Last year, on March 15, 2012 the Organisation for Economic Co-operation and Development (OECD) and World Trade Organisation (WTO) announced a joint initiative to develop a database of Trade in Value Added indicators and to mainstream their production within the international statistics and, in particular, the policies that countries develop around them.
When developing these indicators, their measurements break away from the conventional measurements of trade, which record gross flows of goods and services each time they cross borders. Instead, they analyze the value added by a country in the production of any good or service that is then exported, and offers a fuller picture of commercial relations between nations.
According to preliminary trade data released by the OECD and the WTO, business competitiveness and export performance are increasingly tied to countries’ integration into global production chains and willingness to open markets to wider imports.
The first release from the OECD-WTO database offers new insights on how global value chains impact trade relationships and business activity. Among the key findings are:
- China’s bilateral trade surplus with the United States shrinks by 25% on a value-added basis, reflecting the high level of foreign-sourced content in Chinese exports.
- One-third of the total value of motor vehicles exported from Germany actually come from other countries, while nearly 40% of the total value of China’s electronics exports come from foreign sources.
- While conventional trade data suggests that services represent less than one-quarter of total trade, on a value-added basis services trade reaches an average 50% of OECD countries’ exports, and well above that in the United States, the United Kingdom, France, Germany and Italy – in large part because services add significant value to manufacturing output.
- Bilateral trade surpluses of major commodity exporters like Australia, Brazil and Canada with their key trading partners shrink on a value-added basis, as their raw materials are further processed by trading partners and then re-exported – highlighting where these countries might “move up” the value chain.
Check out our infographic for a visual perspective of these key findings and how they help portray that global value chains impact trade relationships and business activity.