Business competitiveness and export performance are increasingly tied to countries’ integration into global production chains and a willingness to open markets to wider imports, according to preliminary international trade data released by the Organisation for Economic Cooperation and Development and the World Trade Organisation.
The joint OECD – WTO Trade in Value-Added Initiative breaks with conventional measurements of trade, which record gross flows of goods and services each time they cross borders. It seeks instead to analyse 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.
“Countries’ capacity to sell to the world depends on their ability and readiness to buy from the rest of the world,” OECD Secretary General Angel Gurria said during the launch of the new database in Paris with WTO Director-General Pascal Lamy, EU Trade Commissioner Karel de Gucht and New Zealand Trade Minister Tim Groser.
“Our new work with the WTO allows us to see more clearly than ever before how blocking imports will damage a country’s own competitiveness. Trade negotiations have to catch up to these new realities, and countries need to implement policies that help their firms better manage their place in international value chains.”
The first release from the OECD-WTO database offers new insights on how global value chains impact trade relationships and business activity.
Data show that 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 comes 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.
The new indicators of trade in value-added are derived from global input-output tables, developed by the OECD, which describe interactions between industries and consumers for 58 economies, reflecting 95% of global output.