Value Chains and the EU Experience: what implications for trade policy?Alessandra TUCCIChief Economist and Trade Analysis UnitDG TradeEuropean Commission

OutlineTrade in value added and the regional organisation of GVCs

FDI and Multinationals operations

Further data needed?

Discussion: implications for trade and investment policy

Domestic value added in gross exportsSource: OECD-WTO TiVA

Chart1

0.825019061

0.7610594861

0.8680158639

0.6965237746

0.8581012234

Sh. of domestic value added embodied in gross exports

2008-09 average, %

Value Added embodied in Gross E

0OECD-WTO Trade in Value Added (TIVA)VariableGross exportsDomestic value added embodied in gross exportsTime200520082009CountryAustraliaAustriaBelgiumCanadaChileCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIcelandIrelandIsraelItalyJapanKoreaLuxembourgMexicoNetherlandsNew ZealandNorwayPolandPortugalSlovak RepublicSloveniaSpainSwedenSwitzerlandTurkeyUnited KingdomUnited StatesBrazilChinaIndiaIndonesiaRussian FederationSouth AfricaRest of the WorldEU27PartnerTotalIndustryTOTAL0-1falsefalsefalsefalsefalse1true1truefalsefalse65Value Added embodied in Gross Exports by Sourcehttp://stats.oecd.org//View.aspx?QueryId=42030&QueryType=Public&Lang=en

Dataset: OECD-WTO Trade in Value Added (TIVA)

PartnerTotal

VariableEXGR: Gross exportsEXGRDVA: Domestic value added embodied in gross exports

Time200520082009200520082009200520082009av_2008_2009

IndustryCountry

TOTAL: TOTALAustralia143683.4232923.8193419125962.3202326.8169355.50.87666564130.86863944350.87558874770.8717921353

Austria137991.5203590159548.993991.4136300120652.40.68113905570.6694827840.75620953830.7075870968

Belgium214302.5304546.2245781.5125663.7189573.6167070.70.58638466650.62247895390.67975295130.648058057

Canada412630.1506881.1368103.1304358.3396690.2291195.80.73760566670.78260996510.79107130580.7861696245

Chile48868.776304.962680.440188.360155.551047.90.82237301180.78835697310.81441567060.8001090763

Czech Republic80309.3139157.211244948341.485284.168980.40.60194024850.61286156950.61343720260.6131188341

Denmark108700.7163948.4129349.775595.6111275.989895.70.69544722340.67872513550.69498189790.685894658

Estonia10805.416894.212454.55289.19849.98037.10.48948673810.58303441420.64531695370.6094648145

Finland79395.4122740.287765.253569.879124.459396.60.67472170930.64464943030.67676710130.6580401263

France537204.5726245.1581822.6401584.7523921432126.70.74754530160.72141071930.74271212570.7308854886

Germany955785.714414191141943.1719451.71059540.3852078.90.75273327480.73506752720.74616581160.7399733858

Greece5444380017.26009241129.959382.646516.60.75546718590.74212294360.77408972910.7558333072

Hungary65028.1113058.688776.733436.961879.352603.60.51419155720.5473205930.59253835750.567209502

Iceland5168.37472.763753038.24705.84228.70.58785287230.62973222530.66332549020.6451973974

Ireland158731.1211541.3195442.785349.4128976.9116582.90.53769803150.60970080070.59650680220.6033647514

Israel57265.281219.767576.43507950386.845946.10.61257098550.62037658350.67991340170.6474154901

Italy415344593019.1452763.6314941.2465334.3371620.20.75826591930.78468686760.8207819710.8003139658

Japan652457.5856173.9636143.5564897.3690004.8541185.50.86579938160.80591664850.85072864850.825019061

Korea331756493727.5414780.1210775.9278752.7250545.60.6353341010.56458815840.60404440810.5826019507

Luxembourg58661.8100894.583606.923670.138945.832977.30.40350108590.38600518360.39443275610.3898241423

Mexico230076.9306978.7243873.9156179.5208991.7167479.80.67881434420.68080195790.68674753630.6834341891

Netherlands333215.5429221.8350478233650.1277951.2231675.10.70119817360.64757009080.66102608440.6536186106

New Zealand30931.940201.832762.124504.130952.126463.70.79219511250.76991826240.80775347120.7869069499

Norway132726.7213246.3152431.4114784.9182953.8130559.70.86482147150.85794595260.85651447140.857349245

Poland112705.9211222.9169953.277544.2147284.7122707.90.68802254360.69729513230.72200994160.7083146084

Portugal53062.68174065490.538831.752443.844799.20.73180922160.64159285540.68405646620.6604813541

Slovak Republic36008.277613.861001.118768.339805.333643.40.52122294370.51286369180.55152120210.5298759369

Slovenia19155.83141824826.712012.920418.117240.20.62711554720.6498854160.69442173140.6695439748

Spain243684353560.5292525.1180417.6273054.2237302.30.74037524010.77229837610.81122030210.7899208712

Sweden168499.2243646183025.8116372.9160891124005.20.69064363510.66034738920.67752852330.6677174353

Switzerland182530.5283707.2254458.8125172.9190314.2176740.60.68576429690.67081202030.69457452440.6820475467

Turkey105558.4174605.6143295.784335.1128832.4113109.40.79894257590.73784804150.78934259720.7610594861

United Kingdom540773.1700927.6557194.7451501.9571900.54626310.83491930350.81591950440.83028607410.8222821422

United States1116938.91622284.71401127.9986068.113828341241536.10.88283083350.85239908880.88609762180.8680158639

Brazil133140.1225270.9176644.8117130.2200714.2161474.60.87975147980.89099035870.91412031380.901156138

China8365231581183.31393189.45345011076001995720.30.63895553380.68050364560.71470562440.6965237746

India161471.1305426.8268229.3128904.6229350.3205333.50.7983137540.75091740480.76551480390.7577428358

Indonesia97387.7152090.5130357.979710.8124151.3111353.70.81848939860.81629884840.85421520290.833798315

Russian Federation268967.1520002.4341584.9243207473109316995.20.90422583280.90982080080.92801291860.9170332478

South Africa67643.898005.377556.955788.275135.164426.30.82473486110.76664323260.83069720420.794939913

Rest of the World1687980.826469432050044.51458804.92388552.81889717.90.86423074240.90238165310.92179360010.9108541805

EU271881119.72753853.12298271.51636176.32345941.11989293.20.86978850950.85187590430.86556057450.8581012234

data extracted on 11 Mar 2013 15:21 UTC (GMT) from OECD.Stat

Dataset: OECD-WTO Trade in Value Added (TIVA)

EXGR: Gross exports

EXGRDVA: Domestic value added embodied in gross exports

data extracted on 11 Mar 2013 15:21 UTC (GMT) from OECD.Stat

Sheet2

Partner

VariablexxSh. of domestic value added embodied in gross exports

Timeav_2008_2009 (%)

IndustryCountry

TOTAL: TOTALAustralia87.2%

xAustria0.7075870968

xBelgium0.648058057

Canada0.7861696245

Chile0.8001090763

xCzech Republic0.6131188341

xDenmark0.685894658

xEstonia0.6094648145

xFinland0.6580401263

xFrance0.7308854886

xGermany0.7399733858

xGreece0.7558333072

xHungary0.567209502

Iceland0.6451973974

xIreland0.6033647514

Israel0.6474154901

xItaly0.8003139658

xJapan0.825019061

Korea0.5826019507

xLuxembourg0.3898241423

Mexico0.6834341891

xNetherlands0.6536186106

New Zealand0.7869069499

Norway0.857349245

xPoland0.7083146084

xPortugal0.6604813541

xSlovak Republic0.5298759369

xSlovenia0.6695439748

xSpain0.7899208712

xSweden0.6677174353

Switzerland0.6820475467

xTurkey0.7610594861

xUnited Kingdom0.8222821422

xUnited States0.8680158639

Brazil0.901156138

xChina0.6965237746

India0.7577428358

Indonesia0.833798315

Russian Federation0.9170332478

South Africa0.794939913

Rest of the World0.9108541805

xxEU270.8581012234

Sh. of domestic value added embodied in gross exports

Slovak Republic53.0%

Hungary56.7%

Ireland60.3%

Czech Republic61.3%

Belgium64.8%

Netherlands65.4%

Finland65.8%

Portugal66.0%

Sweden66.8%

Slovenia67.0%

Denmark68.6%

Austria70.8%

Poland70.8%

France73.1%

Germany74.0%

Spain79.0%

Italy80.0%

EU2785.8%

Sh. of domestic value added embodied in gross exports

Japan82.5%

Turkey76.1%

United States86.8%

China69.7%

EU2785.8%

Sheet2

Sh. of domestic value added embodied in gross exports

Sh. of domestic value added embodied in gross exports(2008-09 average, %)

Sh. of domestic value added embodied in gross exports

(2008-09 average, %)

Regional GVCs?Many of the GVCs involving EU firms are regional & DE is the main hub

EU, Turkey and China: proximity matter

Proximity in production still plays a roleProduction plants of the 100largest car parts suppliers for EU and US

Motor vehicles: Trade or FDI?

Light Vehicle Sales by Production RegionLow import penetration across regions..Source: HIS Global Insight

ASIAEU is a big investor relative to US and Japan.

Mostly services

...but manufacturing share is higher than average extra-EU:GVCs?

There is a limit to what you can ship from Europe: maybe more than we normally think?

to serve far away markets you need to enter the regional value chains

More data? Trade in VA by ownership?

Data on the ownership of domestic value added produced: how much of the 86% of EU value added is US owned? Asian owned? More important when looking at the single countries

Data on TNCs operations can shed light on this.

Some potential policy implicationsIf to serve far away markets you need to enter the regional value chains Change of perspective: to be in (Asia) has potentially more value than to trade with (Asia)Defensive concerns are often exaggeratedTrade facilitation is the single most important cross-cutting area that can boost or bust global value chain performanceThe untapped "GVC" value of FTAs lies in services and investment access

Third parties agreementsIf EU firms are part of the (Asia) value chain EU best interest lies in (Asian) regional integration We have a bigger stake in (Asian) regional integration than we normally thinkFTAs among "strategic partners" may fundamentally alter EU's position in GVCsTPP: a threat or an opportunity for EU companies in the region?

EU27=85.6%Average 2008 and 2009 because there is high variability

*The arrows represent the flows of VA exports between two countries. Only bilateral value-added flows above 2 billion U.S. dollar are plotted.1 For example, an arrow from Germany to Poland indicates that Germanys value-added embodied in Polands exports is above 2 billion U.S dollar.Source: Rahman, and Zhao (2013) "Export Performance in Europe: What Do We Know from Supply Links? " IMF WP no 13/62 http://www.imf.org/external/pubs/cat/longres.aspx?sk=40370.0

*For the US: The radii for the first three quartiles drawn around the location centroid are: 392km, 592km, and 1,280km, respectivelyFor the EU The radii for the first three quartiles drawn around the location centroid are: 315km, 550km, and 950km, respectively.Source: http://revel.unice.fr/eriep/index.html?id=3369*Source: ESTAT FATS for turnover of MNEs and COMEXT for tradeIn the car sector FDI accounts for much more than the exports Japan and India: 90% of sales in these countries comes from local sales very difficult to access the market if you are not there?**We are already very present*JP, IN, HK and China are the only countries for which detailed data are availableIn Asia more than in the rest of the world FDI is manufacturing. Rest of the world more services makes sense because of the nature of services physical presence mode 3*Why Asia more manufacturing? Idea of global / regional value chain In relative terms we are "producing" there more than in closer countries?**