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Session 3 - Measuring trade in value added and beyond - Nadim Ahmad
 

Session 3 - Measuring trade in value added and beyond - Nadim Ahmad

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    Session 3 - Measuring trade in value added and beyond - Nadim Ahmad Session 3 - Measuring trade in value added and beyond - Nadim Ahmad Presentation Transcript

    • Measuring Trade in Value Added, and Beyond The Changing Shape of Trade and Investment in the UK London, September 2013 nadim.ahmad@oecd.org
    • 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 2
    • 3 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 4 Escape slides: Air Cruisers (USA) Horizontal Stabiliser: AleniaAeronautica (Italy) Centre fuselage: Alenia Aeronautica (Italy) Final assembly: Boeing CommercialAirplanes (USA) Vertical Stabiliser: Boeing CommercialAirplanes (USA) Landing gear: Messier-Dowti (France) Electric brakes: Messier-Bugatti (France) Tires: Bridgestone Tires (Japan) Doors & windows: Zodiac Aerospace (USA) PPGAerospace (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)
    • So? Gross trade statistics increasingly ‘multiple count’ flows in intermediates as the production process develops over several countries… 5
    • ……… …meaning that gross trade statistics may create ‘misleading perceptions’ and imperfect policies 6
    • 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? 7
    • How can we respond? • By measuring the value that is added by individual firms in the production process 8
    • How do we measure TiVA? •Using a global IO table 9
    • 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 10
    • 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. 11
    • What does the first release tell us? Domestic content of exports 12 0% 20% 40% 60% 80% 100% LUX SVK IRL KOR HUN CZE ISL NLD BEL SVN FIN SWE EST CHN PRT DNK AUT ISR MEX CHE POL DEU FRA GRC IND TUR ESP ITA CAN CHL NZL GBR ZAF NOR JPN IDN AUS USA BRA RUS 2009 1995
    • Exports require imports foreign content of exports - UK 13 0% 5% 10% 15% 20% 25% 30% 35% Agriculture Mining Foodproducts Textiles& apparel Wood&paper Chemicals& minerals Basicmetals Machinery Electrical equipment Transport equipment Other manufactures Wholesale& retail Transport& telecoms Finance& insurance Business services Otherservices Total 2009 1995
    • Imports and competitiveness Per cent of total sector growth in value-added driven by exports 1995-2009 14 Import content growing Import content decreasing
    • Exports and Imports (i) 15 31% 23% 33% 36% 33% 31% 36% 40% 14% 17% 34% 0 50000 100000 150000 200000 250000 Spain Italy Mexico Canada China United Kingdom Korea France Japan United States Germany Transport equipment: Import content of exports, $US million, 2009 Foreign Content Domestic Content
    • Exports and Imports (ii) 16 56% 25% 61% 55% 57% 45% 25% 47% 18% 13% 43% 0 50000 100000 150000 200000 250000 300000 350000 400000 450000 500000 Malaysia United Kingdom Singapore Thailand Mexico Chinese Taipei Germany Korea Japan United States China Electronic equipment: Import content of exports, $US million, 2009 Foreign Content Domestic Content
    • With hubs playing an important role 17 Domestic, 6 0.7% Germany, 8. 2% US, 3.6% Italy, 3.2% OtherEurop e, 14.8% Asia, 4.4% Rest of the world, 5.1% France: Motor vehicles, 2009 Domestic, 69.1%US, 2.4% UK, 2.4% France, 2.1 % OtherEuro pe, 16.3% Asia, 3.4% Rest of the world, 4.4% Germany: Motor vehicles, 2009 Domestic, 4 0.6% US, 20.1% China, 9.6% Japan, 9.4% Europe, 7.4 % Other Asia, 6.8% Rest of the world, 6.1% Mexico: Electronics, 2009 Domestic, 5 5.4% China, 12.1 % Chinese Taipei, 4.7 % Japan, 4.1% Europe, 5.6 % Other Asia, 8.3% Rest of the world, 9.9% Korea: Electronics, 2009
    • And a significant share of total intermediate imports is used in exports - UK 18 0% 20% 40% 60% Agriculture Mining Foodproducts Textiles&apparel Wood&paper Chemicals& minerals Basicmetals Machinery Electrical equipment Transport equipment Other manufactures Utilities Wholesale&retail Transport& telecoms Finance& insurance Businessservices Otherservices Total 2009 1995
    • Particularly in sectors with high fragmentation 19 0 10 20 30 40 50 60 70 80 90 United States Japan Mexico Germany China United Kingdom Korea Czech Republic Hungary Intermediate imports embodied in exports, 2009 % of total intermediate imports Total Electronics Transport equipment
    • VA figures reveal significant and increasing export dependencies 20 Around and over 2/3rds in many sectors And over half for all manufacturing
    • Services matter Services Value-Added: % of exports, 2009 21 0 10 20 30 40 50 60 70 80 90 Foreign Domestic
    • And have a high content in goods - UK 22 0% 10% 20% 30% 40% Agriculture Mining Foodproducts Textiles&apparel Wood&paper Chemicals& minerals Basicmetals Machinery Electrical equipment Transport equipment Other manufactures Foreignservicecontents Domesticservicecontents 1995Total
    • Design, R&D, software etc becoming more important - Services content of transport equipment 23 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 24 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 domesticfinal 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 25 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 domesticfinal 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 26 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 HongKong, China Singapore Philippines India Indonesia VietNam Cambodia Brunei Darussalam Value-Added Gross Exports to China: Gross and Value-added terms, % of total
    • Who trades with who? Japan’s trade balances 27 -20000 -10000 0 10000 20000 30000 40000 Rest of the World Australia Indonesia Russian federation United Kingdom Germany Canada India Korea China United States Gross Trade Balance Value Added Trade Balance
    • 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 28 -6 -4 -2 0 2 4 6 8 10 TWN KOR PHL JPN MYS AUS THA SAU RUS EU27 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 ZAF IND IDN CAN VNM MEX TUR CHN KHM CHL ARG Exports Imports BrazilUnited States
    • 29
    • 30 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, ownership 31
    • 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. 32
    • Examples of current inconsistencies in bilateral trade statistics (Services 2009) 33
    • 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) 34
    • 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 35 0 10 20 30 40 50 60 % 2008 1995
    • 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 36
    • Summary – What’s needed • New thinking on SU tables • Better gross trade data • Links to microdata • Income, Ownership and FATS 37
    • Further information • www.oecd.org/trade/valueadded • Video: http://www.youtube.com/watch?feature=pl ayer_embedded&v=RZKX-0SK41U • OECD Workshop on Measuring TiVA 5-6 December 2013 38