Measuring Trade in Value-AddedMeasuring Trade in Value-AddedOECD Working Party on Trade in Goods and Services

Paris, November Paris, November 20112011

Contact: nadim.ahmad@oecd.org

Trade in Value-Added• Increasing recognition that gross estimates

of trade may create ‘misleading perceptions’ (Pascal Lamy), and imperfect policies in a number of areas, including:– dealing with bilateral trade imbalances– dealing with the impact of macro-economic

shocks on supply-chains– understanding the importance of trade to jobs

• Leading to a call for new metrics that better respond to these issues.

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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

Responding to needs

• IO tables provide a means to respond to these developments by measuring interconnectedness of trade and trade in value-added terms.

• A number of initiatives have been launched using interconnected IO tables ( a world IO table).

• Including a two-year project of the OECD (STD/TAD/STI).

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International Collaboration• Various initiatives pooling resources to identify best

practices for allocation of bilateral trade flows within IO tables.

• But recognition: • that a long-term approach is needed to ‘institutionalise’

estimates of trade in value-added. • And that its international nature requires the involvement

of an international agency or international consortia.

• Formalising collaboration with WTO and IDE-JETRO, and exploring closers links with USITC, UNSD &World Bank.

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Indicator & data sharing with IDE-JETRO and WTO in TiVA Project

Value added in trade “headline” indicator: • bilateral flows;

• by sector to the degree possible.

Common to WTO and the OECD: publically

available

Input-Output tables, methodological

assumptions and bilateral trade flow data

OECD “analytical” data on trade in services, trade by enterprise,

intangibles and income flows.

Shared by OECD and IDE-JETRO

OECD only

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What do we know now: Import contents of exports (2005)

Source: OECD Inter-country inter-industry model (March 2011)

Import contents of exports

8Source: OECD Inter-country I-O model, 2011

And globalisation continues apace

• As production processes continue to become more fragmented and chains become more interconnected.

• Processing trade increasing in China.

• Driven by technological advancement, reduced transaction costs and trade policy reform.

• Reinforcing the need for on-going and robust estimates

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Work Plan• Estimates can be produced now, but necessarily

require assumptions relating to BTD IO flows. • Much of the work over next two years will be in

improving the nature of these assumptions, by: • Developing improved estimates of BTD by Industry and

End-Use• Improving BTD by services• Using firm-level micro data• Decomposing value-added into ‘labour’ and ‘capital’ flows.• Contribution of intangibles (R&D and software)

• And investigating the scope to trace property income flows.

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Chinese High Tech Exports by Ownership(% of the total)

Source: OECD STI Scoreboard 2011. Data on intangible investment are based on COINVEST [www.coinvest.org.uk] and national estimates by researchers. Data for fixed investment are OECD calculations based on OECD, Annual National Accounts and EU KLEMS Databases, March 2010.

Tangibles vs. intangibles

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15

20

25

30

%

Machinery and equipmentSoftware and databasesR&D and other intellectual property productsBrand equity, firm-specific human capital, organisational capital

Investment in fixed and intangible assets as a percentage of GDP, 2006

What can WPTGS do?• Support the initiative & related

developments especially in:– Improving bilateral trade flows, particularly in

services– More detailed IO tables?

• Linking business statistics and trade registers (TEC)– Breakdowns by

» Export intensive» Import Intensive» Export-Import Intensive» Processors?» Foreign/domestic ownership?

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