in value added on trade policy 4. Going forward with the OECD-WTO TiVA database

3. Emergence of “Trade in tasks”: Impact on statistics  Revision of international statistical concepts  Need for new measures of international trade taking place within GVCs Global Value Chains Predominance of trade in intermediate goods Development of intra-firm trade Increase of processing trade Policy impact  Need for a new angle of trade analysis  Need to adapt trade regulation to business reality International consumer demand Lower applied tariffs and trade policy incentives Development of infrastructure and technology Export processing zones Outsourcing/Offshoring strategies and FDI

4. Traditional statistics present some biases:  Multiple counting of trade flows in intermediate goods and services  Difficult attribution of the country of origin of an imported product Measuring trade in value added terms allows:  To circumvent the biases observed with traditional statistics  To take into account the specificity of trade occurring between the different actors of a production chain

5. Approach Bottom up approach Top down approach Level of detailMeasurement type 1.Case studies : geographical decomposition of a product value into the components and services used for its production o Examples: iPhone, iPod, iPad, Barbie doll… Product level Not applicable 2.Trade statistics : focus on the role of intermediates in foreign trade o Use of BEC or BOP (e.g. business and computer services) classifications o Estimation of vertical specialization or shares of parts and components in total trade o Strengthening linkage between trade and business statistics Product/sectoral / product group level Direct measurement (based on raw reported data) 3.Input-output tables : combining national accounts with trade statistics o Decomposition of gross trade into its foreign and domestic value added contents Sectoral level (aggregated) Indirect measurement (estimates)

6.  Advantages of II-O tables Identification of the origin and use of intermediate goods and services produced and traded amongst countries and industries (intermediate demand matrix) Enable to take into account backward linkages between countries and industries (Leontief inverse matrix) Coverage of all of goods and services  Some limitations Assumptions applied during the construction phase of II-O tables (production assumption, proportionality assumption, dealing with inconsistencies of official trade statistics) Aggregated sectoral level only, not product or firm level Benchmark years only (every 5 years)  Some official II-O tables available : ICIO (OECD), WIOT (WIOD project), AIO (from IDE-JETRO), GTAP (Purdue University)

7.  The value added embodied in gross exports: Domestic value added content of gross exports Foreign value added content of gross exports  The value added created by final demand: Domestic value added embodied in foreign final demand Foreign value added embodied in domestic final demand

8. Source: WTO

10. The rationale behind the TiVA database: Development of methodologies Regular production of trade in value added indicators to support trade policy Access to the TiVA database: http://www.wto.org/miwi or http://www.wto.org/miwi http://stats.oecd.org/Index.aspx?DataSetCode=TIVA_OECD_WTO Coverage of the OECD ICIO table: Years: 2005, 2008, 2009 42 countries 19 aggregated sectors ( ISIC Rev. 3) Available data sets: Gross exports Value added embodied in gross exports Value added embodied in final demand Services value added content of gross exports Revealed comparative advantage (gross vs value added) TiVA database new update coming soon with 57 countries

11. The concept of country of origin: attributing the entire commercial value of an imported good to the last country of a production chain can be misleading Source: Meng and Miroudot

12. The notion of comparative advantage: within GVCs, comparative advantage applies more to tasks than to final goods. Trade in value added enables to identify new comparative advantages, notably in the area of services. (see RCAs in the TiVA database) Source: WTO Secretariat estimates based on WIOD data, 2007

13. Source: WTO Secretariat estimates based on WIOD data, 1995-2007

14. Marketing Brand Innovation Design R&D Standardization Innovation R&D Design Added Value Manufacture Logistics Marketing Brand Standardization Logistics Assembly Manufacture Assembly Customer services Services Goods Servicesand services Source: WTO, based on Shih S., Business Week ( May 16, 2005 ) Manufacturing process

15. Source: WTO estimates based on OECD ICIO table Shares of domestic and foreign sectoral contributions in Russia exports of manufacturing products, 2008

16. Sources: WTO estimates based on OECD ICIO table 2008

17. Statistical challenges Extending TiVA database coverage: countries, sectors, years and indicators Improving data quality:  Trade statistics required for the construction of II-O tables (bilateral trade in services, inconsistencies of “Mirror” merchandise trade flows)  Standardization and development of national I-O tables and Supply-Use tables  Including official processing trade data in the II-O tables (e.g. for China, Mexico) Further methodological developments More trade in value added indicators Fostering the use of Input-Output modeling to assist trade policy-making and reveal the impact of trade and GVCs:  Trade and employment  Trade and environment  GVCs’ role in the propagation of macro economic shocks

18. Link to the OECD-WTO TiVA database: http://www.wto.org/miwi or http://www.wto.org/miwi http://stats.oecd.org/Index.aspx?DataSetCode=TIVA_OECD_WTO Two publications for further details and analysis of GVCs and trade in value added. Free download from the MIWI website at http://www.wto.org/miwi http://www.wto.org/miwi WTO/IDE-JETRO joint publication: “Trade Patterns and Global Value Chains in East Asia: from trade in goods to trade in tasks” (2011) WTO/French Senate conference proceedings: “Globalization of industrial production chains and measurement of trade in value added” (2010) Contacts and questions: christophe.degain@wto.org or tiva.contact@oecd.org or miwifeedback@wto.orgchristophe.degain@wto.orgtiva.contact@oecd.org miwifeedback@wto.org