Global value chains (GVCs) have become a dominant feature of today’s global economy. The proliferation of internationally fragmented production, driven by technological progress, cost, access to resources and markets, and trade policy reforms, challenges our conventional wisdom on how we look at and interpret trade statistics and, in particular, the policies that we develop around them. Traditional measures of trade, that record gross flows of goods and services each and every time they cross borders, may not accurately reflect modern trade patterns and could, if taken alone, lead to ill-informed policy decisions.
To help address this issue, the OECD and WTO announced a joint initiative agreed to develop a database of Trade in Value Added indicators and to mainstream their production within the international statistics system.
Better understanding global trade flows
The first release of OECD-WTO TiVA database presents indicators for 40 countries (all OECD countries, Brazil, China, India, Indonesia, Russian Federation and South Africa) covering the years 2005, 2008 and 2009 and broken down by 18 industries. Indicators in the database include:
– Decomposition of gross exports by industry into their domestic and foreign content.
– 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
Accessing the database
Global value chains and going beyond trade in value added
Taking into account the origin of value added is only the beginning of the OECD’s work in this area. A comprehensive report on the policy implications of GVCs will be released for the OECD Ministerial meeting in May 2013, covering trade policy, investment policies and other domestic policies aimed at drawing the benefits from engagement in global value chains. Much of the evidence that will feed into this work will draw on the underlying Statistical Information System (global input-output database) developed to produce the TIVA database, and so, further indicators can be expected in a number of areas in the coming years. Two important areas in this respect concern ‘trade in jobs and skills’, where indicators will begin to be rolled out for some countries later this year and over the longer term; and how income (profits) generated from trade flows, in particular how income generated via knowledge based assets, is further distributed between affiliate companies will also be explored. The Statistical Information System also lends itself to the calculation of indicators in a number of other areas such as carbon footprints, where the OECD will look to update its earlier results, notably as part of the OECD Green Growth Indicators.