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Present value
William Powers, World Economics, December 2012
As production has become more globally integrated, imported components account for a rising share of the value of exports. Many countries may contribute inputs to a good, and the final assembler may capture only a small share of the product’s value. Official trade statistics, which attribute all value to the final exporter, can be uninformative or misleading about a country’s global engagement and its participation in global supply chains. New measures are required that incorporate both production and trade, and track the flow of inputs, and their value, through industries and across national borders. This paper examines the construction and use of value-added measures that incorporate the necessary production and trade data, and evaluates their performance against similar measures based on gross trade. The value-added measures provide a more revealing look into global integration that is consistent across different measures and analytical approaches.
Alejandro Jara & Hubert Escaith, World Economics, December 2012
The raise of global production networks since the 1980s changed the way we understand international trade and has profound repercussions on development policies and the conduct of global governance. New comparative advantages allow large developing countries to leap-frog through their industrialization process while smaller economies without large internal market or mining resources are now able to build an industrial base. Offshoring also gave the possibility to firms from industrialised countries to remain competitive in front of fast-expanding firms from emerging countries. But in the process, the relative demand for low and medium skilled workers in industrialised countries contracted, and this employment and income effect became a political issue and fuelled demand for protectionism. Unfortunately, the debate lacks accurate data as traditional statistics give only a blurred picture of what is known as ‘trade in tasks’. Before revising the trade and governance implications, the article calls for a new measurement of international trade based on its value-added content in order to have a better understanding of the actual issues.
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