Upload
hyderalikhawaja
View
218
Download
0
Embed Size (px)
Citation preview
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 1/40
U N I T E D N A T I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T
INVESTMENT AND VALUE ADDED
TRADE IN THE GLOBAL ECONOMY
GLOBAL VALUECHAINS
AND Development
Advance unedited version
A preliminary analysis
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 2/40
Global Value Chains and Developmentii
Editorial Note
The Division on Investment and Enterprise o UNCTAD is a global centre o excellence dealing with issuesrelated to investment and enterprise development in the United Nations System. It builds on three-and-a-hal decades o experience and international expertise in research and policy analysis, osters intergovernmentalconsensus-building, and provides technical assistance to developing countries.
The terms country/economy as used in this Report also reer, as appropriate, to territories or areas; thedesignations employed and the presentation o the material do not imply the expression o any opinionwhatsoever on the part o the Secretariat o the United Nations concerning the legal status o any country,territory, city or area or o its authorities, or concerning the delimitation o its rontiers or boundaries. Inaddition, the designations o country groups are intended solely or statistical or analytical convenience anddo not necessarily express a judgment about the stage o development reached by a particular country orarea in the development process. The major country groupings used in this Report ollow the classicationo the United Nations Statistical Oce. These are:
Developed countries: the member countries o the OECD (other than Chile, Mexico, the Republic o Koreaand Turkey), plus the new European Union member countries which are not OECD members (Bulgaria,Cyprus, Latvia, Lithuania, Malta and Romania), plus Andorra, Bermuda, Liechtenstein, Monaco and SanMarino.
Transition economies: South-East Europe and the Commonwealth o Independent States.
Developing economies: in general all economies not specied above. For statistical purposes, the data orChina do not include those or Hong Kong Special Administrative Region (Hong Kong SAR), Macao Special Administrative Region (Macao SAR) and Taiwan Province o China.
Reerence to companies and their activities should not be construed as an endorsement by UNCTAD o those companies or their activities.
The boundaries and names shown and designations used on the maps presented in this publication do notimply ocial endorsement or acceptance by the United Nations.
The ollowing symbols have been used in the tables:
• Two dots (..) indicate that data are not available or are not separately reported. Rows in tables havebeen omitted in those cases where no data are available or any o the elements in the row.
• A dash (–) indicates that the item is equal to zero or its value is negligible.
• A blank in a table indicates that the item is not applicable, unless otherwise indicated.
• A slash (/) between dates representing years, e.g., 1994/95, indicates a nancial year.
• Use o a dash (–) between dates representing years, e.g. 1994–1995, signies the ull period involved,including the beginning and end years.
• Reerence to “dollars” ($) means United States dollars, unless otherwise indicated.
• Annual rates o growth or change, unless otherwise stated, reer to annual compound rates.
Details and percentages in tables do not necessarily add to totals because o rounding.
The material contained in this study may be reely quoted with appropriate acknowledgement.
UNITED NATIONS PUBLICATIONUNCTAD/DIAE/2013/1
© Copyright United Nations 2013
All rights reserved
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 3/40
iii
UNCTAD’s Division on Investment and Enterprisebuilds on eorts in the international community tomap the distribution o value added in global trade,
launching a GVC dataset that expands coverageto include almost all countries, including developing
economies, and a broad range o industries andactivities o relevance to them. The UNCTAD-EoraGVC Database – part o UNCTAD’s FDI-TNCs-GVC
Inormation System – provides new perspectives ontrade links between economies, on the distributiono value added, income and employment resulting
rom trade, on the investment-trade nexus and onhow transnational corporations (TNCs), through
equity and contractual modes, shape patterns o value added trade.
Highlights o the ndings presented in this report:
• Global investment and trade are inextricably
intertwined through the international
production networks o frms investing in
productive assets worldwide and trading inputsand outputs in cross-border value chains o various degrees o complexity. Such value
chains (intra-rm or inter-rm, regional orglobal in nature, and commonly reerred to asGlobal Value Chains or GVCs) shaped by TNCs
account or some 80% o global trade.
• GVCs are responsible or the growing
signifcance o “double counting” in global
trade fgures. The new data shows that some28% o gross exports consist o value addedthat is rst imported by countries only to be
incorporated in products or services that arethen exported again. Thus some $5 trillion out
o the $19 trillion in global gross exports (in2010 gures) is actually double counted.
• GVCs make extensive use o services.While the share o services in gross exports
worldwide is only around 20%, almost hal (46%) o value added inputs to exports iscontributed by service-sector activities, as
most manuacturing exports require servicesor their production. In act, a signicant part o
the international production networks o TNCsare geared towards providing services inputs,as indicated by the act that more than 60% o
global FDI stock is in services activities (26% in
manuacturing and 7% in the primary sector).
This picture is similar in both developed anddeveloping economies.
• The majority o developing countries, including
the poorest, are increasingly participating in
GVCs. The developing country share in globalvalue added trade increased rom 20% in 1990
to 30% in 2000 to over 40% today. Again, therole o TNCs is instrumental, as countries witha higher presence o FDI relative to the size
o their economies tend to have a higher levelo participation in GVCs and a greater relative
share in global value added trade compared totheir share in global exports.
• GVC links in developing countries can play an
important role in economic growth. Domestic
value added created rom GVC trade canbe very signicant relative to the size o
local economies. In developing countries,or example, value added trade contributessome 28% to countries’ GDP on average, as
compared with 18% or developed countries.
Furthermore, there appears to be a positivecorrelation between participation in GVCs
and GDP per capita growth rates. Economieswith the astest growing GVC participation
have GDP per capita growth rates some 2percentage points above the average.
• There appear to be a number of distinct GVC
development paths for developing countries,
including “engaging” in GVCs, “upgrading”
along GVCs, “leaprogging” and “competing”
via GVCs. The best development outcome
may result rom increasing GVC participation
and upgrading along GVCs at the same
time. Countries that, over the last 20 years,
managed to grow both their participation
in GVCs and their domestic value added
in exports experienced GDP per capita
growth o 3.4% on average, compared to
2.2% or countries that only increased their
participation in GVCs without “upgrading”
their domestic value addition.
These fndings will have some important policy
implications. For example, GVCs can be an
important avenue or developing countries to build
Executive Summary
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 4/40
Global Value Chains and Developmentiv
productive capacity, including through technology
dissemination and skill building, opening up
opportunities or longer-term industrial upgrading.
However, such potential benefts o GVCs arenot automatic. Policies matter, including a set
o coherent and mutually reinorcing trade and
investment policies, as well as the right overall
development strategies.
UNCTAD intends to build on the preliminary
analyses o the new data presented in this launch
report in its orthcoming World Investment Report
2013, which will examine the mechanisms through
which GVCs can contribute to development
(e.g. market access, employment generation,
productive capacity building), as well as the risks
involved or developing countries (e.g. social and
environmental sustainability impact, the risk o remaining locked into low value adding activities,
ootlooseness o activities).
The balance o opportunities and risks associated
with GVCs makes a well-inormed policy debate
on their development impact o paramount
importance. UNCTAD hopes that its GVC
Database will stimulate and contribute to such
debate by providing new insights into the evolving
nature o globalized production networks.
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 5/40
v
The UNCTAD-Eora GVC Database launch report
was prepared by a team led by James Zhan
and including Richard Bolwijn, Bruno Casella
and Masataka Fujita. Carlo Altomonte served as
principal economic advisor, and Keiichiro Kanemoto
and Daniel Moran as principal data consultants.
At various stages o preparation the team benefted
rom comments and inputs received rom experts,
including Richard Baldwin, Peter Buckley, Lorraine
Eden, Gary Geref, Bart Los, Bo Meng, William
Powers and Pierre Sauvé. Comments were also
received rom UNCTAD colleagues, including Marco
Fugazza, Alessandro Nicita, Victor Ognivtsev, Miho
Shirotori and Guillermo Valles.
Research and statistical assistance was provided
by Bradley Boicourt, Lizanne Martinez and Davide
Rigo. The document was typeset by Teresita
Ventura.
UNCTAD wishes to thank the Eora project team
members or their kind collaboration.
Acknowledgements
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 6/40
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 7/40
vii
Table of Contents
Executive Summary .....................................................................................................................iii
Acknowledgements ......................................................................................................................v
Introduction ............................................................................................................................1
I. Value added trade patterns in the global economy ............................................................4
II. Value added trade patterns in the developing world ........................................................13
III. GVCs: the investment-trade nexus .....................................................................................16
IV. The development impact of GVCs ......................................................................................20
Concluding remarks: a policy analysis agenda .......................................................................24
Boxes
Box 1. International efforts to map GVCs and the UNCTAD-Eora
GVC Database ................................................................................................................. 3
Box 2. Understanding value added trade data and indicators ................................................... 5
Box 3. Estimating trade within the international production
networks of TNCs .......................................................................................................... 17
Figures
Figure 1. Value added trade: how it works ..................................................................................... 1
Figure 2. UNCTAD’s data on FDI, TNCs and GVCs ........................................................................ 2
Figure 3. Global value added in trade, 2010 ................................................................................... 4
Figure 4. Share of foreign value added in exports, by region, 2010 ............................................... 6
Figure 5. Share of foreign value added in exports, selected industries, 2010 ................................ 7
Figure 6. Share of foreign value added in exports, developed and
developing economies, selected industries, 2010........................................................... 8
Figure 7. Relative value added trade shares of the top 25 exporting economies, 2010 ................ 9
Figure 8. Domestic value added in trade as a share of GDP, by region, 2010 ............................. 10
Figure 9. GVC participation, 2010, and GVC participation growth rates,
2005-2010 ...................................................................................................................... 11Figure 10. GVC participation rate of the top 25 exporting economies, 2010 ................................. 12
Figure 11. Share of developing countries in global value added trade and
in gross exports, 1990-2010 .......................................................................................... 13
Figure 12. Domestic value added trade shares of the top 25 developing
economy exporters, 2010 .............................................................................................. 14
Figure 13. GVC participation rate of the top 25 developing economy
exporters, 2010 .............................................................................................................. 15
Figure 14. Global gross trade (exports of goods and services),
by type of TNC involvement, 2010 ................................................................................ 16
Figure 15. Sector composition of global gross exports, value added inputs
to exports, and FDI stock, 2010 .................................................................................... 18
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 8/40
Global Value Chains and Development viii
Figure 16. Correlation between levels of inward FDI stock and
GVC participation .......................................................................................................... 19
Figure 17. Key value added trade indicators, by quartile of inward FDI
stock relative to GDP, 2010............................................................................................ 19Figure 18. Correlation between growth in GVC participation and
GDP per capita .............................................................................................................. 21
Figure 19. GDP per capita growth rates by quartile of growth in GVC
participation, developing economies only, 1990-2010 .................................................. 22
Figure 20. GDP per capita growth rates for developing countries with high/low
growth in GVC participation, and high/low growth in
domestic value added share, 1990-2010 ...................................................................... 22
Figure 21. Possible GVC Development Paths ................................................................................ 23
Annex
Technical note on the UNCTAD-Eora GVC Database ......................................................................... 26
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 9/40
Introduction 1
Introduction
Figure 1. Value added trade: how it works
Source: UNCTAD.
Global trade in goods and services, which today
amounts to more than $20 trillion, includes a
signicant amount o double counting. Raw material
extracted in one country may be exported rst to a
second country or processing, then exported again
to a manuacturing plant in a third country, which
may then export it to a ourth or nal consumption.
The value o the raw material counts only once
as a GDP contribution in the original country, but
is counted several times in world exports. Value
added trade statistics aim to identiy the double
counting in gross trade gures and show wherevalue is created in global production chains (see
gure 1 or a simplied example). Such cross-
border production chains, which may comprise
only two countries, a region or a global network, are
commonly reerred to as global value chains (GVCs).
A typical GVC producing any end-product or nal
consumption will involve activities across multiple
sectors and industries, rom extractive industries
or primary sector activities, to manuacturing, to
services value added incorporated along the chain.
Value added trade statistics can lead to important
policy insights in the area o trade, investment
and development. UNCTAD, in line with its role
as a research, policy analysis and consensus
building institution working or development
(and in response to the mandate received at its
latest UNCTAD XIII ministerial meeting, as well
as requests made by the G20) aims to provideinsights into the relevance, impact and patterns
o value added trade and GVCs across the global
economy, and in particular in developing countries.
In a collaborative eort with the Eora project,1 its
Division on Investment and Enterprise has built a
value added trade dataset that covers developed
and developing countries and a broad range o
Domestic Value
Added in exports
Foreign Value Addedincorporated
Participating
countries Gross
exports
Domestic
Value Added
Double-
counting
Value chain
Country A
Country B
Country C
Country D
Raw material
extraction
Final
demandProcessing Manufacturing
2
2 + 24 = 26
2 + 24 + 46 = 72
2
26
72
100
2
24
46
72
0
2
26
28∑
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 10/40
Global Value Chains and Development2
Figure 2. UNCTAD’s data on FDI, TNCs and GVCs
Source: UNCTAD.
industries relevant to them: the UNCTAD-Eora GVC
Database (box 1). With this database UNCTAD has
added an important element to its FDI and TNCs
Inormation System (gure 2). The new databasewill be used as a basis or the World Investment
Report 2013 (WIR13), which will assess the
patterns, drivers and determinants, development
impact and policy implications o value added trade
and investment.
As a preview to the theme part o WIR13, and
to accompany the launch o the UNCTAD-Eora
GVC Database, this short report presents a ew
preliminary ndings based on the new data. It
essentially aims to answer a number o basic
questions that are top o mind or policymakers andthe development community:
• How much value added does trade actually
generate?
• Which countries incorporate the most oreign
value added in their exports?
• Which industries have the most segmented
value chains?
• How much value added do countries get out o
their exports?
• How signifcant is value added trade to
countries’ GDP?
• Which countries participate most in GVCs?
• How much value are developing countries
capturing rom trade?
• To what extent are developing country exports
integrated in GVCs?
• What is the role o TNCs in global trade?
• How do international production networks o
TNCs shape value added trade?
• How does the presence o TNCs aect
countries’ GVC participation?
• What is the impact o value added trade and
GVCs on economic growth?
• Is there a trade-o between GVC participation
and domestic value added?
• Are there dierent GVC development paths?
UNCTAD intends to deepen the analysis on these
and other questions, to look at how TNCs shapeglobal and regional value chains and patterns
o value added trade, to identiy the drivers and
determinants o investment in GVCs, and to assess
the impact o GVCs, including by analyzing where
and how employment and income is generated
throughout GVCs. WIR13 will also examine the
mechanisms through which GVCs can contribute
to development (e.g. market access, employment
generation, productive capacity building), as well
as the risks involved or developing countries (e.g.
social and environmental sustainability impact,the risk o remaining locked into low value adding
activities, ootlooseness o activities or vulnerability
o production due to cyclical actors). And it will
assess the implications or national and international
trade and investment policies.
FDI
Database
TNCs
Database
UNCTAD-
Eora GVC
Database
Distinguishing features
▪ Coverage of 187
economies
▪ 25-500 industries
depending on the
country
▪ Continuous timeseries
from 1990 to 2010
UNCTAD FDI-TNCs-GVC Information System
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 11/40
Introduction 3
Box 1. International efforts to map GVCs and the UNCTAD-Eora GVC Database
The growing importance o GVCs has led to the realization that the way international trade has traditionally been
accounted or may no longer be sucient. A growing body o work exists aimed at netting out the “double-counting”eect o GVCs on global trade, determining value added in trade, and mapping how value added moves betweencountries along GVCs beore nal consumption o end-products. Value added in trade can be estimated basedon international input-output (I-O) tables which illustrate the economic interactions between countries (see the Technical Annex). To date, and using dierent methodologies, several initiatives have sought to compile inter-countryI-O tables. A selection o the main initiatives is listed in the table below.
Project Institution Data sources Countries Industries Years Comments
UNCTAD-EoraGVC Database
UNCTAD/Eora
Nationalsupply-useand I-O tables,and I-O tablesrom Eurostat,IDE-JETRO and
OECD
187
25-500depending
on thecountry
1990-2010
“Meta” database drawingtogether many data sourcesand interpolating missingpoints to provide broad andconsistent coverage, even o data-poor countries
Inter-Country-Input-Outputmodel (ICIO)
OECD/WTONational I-Otables
40 182005,
2008, 2009
Based on national input-outputtables harmonised by theOECD
Asian InternationalI-O tables
Institute o DevelopingEconomies(IDE-JETRO)
Nationalaccounts andrm surveys
10 76
1975,1980,1985,1990,1995,2000,
2005
US-Asian tables. Also bilateral tables, includingChina-Japan.
Global Trade Analysis Project(GTAP)
PurdueUniversity
Contributionsrom individualresearchers andorganisations.
129 57 2004, 2007
Non-ocial dataset.Includes data on areas such asenergy volumes, land use, CO2emissions and internationalmigration.
World Input-Output Database(WIOD)
Consortium o 11 institutions.EU unded.
National supply-
use tables40 35 1995-2009
Based on ocial nationalaccounts statistics.Uses end-use classication toallocate fows across partnercountries
The UNCTAD-Eora GVC Database uses input-output tables to estimate the import-content ratio in exportableproducts and value added trade. Its value added trade data are derived rom the Eora global multi-region input-output (MRIO) table. The Eora MRIO brings together a variety o primary data sources including national input-output tables and main aggregates data rom national statistical oces; input-output compendia rom Eurostat,IDE (Institute o Developing Economies)–JETRO (Japan External Trade Organization) and OECD; national accountdata (the UN National Accounts Main Aggregates Database; and the UN National Accounts Ocial Data); and tradedata (the UN Comtrade international trade database and the UN ServiceTrade international trade database). Eoracombines these primary data sources into a balanced global MRIO, using interpolation and estimation in someplaces to provide a contiguous, continuous dataset or the period 1990-2010. The Eora MRIO thus builds onsome o the other eorts in the international community. Accompanying every data point in the results provided on
the Eora website (www.worldmrio.com) is an estimate o that data point’s standard deviation, refecting the extentto which it was contested, interpolated, or estimated, during the process o assembling the global MRIO romconstituent primary data sources. Further details on the EORA database can be ound in the Annex: “Technical noteon the UNCTAD-Eora GVC Database”.
The joint OECD-WTO project (see table), which recently published its rst results, is recognized as a comprehensiveeort to set a common standard or data on value added in trade. Placing signicant emphasis on methodologyit necessarily sacrices some coverage (o countries, industries and time series) or statistical rigor. In contrast,the primary objective o the UNCTAD-Eora GVC Database is extended coverage to provide a developing countryperspective. This explains the choice o the MRIO approach, the key innovation o which is the use o algorithmsthat put together unrelated data and minimize accounting discrepancies irrespective o the type o underlying data,allowing the inclusion o data-poor countries.
Source: UNCTAD.
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 12/40
Global Value Chains and Development4
I. Value added trade patterns in the global economy
Figure 3. Global value added in trade, 2010
Source: UNCTAD-Eora GVC Database, UNCTAD estimates.
How much value added does trade generate?
At the global level, the average oreign value added
in exports is approximately 28% (gure 3). That
means, roughly, that around $5 trillion o the $19
trillion in 2010 world exports o goods and services
has been contributed by oreign countries or
urther exports and is thus “double counted” in
global trade gures.2 The remaining $14 trillion isthe actual value added contribution o trade to the
global economy (or around one-th o global GDP).
These gures dier signicantly by country and by
industry, with important policy implications:
• At the country level, oreign value addedin exports indicates what part o country’sgross exports consist o inuts that have beenproduced by other countries, or the extent towhich a country’s exports are dependent onimported content. It is also an indication o the
level o vertical specialization o economies:
the extent to which economic activities in acountry ocus on particular tasks and activitiesin global value chains.
• At the industry level, the average oreignvalue added is a proxy or the extent to whichindustry value chains are segmented or“ne-sliced” into distinct tasks and activitiesthat generate trade, compounding thedouble counting eect. This is important orpolicymakers designing, or example, industrialdevelopment, trade and investment promotion
policies.
Which countries incorporate the most oreign value added in their exports?
Developed countries, as a whole, at 31% have
a higher share o oreign value added in exports
than the global average (gure 4), i.e. their import
dependence o exports appears higher. However,
this picture is distorted by the weight in global
gures o internal trade within the highly integrated
EU economy, which accounts or some 70%
$ Trillions ESTIMATES
“Double counting”(foreign value
added in exports)
Global gross exports Value added in trade
~19 ~5
~14
28%
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 13/40
I. Value added trade patterns in the global economy 5
Box 2. Understanding value added trade data and indicators
A country’s exports can be divided into domestically produced value added and imported (oreign) value added that
is incorporated into exported goods and services. Furthermore, exports can either go to a oreign market or nalconsumption or as intermediate inputs to be exported again to third countries (or back to the original country). Theanalysis o GVCs takes into account both oreign value added in exports (the upstream perspective) and exportedvalue added incorporated in third-country exports (the downstream perspective). The most common indicators,which will also be used in this report, are as ollows:
1. Foreign value added (oreign value added as a share o exports) indicates what part o a country’s grossexports consists o inputs that have been produced in other countries. It is the share o the country’s exportsthat is not adding to its GDP.3
2. Domestic value added is the part o exports created in-country. It is the share o the country’s exportsthat contributes to GDP (domestic value added trade share). The sum o oreign and domestic value addedequates to gross exports. As a share o GDP, domestic value added measures the extent to which trade con-tributes to the GDP o a country.
3. GVC participation4 indicates the portion o a country’s exports that is part o a multi-stage trade process,by adding to the oreign value added used in a country’s own exports also the value added supplied to othercountries’ exports. Although the degree to which exports are used by other countries or urther export gener-ation may appear less relevant or policymakers as it does not change the domestic value added contributiono trade, the participation rate is a useul indicator or the extent to which a country’s exports are integrated ininternational production networks and it is thus helpul in exploring the trade-investment nexus.This variablecorrects the limitation o the previous indicators in which countries at the beginning o the value chain (e.g.exporters o raw materials) have a low oreign value added content o exports by denition. It gives a morecomplete picture o the involvement o countries in GVCs, both upstream and downstream.
A country’s GVC participation, measured as a share o exports, eectively assesses the reliance o exportson GVCs. In this sense, it is also an indicator o how much hypothetical “damage” to GVCs (and global GDP)would occur i a country’s exports were blocked; alternatively, it represents the vulnerability o the GVC toshocks in the respective country.
GVC indicators can also be used to assess the extent to which industries rely on internationally integratedproduction networks. For example, a number o complex methods have been devised in the literature to measureGVC length.5 This report will use a simplication device by looking at the degree o double counting in industrieswhich, conceptually, can serve as a rough proxy or the length o GVCs.
Data on value added trade by industry can provide useul indications on comparative advantages and competitivenesso countries, and hence orm a basis or development strategies and policies. However, this short launch report willocus primarily on country-level indicators; WIR13 will explore industry value added trade data and its developmentimplications in greater detail.
Source: UNCTAD; additional reerences listed in the endnotes.
o EU originated exports. Japan and the UnitedStates show signicantly lower shares o “double
counting”.
Thus, while developing countries have a lower
share o oreign value added (25%) than the world
average (28%) their oreign value added share is
signicantly higher than in the United States and
Japan – or than in the EU, i only external trade is
taken into account. Among developing economies,
the highest shares o oreign value added in
trade are ound in East and South-East Asia andin Central America (including Mexico) where
processing industries account or a signicant part
o exports. Foreign value added in exports is much
lower in Arica, West Asia, South America and in
the transition economies, where natural resources
and commodities exports with little oreign inputs
tend to play an important role. The lowest share
o oreign value added in exports is ound in South
Asia, mainly due to the weight o services exports,
which also use relatively less oreign inputs.
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 14/40
Global Value Chains and Development6
Source: UNCTAD-Eora GVC Database.
Figure 4. Share of foreign value added in exports, by region, 2010
Which industries have the most segmented value chains?
The average oreign value added share o exports
and the degree o double counting in global exports
o an industry provides a rough indication o the
extent to which industries rely on internationallyintegrated production networks, as it proxies the
extent to which intermediate goods and services
cross borders until nal consumption o the
industry’s output.
Traditionally a select number o manuacturing
industries have been at the oreront o value chain
segmentation (“ne-slicing” o value chains) and
o associated trends such as outsourcing and o-
shoring. The electronics and automotive industries,
where products can be broken down into discrete
components that can be separately produced, easily
transported, and assembled in low-cost locations,
have led the way in shaping GVCs and consequently
rank highest by share o oreign value added in trade
(gure 5). A number o industries that incorporate
and process outputs rom extractive industries
and traded commodities (e.g. petroleum products,
plastics, basic chemicals) ollow closely behind. The extractive industries themselves naturally rank
much lower as they require little imported content
o exports apart rom some services. Foreign value
added in exports is thus not a ully-fedged indicator
o the GVC complexity o industries; extractive
industries are clearly a undamental “starting point”
o many GVCs, not because o their use o oreign
value added, but because they constitute value
added inputs in many other industries’ exports.
Similarly, telecommunications, services industries,
e.g. business services, nance, utilities, also rank
25%
21%
21%
16%
31%
11%
30%
27%
14%
18%
11%
39%
31%
28%
14%
13%
14%
Developing country average
Central America
Latin America and Caribbean
West Asia
South Asia
East and South-East Asia
Asia
Africa
Developing Economies
Japan
United States
European Union
Developed Economies
Global
Least Developed Countries
Transition Economies
South America
Memorandum item:
Caribbean
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 15/40
I. Value added trade patterns in the global economy 7
Figure 5. Share of foreign value added in exports, selected industries, 2010
Source: UNCTAD-Eora GVC Database.
Note: illustrative list o industries selected based on signicance in GVCs, at various levels o industry classication.
10 20 30 40 50%
1 Manufacture of ofce, accounting and computing machinery
2 Manufacture of motor vehicles, trailers and semi-trailers
3 Manufacture of radio, television and communication equipment
4 Coke, petroleum products and nuclear fuel
5 Manufacture of man-made bres plastics and synthetic rubber
6 Manufacture of electrical machinery and apparatus n.e.c.
7 Manufacture of other transport equipment
8 Rubber and plastic products
9 Manufacture of basic chemicals
10 Metal and metal products
11 Manufacture of textiles
12 Manufacture of paints, varnishes and similar coatings, etc
13 Other chemical products
14 Machinery and equipment
15 Other manufacturing16 Manufacture of wearing apparel; dressing and dyeing of fur
17 Wood and wood products
18 Precision instruments
19 Tanning of leather; manufacture of luggage, handbags, saddlery
20 Transport and storage
21 Manufactures of fertilizers, pesticides, other agro-chemical products
22 Manufacture of detergents, cleaning preparations, toiletries
23 Food, beverages and tobacco
24 Publishing, printing and reproduction of recorded media
25 Non-metallic mineral products
26 Manufacture of pharmaceuticals, medicinal chemicals
27 Construction
28 Research and deelopment
29 Recycling
30 Electricity, gas and water
31 Post and telecommunications
32 Hotels and restaurants
33 Computer and related activities
34 Mining and quarryiing
35 Other business activities
36 Retail trade, repair of personal and household goods
37 Agriculture and related service activities
38 Finance
39 Wholesale trade and commission trade
40 Rental activities
41 Real estate activities
42 Petroleum
Memorandum item:
Primary sector
Sectondary sector
Tertiary sector
29.4%
14.2%
9.6%
0
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 16/40
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 17/40
I. Value added trade patterns in the global economy 9
Figure 7. Domestic value added trade shares of the top 25 exporting economies, 2010
Source: UNCTAD-Eora GVC Database.
stage). For example, China, on the one hand, is
a large economy with an increasingly important
internal supply chain. On the other hand, it has
a signicant share o processing trade and is an
important exporter o electronics, the industry withthe most complex GVC linkages. Consequently,
China’s domestic value added trade share (70%)
is aligned with the median (71%) domestic value
added trade share o the top 25 global exporters
(gure 7).
A signicant number o countries with relatively low
domestic value added shares have high absolute
contributions to their GDP rom domestic value
added in exports. For example, in gure 7, in the
group o countries with domestic value added trade
shares o less than 75%, the absolute contribution
o trade to GDP is about 25%. In the group o
countries with more than a 75% share o domestic
value added in gross exports it is only around
15%. Thus, while the domestic value added trade
shares in small open economies may appear low,the absolute contribution to their GDP can be
signicant in relation to the size o their economy.
This aspect is explored urther in the next section.
How signifcant is value added trade to countries’ GDP?
Domestic value added created rom trade – the
actual contribution o trade to GDP ater discounting
imported inputs – can be signicant relative to the
size o local economies. While the contribution o
trade to global GDP is over one-th, this share
DVA component
FVA component
United States
China
Germany
Japan
France
United Kingdom
Netherlands
Korea, Republic of
Italy
Hong Kong, China
SingaporeCanada
Russian Federation
Spain
Belgium
India
Switzerland
Taiwan Province of China
Mexico
Saudi Arabia
Australia
Brazil
MalaysiaThailand
Sweden
Top 25 global
exporters
Breakdown of gross exports in domestic
and foreign value added ($ Billions)Domestic value added
trade share
89%
70%
63%
82%
69%
58%
47%
56%
73%
46%
36%
70%
91%
72%
42%
90%
71%
71%
68%
86%
87%
87%
58%
70%
60%
0 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 18/40
Global Value Chains and Development10
Source: UNCTAD-Eora GVC Database.
Figure 8. Domestic value added in trade as a share of GDP, by region, 2010
is higher in developing and transition economies
(gure 8). It is particularly high in Arica, West Asia
and the transition economies due to the relative
importance o exports o natural resources there
and, in part, due to the relatively small size o the
local “non-tradables” economy. The contribution
o trade to GDP is high also in East and SouthEast Asia which, on this measure, almost rivals the
highly integrated European market. This not only
refects the export competitiveness o these Asian
economies but also their higher share o domestic
value added in trade compared to Europe.
Which countries participate most in GVCs?
The value and share o developing country
exports that depend on GVCs, either because o
upstream links (oreign value added in exports) or
downstream links (exports that are incorporated in
other products and re-exported) is quite signicant
(gure 9). East and South-East Asia remains the
region with the highest level o GVC participation,
refecting its primacy as the most important region
or export-oriented manuacturing and processingactivities. Central America (including Mexico)
also has a high participation rate in the upstream
component, where it ranks equal with South-
East Asia. However, it has a lower downstream
participation rate, refecting the act that it exports
relatively more to the United States domestic
market rather than or onward exports.
A signicantly higher GVC participation rate
in commodity exporting regions due to high
downstream links (despite relatively low upstream
26%
30%
14%
27%
22%
16%
37%
18%
24%
25%
30%
28%
13%
12%
26%
18%
22%
Memorandum item:
-East Asia
European Union
Least Developed Countries
Transition Economies
South America
Caribbean
Central America
Latin America and Caribbean
West Asia
South Asia
East and South
Asia
Africa
Developing Economies
Japan
United States
Developed Economies
Global
Developing country average
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 19/40
I. Value added trade patterns in the global economy 11
Figure 9. GVC participation, 2010, and GVC participation growth rates, 2005-2010
Source: UNCTAD-Eora GVC Database.
Note: GVC participation indicates the share o a country’ exports that is part o a multi-stage trade process; it is the oreign valueadded used in a country’s exports (upstream perspective) plus the value added supplied to other countries’ exports (downstreamperspective), divided by total exports. GVC participation growth here is the annual growth o the sum o the upstream and downstreamcomponent values (CAGR).
links) indicates that much o their exports are
processed and incorporated in third-country
exports – i.e. they operate at the starting point o
GVCs. South Asia remains the lowest ranked region
in terms o GVC participation. Much o the services
exports rom the region satises domestic demand
in importing countries and is not used to produce
urther exports.
However, South Asia is the region with the highest
GVC participation growth rate, albeit rom a low
base. Transition economies also show aster than
average growth. Nearly all developing regions
outpace the developed world in GVC growth.
Remarkable is the rapid growth rate o GVCs in the
least developed countries partly because o a low
base in terms o absolute values.
As noted above, GVC participation – or the role that
individual countries play in international production
networks – is driven by many dierent actors,
including size o the economy, industrial structure
and level o industrialization, composition o exports
and positioning in value chains, policy actors, and
others. As a result, countries with very dierent
characteristics may be very similar in the ranking o
GVC participation (gure 10).
Least Developed Countries
Memorandum item:
Transition Economies
South America
Caribbean
Central America
Latin America and Caribbean
West Asia
South Asia
East and South-East Asia
Asia
Africa
Developing Economies
Japan
United States
European Union
Developed Economies
Global
Growth of GVC
participationGVC participation rates
45%
52%
38%
45%
43%
40%
48%
37%
56%
54%
54%
52%
51%
45%
66%
59%
57% 4.5%
3.7%
3.9%
4.0%
1.9%
6.1%
4.8%
5.5%
5.1%
9.5%
6.4%
4.9%
4.1%
5.5%
8.0%
9.6%
5.7%
Upstream component
Downstream component
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 20/40
Global Value Chains and Development12
Figure 10. GVC participation rate of the top 25
exporting economies, 2010
Source: UNCTAD-Eora GVC Database.
Note: The GVC participation rate indicates the share o acountry’s exports that is part o a multi-stage trade process; it isthe oreign value added used in a country’s exports (upstreamperspective) plus the value added supplied to other countries’exports (downstream perspective), divided by total exports.
Singapore
Belgium
Netherlands
United Kingdom
Hong Kong, China
Sweden
Malaysia
Germany
Korea, Republic of
France
China
Switzerland
Russian Federation
Saudi Arabia
Italy
Thailand
Japan
Taiwan, Province of China
Spain
Canada
United States
Mexico
Australia
Brazil
India
82%
79%
76%
76%
72%
69%
68%
64%
63%
63%
59%
59%
56%
56%
53%
52%
51%
50%
48%
48%
45%
44%
42%
37%
36%
Upstream component
Downstream component
For example, the United States and Mexico have
near identical GVC participation rates, but Mexican
exports include a signicant amount o processing
trade, with high oreign value added inputs, whereasUnited States exports are used more downstream
in value chains, as intermediate inputs in the exports
o other countries.
Again, GVC participation is a relative concept.
United States rms may dominate many value
chains in terms o absolute size, but in relative
terms the participation in GVCs o many smaller
economies is higher. In other words, United States
rms also export many nal products that are not
used downstream to generate urther exports.
The GVC participation rate is a useul metric or
examining the trade-investment nexus because it
indicates the extent to which countries’ exports are
integrated into international production networks.
The metric can also eectively assess the extent
to which a country’s exports depend on GVCs.
Conversely, the GVC participation rate indicates
how much hypothetical “damage” to GVCs would
occur i a country’s exports were blocked as well
as the vulnerability o the GVC to shocks in an
individual economy along the value chain.
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 21/40
II. Value added trade patterns in the developing world 13
II. Value added trade patterns in the developing world
How much value are developing countries capturing rom trade?
The share o global value added trade captured by
developing economies is increasing rapidly. It grew
rom around 20% in 1990, to 30% in 2000, to over
40% in 2010. As a group, developing economies
are capturing an increasing share o the global value
added trade pie (gure 11). As global trade grows,
developed economies appear to rely increasingly
on imported content or their exports, allowing
developing countries to add disproportionatelyto their domestic value added in exports. This
underscores the importance or both developed
and developing countries to keep import barriers
(tari and non-tari) in check in order to maintain
export competitiveness.
Looking at the value added trade share or the
top 25 developing economy exporters (excluding
predominantly oil-exporting countries; gure 12)
shows that exporters o natural resources and raw
materials that use little oreign value added in exports
(such as Chile or Indonesia) obtain a relatively highshare o global value added trade, as do services
exporters such as India. Relatively open developing
economies with strong export perormances and
highly integrated in GVCs (such as the Republic o
Korea, Hong Kong (China), Singapore, Malaysia)
get a lower value added contribution rom trade.
However, the absolute contribution o value added
trade to GDP in these countries is high because o
the higher relative importance o trade.
Furthermore, comparing the domestic value added
contribution to GDP o exports in East and South-
East Asian countries with their share in global
GDP – another relative measure o value added
trade perormance – yields positive results; in
other words, despite the lower share o domesticvalue added in exports o these countries, the
absolute contribution o value added trade to their
economies is very signicant.
To what extent are developing country exports integrated in GVCs?
Among the top 25 developing economy exporters
there are signicant dierences in the degree to
which their exports are integrated in – or depend on
– GVCs (gure 13). The main East and South-East Asian exporters rank highest in GVC participation
as they both import a substantial part o their
exports (oreign value added) and a signicant part
o their exports are intermediate goods that are
used in third countries’ exports. These countries’
exports are thus integrated in GVCs both upstream
and downstream; in other words, they operate in
“the middle” o GVCs. The commodity exporting
group o countries also rates relatively high in
GVC participation, but largely because o outsized
downstream usage o their export products in thirdcountries’ exports.
Some o the larger emerging markets such as
India, Brazil, Argentina and Turkey, have relatively
low GVC participation rates. These countries have
lower upstream participation levels, both because
o the nature o their exports (natural resources
and services exports tend to have less need or
imported content or oreign value added) and
because larger economies display a greater degree
o sel-suciency in production or exports. They
also have lower downstream participation levels
Figure 11. Share of developing countries in globalvalue added trade and in gross exports, 1990-2010
Source: UNCTAD-Eora GVC Database.
1990 2000 2010
Value added in trade share
Export share
30% 30%
42%
39%
22%23%
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 22/40
Global Value Chains and Development14
because o a ocus on exports o so-called nal-
demand goods and services, i.e. those not used as
intermediates in third-country exports.
Again, countries may have very similar GVC
participation rates or very dierent reasons. Taiwan
Province o China and Egypt have the same overall
participation rate (50%), but where the ormer uses
a signicant amount o oreign components in its
export products, the latter (Egypt) exports more or
intermediate use in third-country exports.
Figure 12. Domestic value added trade shares of the top 25 developing economy exporters, 2010
Source: UNCTAD-Eora GVC Database.
Note: Excludes predominantly oil-exporting countries.
Top 25 developing
economy exporters
Domestic value added
trade share
70%
56%
46%
36%
90%
71%
68%
87%
58%
70%
91%
80%
82%
78%84%
72%
72%
85%
91%
93%
89%
87%
87%
73%
91%
China
Korea, Republic ofHong Kong, China
Singapore
India
Taiwan Province of China
Mexico
Brazil
Malaysia
Thailand
Indonesia
Turkey
South Africa
Chile Argentina
Viet Nam
Philippines
Egypt
Colombia
Peru
Morocco
Macao, China
Pakistan
Tunisia
Bangladesh
0 100 200 300 400 500 600 1 500 1 600 1 700
Breakdown of gross exports in domestic
and foreign value added ($ Billions)
DVA component
FVA component
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 23/40
II. Value added trade patterns in the developing world 15
Figure 13. GVC participation rate of the top 25
developing economy exporters, 2010
Source: UNCTAD-Eora GVC Database.
Note: Excludes predominantly oil-exporting countries.
Singapore
Hong Kong, China
Malaysia
Korea, Republic of
South Africa
China
Tunisia
Philippines
Thailand
Taiwan Province of ChinaEgypt
Morocco
Chile
Viet Nam
Indonesia
Mexico
Peru
Turkey
Pakistan
Argentina
Macao, China
Brazil
India
Bangladesh
Colombia
82%
72%
68%
63%
59%
59%
59%
56%
52%
50%50%
48%
48%
48%
44%
44%
42%
41%
40%
39%38%
37%
36%
36%
26%
Upstream component
Downstream component
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 24/40
Global Value Chains and Development16
III. GVCs: the investment-trade nexus
Figure 14. Global trade (exports of goods and services), by type of TNC involvement, 2010
Source: UNCTAD estimates, based on World Investment Report 2012 (table I.8) and various sources; see also box 3.
What is the role o TNCs in global trade?
Investment and trade are inextricably intertwined.
Much o trade in natural resources is driven by large
cross-border investments in extractive industries
by globally operating TNCs. Market-seeking oreign
direct investment (FDI) by TNCs also generates trade,
oten shiting arm’s length trade to intra-rm trade.
Eciency-seeking FDI, through which rms seek to
locate discrete parts o their production process in
low-cost locations, is particularly associated withGVCs; it increases the amount o trade taking place
within the international production networks o
TNCs and contributes to the “double counting” in
global trade fows discussed in this report.
The ratio between global FDI stock and trade has
almost doubled over the last decade, increasing
rom around 50% in the mid-1990s to more than
100% in 2010, with growth rates in the FDI to
services trade ratio even higher. FDI is an increasingly
important driver o trade fows worldwide. UNCTAD
estimates that around 80% o global trade (in
terms o gross exports) is linked to the international
production networks o TNCs, either as intra-rm
trade, through non-equity modes o international
production (or NEMs, which include, among others,
contract manuacturing, licensing, and ranchising),
or through arm’s length transactions involving at
least one TNC (gure 14 and box 3).
How do international production networks o TNCs shape value added trade?
The international production networks o TNCs,
within which most trade takes place, are heavily
geared towards providing those value added inputs
required to generate trade. GVCs make extensive
use o services. While the share o services in gross
exports worldwide is only around 20%, almost
hal (46%) o value added inputs to exports is
contributed by service-sector activities, as most
manuacturing exports require services or their
Global trade ingoods and services
Non-TNCtrade
Intra-rmtrade
NEM-generatedtrade
TNC arm´ length trade
All TNC-related trade
Total trade within the international
production networks of TNCs:
~80%
ESTIMATES$ Trillions
~19 ~4
~15 ~6.3
~2.4
~6.3
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 25/40
III. GVCs: the investment-trade nexus 17
Box 3. Estimating trade within the international production networks of TNCs
The estimates or trade taking place with the international production networks o TNCs in gure 15 are based on
evidence on investment-trade links o individual countries and regions:6
• In the United States, in 2010, aliates o oreign TNCs accounted or 20% o exports and 28% o imports o goods, while TNCs based in the United States accounted or 45% o exports and 39% o imports. Thus sometwo-thirds o both exports and imports o goods can be considered as within the international production net-works o TNCs.
• In Europe, in 2009, French TNCs accounted or some 31% o goods exports and 24% o imports, while oreignaliates in France accounted or 34% and 38%, respectively. Thus some 64% o total French exports and 62%o total French imports o goods in 2009 can be considered as within the international production networks o TNCs. Similar scattered evidence exists or other EU countries.
• In Japan, TNCs based there accounted or 85% o exports o goods and services, while oreign aliates con-tributed a urther 8%. Thus 93% o total Japanese exports o goods and services are linked to TNCs.
• In China, oreign aliates accounted or some 50% o exports and 48% o imports in 2012. Adding the trade
activities o Chinese TNCs, although perhaps not as large as the share o their French or United States coun-terparts given the lower (but growing) share o Chinese outward FDI, would lead to estimates o trade withininternational, production networks in excess o the United States share.
• In developing countries as a group it is likely that the share o trade within the production networks o TNCs ishigher, or two reasons: (a) the productivity curve o rms is steeper than in developed countries, meaning thattrade is likely to be even more concentrated in a small number o large exporters and importers with above-average productivity, i.e. predominantly TNCs and their aliates; (b) the share o extractive industries in theirexports (at around 25%) is signicantly higher than the world average (around 17%) and the extraction andtrade o natural resources generally involves TNCs.
A signicant share o this trade is intra-rm trade, the international fows o goods and services between parentcompanies and their aliates or among these aliates, as opposed to arm’s length trade between unrelated parties(inter-rm trade). For example, the share o exports by United States aliates abroad directed to other aliatedrms, including parent rms, remained high at about 60% over the past decade. Similarly, nearly hal o the exports
o goods by oreign aliates located in the United States are shipped to the oreign parent group and as much as70% o their imports arrive rom the oreign parent group. Japanese TNCs export 40% o their goods and servicesto their own aliates abroad. Although urther evidence on intra-rm trade is patchy, the general consensus is thatintra-rm trade accounts on average or around 30% o a country’s export, with large variations across countries.
The above explanations or the most part ocus on merchandise trade. There is evidence that TNC involvement inservices trade, with a growing share o intra-rm trade in services (e.g. corporate unctions, nancial services, etc.),is even higher. Where not in the orm o intra-rm trade, services trade oten takes place in NEM relationships (IT/ BPO, call centers, etc.). NEMs as a whole (including contract manuacturing activities) are estimated to be worthover $2 trillion (see World Investment Report 2011 ).
Arm’s length trade by TNCs (exports to and imports rom unrelated parties) is estimated to be worth around $6 trillion,the residual. Non-TNC-related trade includes all transactions between rms that have only domestic operations,anonymous transactions on commodity exchanges, etc.
Source: UNCTAD.
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 26/40
Global Value Chains and Development18
Figure 15. Sector composition of global gross exports, value added inputs to exports, and FDI stock, 2010
production. The parallel with FDI is clear: more than
60% o global FDI stock is allocated to services
activities, a signicant part o which is linked to
GVCs (gure 15). The share o services FDI is stillmore than 35% i only non-nancial sector FDI is
considered (although nancial sector FDI is not
only a value chain in its own right but also provides
crucial services to other GVCs).
This picture is almost the same in both developed
and developing countries. Developing country gross
exports o primary sector output (commodities) and
primary sector value added in trade are only around
4 percentage points higher than the average or all
countries, driven by slightly higher primary sector
inward FDI stock (8% compared to the 7% average).
How does the presence o TNCs aect countries’ GVC participation?
The involvement o TNCs in generating value added
trade is conrmed by the statistical relationship
between FDI stock in countries and their GVC
participation rates (gure 16). The correlation is
strongly positive, and increasingly so over time,
especially in the poorest countries, indicating thatFDI may be an important avenue or developing
countries to gain access to GVCs and grow their
participation.
Ranking countries by the ratio o FDI stock over
GDP and grouping them in quartiles (gure 17)
shows that the group o countries with most FDI
relative to the size o their economies tend to have:
• higher oreign value added in their exports(oreign aliates o TNCs producing or exportstend to use value added produced by otherparts o the TNC production network);
• higher GVC participation (oreign aliateso TNCs not only use oreign inputs in theirproduction, but also supply to other parts o the TNC network or urther exports); and
• a higher contribution o value added trade totheir GDP.
Source: UNCTAD-Eora GVC Database, UNCTAD FDI Database, UNCTAD FDI Database.Note: The sectoral breakdown o gross exports is based on ISIC, rather than SITC (normally used or merchandise trade), or
consistency with the classication employed or value added trade and FDI. Thus, rened oil/petroleum products and ood andbeverages are classied under manuacturing.
7%11%
7%
71%
43%
26%
22%
46%
67%
Gross exports Value added
inputs to exports
Inward FDI
stock
Services
Manufacturing
Primary sector
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 27/40
III. GVCs: the investment-trade nexus 19
Source: UNCTAD-Eora GVC Database, UNCTAD FDI Database, UNCTAD analysis.
Note: data or 187 countries over 20 years. The regression between the annual GVC Participation growth and annual FDI Inward(stock) growth, in logs, shows a positive and signicant correlation, at the 5% level. This relation also holds, at the 5% level, dividing
the sample in developed and developing countries, and in two time periods (1990-2000 and 2001-2010). All regressions use lagged(one year) inward FDI stock growth rates.
Figure 17. Key value added trade indicators, by quartile of inward FDI stock relative to GDP, 2010
Source: UNCTAD-Eora GVC Database, UNCTAD FDI Database, UNCTAD analysis.
Note: data or 180 countries, ranked by inward FDI stock relative to GDP and grouped in quartiles (o 45 each); data reported aremedian values or each quartile.
Figure 16. Correlation between levels of inward FDI stock and GVC participation
9
1 3
1 7
2 1
0 5 10 15
FDI Stock
9
1
3
1 7
2 1
0 5 10 15
FDI Stock
1990−2010 Fitted values
GVC Participation vs FDI Inward Stock
Developed Countries - logsGVC Participation vs FDI Inward Stock
Developing Countries - logs
G V C p
a r t i c i p a t i o n
G V C p
a r t i c i p a t i o n
1st quartile
(Countries with high FDI
stock relative to GDP)
2nd quartile
3rd quartile
4th quartile
(Countries with low FDI
stock relative to GDP)
34%
24%
17%
18%
Foreign value added
in export
Foreign value added
GVC participation
Contribution of value added
trade to GDP
58%
54%
48%
46%
37%
30%
24%
21%
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 28/40
Global Value Chains and Development20
IV. The development impact of GVCs
What is the impact o value added trade and GVCs on development?
Participation in GVCs is seen by many developing
country policymakers as an important element
o their economic development strategy. They
recognize that GVCs act as a route to market or
export products and services. Production or exports
directly generates value added and contributes to
GDP, job creation, income generation, tax incomeand so orth. And, longer term, GVCs can provide
opportunities or industrial upgrading along the
value chain.
On the other hand, policymakers and the
development community recognize that GVCs
also entail risks. Not all the potential benets o
GVCs materialize automatically (as shown in this
report, local value added contributions and hence
employment and income generation may well be
limited through the use o oreign value added in
exports), and taking advantage o GVC participation(and upgrading opportunities) is dependent on the
development o productive capacities, technology
and skills. (There are many other potential pitalls
or countries in GVC participation, which will be
explored in the policy analysis or World Investment
Report 2013 ).
The experience over the last 20 years shows that,
as countries increase their participation in GVCs,
their GDP growth rates tend to increase as well. A
statistical analysis correlating GVC participation and
per capita GDP growth rates shows a signicant
and positive relationship, both or developed and
developing economies (gure 18).
However, these results only demonstrate a
correlation between the two variables and do not
necessarily show causality. In order to establish
causality, more research will be required, including
the examination o case studies.
Preliminary evidence rom the data appears to
indicate that increased GVC participation tends to
go hand in hand with aster GDP per capita growth
(gure 19). The 30 developing economies with the
highest GVC participation growth rates in the 20-
year period rom 1990 to 2010 (rst quartile) show a
median rate o GDP per capita growth in the same
period o 3.3%, compared to 2.1% or the next 30
countries, and 0.7% or the bottom 30 countries.
GDP per capita growth is only a rough and
exogenous measure o the eect o GVCs on
development. The value added trade data in the
UNCTAD-Eora GVC Database provides a detailedbreakdown o the components o value added –
labour, capital, tax, prots – allowing a more ne-
grained assessment o the economic impact o
GVC participation, which will be included in WIR13.
Is there a trade-o between GVC participation and domestic value added?
GVC participation depends on both upstream and
downstream links in the value chain. Countries
increase their GVC participation both by increasingimported content o exports (oreign value added
in exports) and by generating more value added
through goods and services or intermediate use
in the exports o third countries. Naturally, the
latter mechanism yields the positive results or the
domestic economy, as it implies growing domestic
value added in exports.
In act, both the right hand quadrants in gure 20
– countries that reduce their reliance on oreign
value added in exports – indicate higher GDP per
capita growth results than the let hand quadrants.Examples include China, Chile, the Philippines,
Thailand and Morocco.
Interestingly, both the top quadrants in the matrix
– countries with aster GVC growth rates – have
signicantly higher growth rates than the bottom
quadrants. This suggests that even those countries
that rely more on oreign value added in exports, on
average, may be better o i it results in higher GVC
participation. Countries with high GVC participation
growth rates include Indonesia, Malaysia, VietNam,
Bangladesh, Mexico and Turkey.
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 29/40
IV. The development impact of GVCs 21
Figure 18. Correlation between growth in GVC participation and GDP per capita
Source: UNCTAD-Eora GVC Database, UNCTAD analysis.
Note: the regression between the annual GDP per capita (in PPS) growth and annual GVC participation index growth, in logs, shows
a positive and signicant correlation, at the 5% level. This relation also holds, at the 5% level, dividing the sample in developed anddeveloping countries, and in two time periods (1990-2000 and 2001-2010). To avoid picking-up a compositional eect resulting romthe correlation between a country’ s total value added (used as a component to calculate the GVC participation index) and its percapita GDP, all regressions use lagged (one year) GVC growth rates.
Clearly the optimal policy outcome is depicted in the
top right hand quadrant, where countries increase
GVC participation through growth in the domestic
value added in exports. Examples o countries in
the top right quadrant include China, Indonesia,
Thailand and Peru. While increasing oreign value
added content in exports may be a short-term
trade-o or policymakers, longer term the creation
o domestic productive capacity yields the better
results.
Are there dierent GVC development paths?
The dierent outcomes in each o the combinations
o GVC integration and domestic value added
suggest that there may be a set o distinct “GVC
development paths” or evolutionary lines in
countries’ patterns o participation in GVCs.
Although the matrix is a simplication o reality that
cannot capture all the dynamics o development,
broadly, a number o GVC development paths can
be hypothesized (gure 21), each with a set o
prevalent trade and investment patterns:
• Engaging in GVCs. Developing countries
may see imports o intermediate goods,components and services increase, as wellas the importance o processing exports. This pattern oten coincides with an infux o processing FDI and the establishment o NEM-relationships (e.g. contract manuacturing) with TNCs.
• Preparing or GVCs. Some developingcountries may see exports remainpredominantly within sectors and industrieswith domestic productive capacity (with limitedneed or imported content). FDI infows help
produce intermediate goods and services or
G V C
g r o w t h
− 1
− . 5
0
. 5
1
−.2 −.1 0 .1 .2GDPpc growth
− 1
− . 5
0
. 5
1
G V C
g r o w t h
−.2 −.1 0 .1 .2GDPpc growth
2001−20101990−2000
GVC growth vs GDP per Capita growthDeveloped Countries
GVC growth vs GDP per Capita growthDeveloping Countries
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 30/40
Global Value Chains and Development22
Figure 19. GDP per capita growth rates by quartile of growth in GVC participation,
developing economies only, 1990-2010
Source: UNCTAD-Eora GVC Database, UNCTAD analysis.
Note: data or 120 countries, ranked by GVC participation growth and grouped in quartiles (o 30 each); growth rates reported aremedian values or each quartile.
Figure 20. GDP per capita growth rates for developing countries with high/low growth in GVC participation,
and high/low growth in domestic value added share, 1990-2010
Source: UNCTAD-Eora GVC Database, UNCTAD analysis.
Note: data or 123 developing countries, ranked by growth in GVC participation and domestic value added share; high includes thetop two quartiles o both rankings, low includes the bottom two; GDP per capita growth rates reported are median compound annualgrowth rates or countries in each quadrant.
Median of GDP per capita growth 1990-2010
1st quartile
(Countires with rapidlygrowing GVC participation)
4th quartile
(Countires not increasingtheir GVC participation)
2nd quartile
3rd quartile
3.3%
2.1%
1.2%
0.7%
GVC participationgrowth rate
Growth of the domestic value addedshare of exports
Low
Low
High
High
+ 2.2% + 3.4%
+ 0.7% + 1.2%
“Integrating in GVCs”
+ n.n%median GDP percapita growth rates
=
“Increasing domestic value added”
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 31/40
IV. The development impact of GVCs 23
Figure 21. Possible GVC Development Paths
Source: UNCTAD.
export products, substituting imports. Thesepatterns o trade and FDI preserve domestic
value added in trade, at times at the cost o
more rapid integration in GVCs.
• Upgrading in GVCs. Some developing
countries with an already signicant level
o integration in GVCs have succeeded in
increasing exports o higher value added
products and services or in capturing a
greater share o value chains (covering more
segments). Such export upgrading patterns
oten combine with an infux o FDI in adjacentvalue chain segments and higher technology
segments.
• Competing in GVCs. Some developing
countries manage to compete successully
at high value added levels through domestic
productive capacity or exports. They may see
patterns o FDI aimed at integrating domestic
operators in international production networks,
oten through M&As.
• Converting GVCs. Some developing countries
have seen the composition o their exports
shit towards processing industries requiringhigher imported content, or have even seen
productive capacity or exports convert to
engage in tasks and activities that are part
o GVCs. This process can coincide with
increased FDI in processing industries,
including through M&As, and the establishment
o NEM-relationships with TNCs.
• Leaprogging in GVCs. A ew countries
have experienced very rapid development
o domestic productive capacity or exports
competing successully at high value addedlevels. In these cases, FDI has oten acted as
a catalyst or trade integration and domestic
productive capacity building.
Further research on the eects o integration in
GVCs, increased domestic value added trade,
and associated patterns o trade and investment,
will be needed to explore the policy relevance
and implications o dierent GVC development
paths. Nevertheless, the preliminary ndings
presented in this report provide ample material or a
comprehensive policy analysis agenda.
. %
0. % .2%
“Integrating
in GVCs”
“Upgrading”
CONCEPTUAL
“Converting” “Leapfrogging”
“Engaging” “Competing”
“Preparing”
“Increasing domestic value added”
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 32/40
Global Value Chains and Development24
Concluding remarks: a policy analysis agenda
With this report UNCTAD’s Division on Investment
and Enterprise launches the UNCTAD-Eora GVC
Database o value added trade and investment.
The preliminary analysis o the data presented in
this report shows how global investment and trade
are inextricably intertwined through GVCs. The
international production networks o TNCs that
shape GVCs through their investments in productive
assets worldwide account or some 80% o global
trade.
UNCTAD’s data show that almost all developingcountries, including the poorest, are increasingly
participating in GVCs. Evidence on GVC links
in developing countries – based on the data
presented here and on UNCTAD’s wider research
on GVCs – suggests that they can have important
development benets:
• GVCs can acilitate access to global marketsand integration in the global economy ordeveloping countries, which no longer have todevelop an entire industry to generate exports,
but can ocus on ewer tasks within industryvalue chains.
• Participation in GVCs generates employmentand may result in aster GDP and incomegrowth.
• Moreover, GVCs can be an important avenueor developing countries to build productivecapacity, including through technologydissemination and skill building, openingup opportunities or longer-term industrialupgrading.
However, GVCs can also entail risks or developingcountries:
• Many o the potential development benetso GVCs — in particular technologydissemination, skill building and upgrading —are not automatic. Developing countries canremain locked into relatively low value addedactivities.
• The location o tasks and activities within GVCsis determined by dynamic actors — includingrelative labour productivity and cost — and
as such can shit around the internationalproduction networks o multinational rms (theycan be ootloose).
• The sustainability impact o GVCs can besignicant, starting rom the environmentalimpact o moving goods along internationallydispersed value chain segments, to therisk o rms moving activities with greaterenvironmental impact to less regulatedlocations. Similarly, the social and labourimpact o GVCs must be taken into account.
This balance o opportunities and risks makes a
well-inormed policy debate on the development
impact o GVCs o paramount importance. The
raison d’être or the UNCTAD-Eora GVC Database
on value added trade and investment is to stimulate
and contribute to such debate.
UNCTAD will, in the coming months, deepen the
analysis o the data, ocusing in particular on the
development impact and policy implications or
developing countries. Questions that UNCTAD will
aim to answer include:
• What are the implications o new insights onGVCs or investment and trade theory?
• What are the prospects or urther evolution o GVCs and their role in global investment andtrade dynamics?
• What are the drivers and determinants o the location or re-location o cross-borderproductive activity via (equity and non-equity)investment in GVCs?
• Should developing countries adopt specic
policies in their development strategy toincrease GVC participation? I so, under whatcircumstances, based on what criteria?
• How can developing country policymakerspromote upgrading over time? Is the middle-income trap a real challenge or policymakers?
• Can we measure the “ootloose” nature o some o the links in the chain? What kind o shocks and vulnerabilities might threaten thegains rom GVC participation? Is trade morevolatile within GVCs?
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 33/40
Concluding remarks: a policy analysis agenda 25
• What policies can maximize the benetsand minimize the negative eects o GVCparticipation in economic, social and
environmental terms?• What are the implications o the spread o
GVCs or transer pricing?
The data and policy analysis work that UNCTADwill carry out — with the involvement o experts in
the eld — will contribute to and benet rom on-going debates in UNCTAD’s discussion orumsand expert meetings, and will culminate in the
orthcoming World Investment Report 2013 onGVCs and Development. Upon publication o WIR13 the UNCTAD-Eora GVC Database will be
made available to the public.
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 34/40
Global Value Chains and Development26
ANNEX. Technical note on the UNCTAD-Eora GVC Database
Calculating value added trade rom the Eora data
The Eora dataset provides a multi-region input-
output (MRIO) table at the world level used to
estimate value added in trade. In particular, the
innovation with respect to national input-output
tables is that the MRIO tables break down the use o
products according to their origin: rst, splitting the
fows o products between domestically produced
or imported; second, distinguishing intermediateand nal use; third, indicating the origin o every
imported product. Thereore, using a MRIO table
can allow us to see the relationship between all
producers and consumers in all regions covered.
The construction o the Eora MRIO table ollows
several steps:7
1. The starting points are the national
supply and use tables (SUTs). National SUTs are
considered better than input-output tables because
they provide inormation on both products and
industries. A supply table provides inormation onproducts produced by each domestic industry and
a use table indicates the use o each product by
an industry or nal user. However, these tables are
only available or a limited number o countries;
the remaining countries are hence represented by
traditional input-output (I–O) tables, which can be
sourced rom available data or compiled according
to a range o technology assumptions. In order to
avoid departures rom the original raw data, Eora
decided to keep the technology assumption at the
industry and product-level made by the respectivedata provider.
2. National SUTs and I–O tables are linked
through international trade statistics using import
tables, to obtain a multi-region input-output table.
3. Ater obtaining a rst estimate o a MRIO
table, the resulting trade data have been balanced
through an industry-level balancing condition: the
total output produced by each industry must equal
the sum o the inputs used by that industry. This has
been achieved via ‘constraints data’, which are: i)
Input-output tables and main aggregates data rom
national statistical oces; ii) Input-output compendia
rom Eurostat, IDE-JETRO and OECD; iii) The UN
national accounts main aggregates database and
ocial data; iv) The UN Comtrade and UN Service
Trade international trade databases. The balancing
o the MRIO table is conducted ater the initial table
is constructed. Disturbances are also allowed in
the balancing exercise to allow or unaligned and
conficting inormation. In general, the reliability
o a balanced table increases with the qualityand amount o superior data used or balancing,
and hence it can be expected that countries with
better / more numerous statistical sources will be
represented with more condence in the nal MRIO
(see the next section or a validation o these data).
4. The time series is constructed iteratively,
by starting with an initial year estimate (year 2000),
balancing it with all the starting year constraints,
and taking the solution as the initial estimate or the
ollowing year, and so on. In each year, all available
data or that year (GDP totals, trade data, new I–Otables, interpolated I–O table estimates, and so on)
are overlaid onto the initial estimate o that year, and
the table is re-balanced.
5. Every single data point in the Eora MRIO
is accompanied by an estimate o its standard
deviation, refecting the extent to which it was
contested, interpolated, estimated, or adjusted
away rom its original value in order to assemble a
balanced global I–O table.
Reerences or urther detail about the Eora
database can be ound in the end notes.
Figure A.1 below shows a simplied MRIO table,
considering only one industry or two countries. The
industry (e.g. chemicals) in a country A produces
a good x (e.g. plastic) which can be used as an
intermediate input in the production o another
good or to serve nal demand in the same industry.
Input-output analysis assumes that the inputs
used when producing a product are related to the
industry output by a linear and xed coecient o
production unction (at least in the short run). At the
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 35/40
Annex 27
Figure A.1. Structure of a MRIO Table
X A
X B
V A V
B
X A X
B
A
X B
V A V
B
X A X
B
+
+ +
+
= =
Exports from A to B of
intermediates
Exports from A to B of
nal products
Intermediate use Final demand
Value added
Gross input
Gross
outputCountry A Country B Country BCountry A
Country B
Country A
Industry Industry Industry Industry
Industry
Industry
Intermediate
use of domestic
output
Intermediate
use by B of
exports from A
Intermediate
use by A of
exports from B
Intermediate
use of domestic
output
Final use
of domestic
output
Final use
of domestic
output
Final use by A
of exports
from B
Final use by B
of exports
from A
same time, the output can be used domestically by
country A or exported to another country B, where
it can also enter as an intermediate or nal demand.
Analogously, the same good can be imported rom
country B, and used in A or the production o intermediates or to serve nal demand.
The rows in a MRIO table thus indicate the use o
gross output rom a particular industry in a country.
The gross output X produced in country A (rst row)
can be used by country A itsel as intermediate or as
nal consumption, or by the other country B, again
as an intermediate input or nal product. From here,
we can retrieve a measure o gross exports rom
A to B, summing the intermediate and nal output
produced in country A and used in country B (the
grey blocks in the example above).
The columns o a MRIO table provide instead
inormation on the technology o production, as
they indicate the amounts o intermediates needed
or the production o the gross output whose use
is then decomposed along the row. Hence, each
column provides the domestic and oreign share o
intermediate in the production o one unit o output.
The rst column thus shows how much domestic
inputs contribute to the production o the gross
output o country A (rst cell, ‘Intermediate use o
domestic output’), and how much instead inputs
are sourced rom abroad through imports (second
cell, ‘Intermediate use by A o exports rom B’). The
dierence between the gross output produced ineach country and the sum o the (domestic and
oreign) inputs necessary or its production yields
the value added generated in each country (V ).
Thanks to this inormation, we can translate the
MRIO table or multiple countries and industries into
a standard I–O matrix orm:8
x = T + y
x = A x + y
(I – A)x = y
x = (I – A)-1 y = Ly (1)
where x is gross output, T is the intermediate
demand, y is nal demand, I is the identity matrix,
A is the technological coecient matrix, and L is
the Leontie inverse.9 From this general equation,
we can represent a MRIO table or a n-countries
model, still assuming that each country has one
representative industry producing a single product.
= (2)
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 36/40
Global Value Chains and Development28
= (3)
This n-countries’ ramework has been extended in
the UNCTAD Eora GVC Database to compute the
“value added trade” measure, that is the value
added embodied in gross trade fows. To calculatethe latter, we start rom a row vector v with each
element representing the share o value added
per unit o output by country (that is v 1 = V 1 / X 1 ),
combined with the Leontie inverse and a vector
e summarizing aggregate exports by country as
retrieved by the sum o the intermediate inputs
exported abroad and exports o nal goods10
The rst matrix T is the key matrix o our analysis,
and or ease o readability it is replicated in the next
Figure A.2. The matrix essentially describes how
the value added contained in the exports o each
country (and industry) is generated (by column)
and distributed (by row) across countries. The rst
column o the matrix describes the value added
contained in the export o country 1.11 This is
composed o two parts:
• the term T v 11 (in the matrix multiplication we
have that T v 11 = v 1L11e1 ) denotes the Domestic
Value Added (DVA) content o exports o country 1;
• the generic term T v k1 (in matrix notation T v
k1 =v k L k1e1 ) denotes the Foreign Value Added (FVA)content o exports o country 1 generatedby country k (with k ≠ 1 ). Recall that theproduction o output by country 1 (part o which is exported) requires inputs rom othercountries. In producing these inputs, the othercountries also generate value added. Hence,
this term represents the share o value addedthat has been generated in country k (v k ) andthat has been imported by country 1 (L k1 ) inorder to produce its exports (e1 ).
The (column) sum o Domestic and Foreign Value
Added, by construction, will yield the total exports
o country 1.
The other columns o the T matrix replicate the
exercise or the other countries. So in column 2 o
the matrix we will nd the term T v 22, which denotes
the DVA content o exports o country 2, as well
second column) or its exports. More specically,
in matrix expression we have T v 12 = v 1L12e 2: hence
this term represents the share o exports o country
2 (e 2 ) that depends on the value added sourced
by country 1 (v 1L12 ). The same would be true or
a country 3, in which the term T v 13 in the third
column indicates how much country 3 is sourcing
in terms o value added rom country 1. Hence,
by reading the matrix along the row, rather than
along the column (and excluding the diagonal term
T v kk ), we would have an indication o how much o each country’s domestic value added enters as an
intermediate input in the value added exported by
other countries. The latter terms is what Koopman
et al. (2011) call “indirect value added exports”
(DVX). Clearly, by construction what each country
contributes to all the others in terms o indirect
value added exports has to be equal at the world
level to what each country sources rom all the
others in terms o oreign value added, that is at
the world level FVA = DVX. The latter gives a rough,
though not perect, proxy o the double countingembedded in the gross (ocial) trade gures.
More precisely, part o the DVA exported and
incorporated in third countries’ export can itsel
return home and thus generate some urther
double counting, as the original DVA measure
would include a share o domestic value added that
is returned home ater being processed abroad.12
However, given the complexity o computing all
these terms or a MRIO with 187 countries, and
since a perect decomposition o gross exports in
as the generic term T v k2, which denotes the FVA
content o exports o country 2 generated by
country k , and so on. Hence, the DVA can be read
on the diagonal o the matrix as the generic termT v
kk or any country k in the dataset.
Now, consider country 1 and country 2. As we have
seen, country 1 is sourcing some value added rom
country 2 or its exports (the term T v 21 which we have
already considered as a component o FVA in the
rst column), but also country 2 is sourcing some
value added rom country 1 (the term T v 12 in the
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 37/40
Annex 29
Figure A.2. The matrix of the value added content of trade
Country 1 Country 2 Country 3 Country k Country N Country 1 Country 2
Country 3 …
Country k …
Country N
Country 2 Country 3 Country k Country N Country 1 Country 2
Country 3 …
Country k …
Country N
DVX
FVA
DVA … …
T v
11 12T … …
T v
21 22T … …
32T
v
33… T
v
3k… T
v
3N
… … … … … …
k2
T v
k3… T v
kk… T v
kN
… … … … … … …
Tv
N1 N2T
v
N3… T
v
Nk… T
v
NN
… …
v
11
v
12 13…
1k…
1N
v
21 22 23…
2k…
2N
v
31 32
v
33…
v
3k…
v
3N
… … … … … … …
k1 k2
v
k3… v
kk… v
kN
… … … … … … …
v
N1 N2
v
N3…
v
Nk…
v
NN
all its components is still under discussion in the
literature, we have not carried out this exercise in
the UNCTAD Eora GVC data (in short Eora data),
limiting ourselves to identiy the three terms o DVA,
FVA and DVX previously discussed.13
In any case, attempts by the literature to calculate
such a measure o ‘re-imported DVA’ show that the
latter is relatively small at the world level (though
it might be slightly more signicant or some
countries or industries). In particular, Koopman et
al. (2011) estimate that the domestic content o
oreign exports that nally return home is 4% o
gross exports in 2004. The results computed by
Stehrer (2012) using the WIOD database indicate
at the world level a range rom a minimum share o
2.6% in 1995 to a maximum o 3.3% in 2008, with
the gure or 2009 being at 2.9%. The OECD–WTO
initiative, in turn, estimates that the re-importedDVA equals to just 0.6% o world gross exports in
2009.
In light o this evidence, the oreign value added
component (FVA) reported in the Eora data can
thus be considered as a lower bound o the
actual “double counting” taking place in world
trade, remembering in any case that a small (and
unaccounted) raction o double counting remains
in our DVA measure.
Validating the UNCTAD Eora GVC data
As recalled in Box 1, a number o world I–O tables
nowadays exist providing a measurement o value
added trade and thus allowing, in principle, a
benchmarking exercise, at least or the commoncountries and indicators that can be identied
within each dataset.
The most simple indicator that can be commonly
computed across datasets is the oreign value
added content o exports (FVA). Koopman et al.
(2012), working with the GTAP database, estimate
that the oreign content o exports at the world level
is 21.5% in 2004 (Eora data in 2004 is 28.7%).14
Stehrer (2012) estimates that the world oreign
value added o exports (using WIOD) is 23.7% in
2009,15
while rom the OECD–WTO data one canestimate the same gure at roughly 21% o gross
exports in 2009. The same gure or the Eora data
is at 27.6%.
It seems thereore that the UNCTAD Eora GVC data
on FVA have a slight upper bias (between 4 and 7%)
at the world level with respect to other comparable
dataset. This can be expected, considering that
the dataset is the only one covering all individual
countries in the world. As such it does not include,
as others dataset do, an articial ‘Rest o the
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 38/40
Global Value Chains and Development30
Figure A.3. FVA share in exports, comparison between Eora and WIOD
Source: UNCTAD/Eora, WIOD.
World’ country whose I–O matrix has been derived
through a proportionality assumption based on an
‘average’ world technology. The latter could yield
a downward bias in the computed world FVA, asthe world average I–O includes by denition large,
relatively close, countries, while most excluded
countries in the ‘Rest o the World’ aggregate tend
to be small, relatively more open, economies.
To get a sense o this dierence, Figure A3 below
reports the extent o the dierence in world FVA
share between Eora and the WIOD data or various
years.16 As it can be seen, within a common time
trend o increasing oreign value added over time
(in line with evidence o a deepening globalization
process across the world), level dierences in the
two datasets are not large, and are getting smaller
over time.
Figure A4 compares instead the FVA share o all the
39 countries included in WIOD (vertical axis) with
the same measure retrieved rom the Eora data
(horizontal axis) or the year 2009 (last available year
in WIOD data). As it can be seen, both variables or
each country tend to be scattered around the 45°
degree line, thus indicating no particular bias in one
dataset or the other. Correlation is around .9.17
15%
20%
25%
30%
Eora
WIOD
1990 1995 2000 2005 2010
Figure A.4. FVA share in exports by country, WIOD vs. Eora, 2009
Source: UNCTAD/Eora GVC Database; WIOD.
W I O D
. 1
. 2
. 3
. 4
. 5
. 6
.1 .2 .3 .4 .5 .6
Eora
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 39/40
31
Notes and References
1 The Eora Project, originally unded by the AustralianResearch Council, based at the University o Sydneyand comprising an international team o researchers,developed the so-called “world multi-region input-output database” that is the basis or the generationo the value added trade estimates in the GVCDatabase discussed in this paper. For urther details,see http://www.worldmrio.com/.
2 Equating oreign value added with the doublecounting in global trade gures is a simplication.Some urther double counting takes place withinoreign value added as exported value added canre-enter countries to be incorporated in urther
exports, and so orth. Such circular double countingcan be signicant in some countries and someindustries, but is marginal in most.
3 This variable is related to an active literature onmeasuring vertical specialization, with the rstindicator calculated being the value o importedinputs in the overall (gross) exports o a country. Therenement to this indicator o vertical specializationcorrects or the act that the value o (gross)imports used by country A to produce exports(as retrieved rom ‘standard’ I–O tables) in realitymight incorporate the domestic value-added o the same country A that has been used as aninput by a oreign country B, rom which the samecountry A then sources. Allowing instead only orthe oreign value-added o country B to enter in thecalculation o country A’s inputs nets out this eect.See: Hummels, D., J. Ishii and K.-M. Yi (2001) “Thenature and growth o vertical specialization in worldtrade”, Journal o International Economics 54(1),75-96; and Johnson, R.C. and G. Noguera (2012)“Accounting or intermediates: Production sharingand trade in value-added”, Journal o InternationalEconomics 86(2), 224-236.
4 This indicator was rst introduced in Koopman, R.,W. Powers, Z. Wang and S.-J. Wei (2011) “Givecredit to where credit is due: tracing value added in
global production chains”, NBER Working PapersSeries 16426, September 2010, revised September2011.
5 See Fally, T. (2011). “On the Fragmentation o Production in the US”, University o Colorado-Boulder, July.
6 Estimates are based on data rom the UnitedStates Bureau o Economic Analysis (“U.S. Aliateso Foreign Companies and U.S. (Ministry o Commerce) Multinational Companies”, 2012); ChinaMOFCOM; OECD; IDE-JETRO. Data or Europerom Altomonte, C., F. Di Mauro, G. Ottaviano, A.Rungi and V. Vicard. 2012. “Global Value Chains
during the Great Trade Collapse: A Bullwhip Eect?”ECB Working Paper Series No. 1412.
7 Detailed technical inormation on the constructiono Eora can be ound in M. Lenzen, K. Kanemoto, A. Geschke, D. Moran (2012) “Mapping theStructure o the World Economy.” EnvironmentalScience & Technology 46 (15): 8374–8381.Twomore approachable summaries are also due tobe published soon: “Tracing Embodied CO2in Trade Using High-Resolution Input-Output Tables”, chapter in Computationally Intelligent Data Analysis or Sustainable Development. ed. T. Yu.and The Eora MRIO, chapter in The Sustainability
Practitioner’s Guide to MRIO. ed. J. Murray and M.Lenzen.
8 United Nations (1999). “Handbook o input–outputtable compilation and analysis”. Studies in MethodsSeries F, No 74. Handbook o National Accounting.New York.
9 See Leontie, W. (1970). “EnvironmentalRepercussions and the Economic Structure: AnInput-Output Approach”. The Review o Economicsand Statistics, 52(3), 262–271.
10 Starting with the seminal work o Hummels, Ishii& Yi (ibid.), variations o this methodology haverecently been used in a number o recent papers.Johnson & Noguera (ibid.), Timmer, M., B. Los, R.Stehrer, and G. de Vries (2012) “Fragmentation,Incomes and Jobs. An analysis o Europeancompetitiveness”, WIOD Working Paper 9,Groningen; and Stehrer, R., N. Foster and G. de Vries (2012) “Value Added and Factors in Trade: A Comprehensive Approach”, WIIW Working paper80, Vienna ultimately reapportion worldwide naldemand across countries, rather than exports,allowing them to disentangle the value addedcreated in one country due to consumption inother countries (‘trade in value added’). The OECD-WTO exercise instead ollows an approach entirelysimilar to the one presented here and originally
proposed by Koopman et al. (ibid.): this approachdisentangles the domestic and oreign value addedembodied in a country’s gross exports (reerred toin this report as ‘value added (in) trade’). Details onthe OECD-WTO dataset and method can be oundin OECD - WTO (2012), “Trade in Value-Added:Concepts, Methodologies and Challenges”, www.oecd.org; and in De Backer and Miroudout (2012).“Mapping Global Value Chains”, Paper prepared orthe WIOD Conerence: Causes and Consequenceso Globalization, Groningen, The Netherlands, 24-26 April 2012.
11 As in Stehrer et al. (ibid.).
7/28/2019 854 Global Value
http://slidepdf.com/reader/full/854-global-value 40/40
Global Value Chains and Development32
12 For a precise decomposition, see Koopman et al.(ibid.).
13 To get an idea o the complexity o the exercise,
each yearly MRIO contains tens o millions o observations, that is around 4GB o data, buttogether with the superior variables needed tobalance the MRIO table at the world level, eachdataset to be used by the optimization algorithmgrows to 70 GB, and thus requires 2 to 10x asmuch in RAM capability to run. The Australian NCIsupercomputing acilities have been used by theEora team to retrieve value added trade data.
14 The GTAP dataset employs a dierent balancingalgorithm with respect to other existing world I–Otables (including Eora), as the balancing algorithmprioritize the correspondance between gross vs.SUT-derived trade fows rather than domestic value
added. See Koopman et al. (ibid.).
15 See Stehrer et al. (ibid.).16 The Eora data have been validated against the
WIOD data as the latter dataset gives direct access
to the original national Supply-use tables. Assuch, it allows to exactly replicate the underlyingmethodology in the construction o the indicators tobe compared across datasets.
17 Two outliers have been excluded rom thecomparison, that is Bulgaria and Luxembourg. Inboth cases FVA shares in WIOD were some 20%larger than the measure retrieved in Eora. Theaverage (absolute) dierence across the remainingcountries is instead around 6 percentage points.