Gross trade accounting: A transparent method to discover global value chain-related information behind official trade data: Part 2
Zhi Wang, Shang-Jin Wei, Kunfu Zhu 16 April 2014
One common measure of trade linked international production networks is the so-called VAX ratio, i.e. the ratio of value-added exports to gross exports. This column argues that this measure is not well-behaved at the sector, bilateral, or bilateral sector level, and does not capture important features of international production sharing. A new gross trade accounting framework is proposed that can better track countries’ movements up and down global value chains.
competitiveness, globalisation, trade, comparative advantage, global value chains, global supply chain, statistics
Gross trade accounting: A transparent method to discover global value chain-related information behind official trade data: Part 1
Zhi Wang, Shang-Jin Wei, Kunfu Zhu 07 April 2014
The growth of international trade in intermediate inputs means that standard trade statistics can give a misleading picture of the real patterns of production behind world trade. This column introduces an accounting framework that decomposes traditional trade flows into components that better reflect the underlying location of the value addition linked to exports.
Production segmentation across national borders has become an important feature of the world economy. With the rapid increase in intermediate trade flows, trade economists and policymakers have reached a near consensus that official trade statistics based on gross terms are deficient, often hiding the extent of global value chains. There is also widespread recognition among the official international statistics agencies that fragmentation of global production requires a new approach to measure trade, in particular the need to measure trade in value-added.
globalisation, trade, global value chains, global supply chain, statistics
Ukraine’s trade policy: Addressing supply-chain frictions
Bernard Hoekman, Jesper Jensen, David Tarr 29 November 2013
Two regional trade agreements are centre of attention in Ukraine: the Deep and Comprehensive Free Trade Agreement with the EU – that for the time being Ukraine has rejected – and the Eurasian Customs Union with Russia, that Ukraine has been invited (or pressured) to join. Rather than choosing between the two, Ukraine should focus on reducing policy frictions that negatively affect trade through processes that mobilise firms and industries on both sides of the border. The recent proposal by Ukraine to establish a joint commission among Ukraine, Russia and the EU to promote trade could be a step in this direction.
On November 21 2013, Ukraine suspended preparations for signing the Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union (EU) at the Third EU-Eastern Partnership Summit in Vilnius on November 28-29. In 2010, the Russian Federation, Belarus and Kazakhstan formed the Eurasian Customs Union (ECU) and have invited Ukraine to become a member. This has become a politically charged issue, generating great uncertainty that is likely to have negative consequences for investment and economic activity (see Handley and Limão 2013, Shepotylo 2013).
EU institutions International trade
WTO, barriers to trade, FTAs, global supply chain, Ukraine
Can FTAs support ‘Factory Asia’?
Jayant Menon 14 May 2013
Are free trade agreements good for ‘Factory Asia’? This column argues that rather than supporting ‘Factory Asia’, it is more likely that fragmentation trade has prospered despite the noodle bowl of overlapping FTAs in the region. Inter-regional FTAs, on the other hand, may have been able to indirectly support the growth of production networks among existing members, if they led to increased demand for the final goods that the networks produce.
Free trade agreements (FTAs) have been proliferating in Asia for more than a decade. Production networks and the product-fragmentation trade that they generate have been growing for a much longer period. In fact, since ‘Factory Asia’ emerged, well before FTAs (Baldwin 2008). They are clearly not necessary for the formation of production networks, but can they support production networks’ further growth and/or spread?
barriers to trade, free trade agreements, production fragmentation, global supply chain
Firms and credit constraints along the global value chain: Processing trade in China
Kalina Manova, Zhihong Yu 13 May 2013
What can we learn from China’s experience as a linchpin in the global value chain? This column presents new research showing that financial frictions influence the organisation of production across firm and country boundaries. If you’re credit-constrained, you might be stuck in the low value-added stage of the supply chain. Strengthening capital markets might thus be an important prerequisite for moving into higher value-added, more profitable activity. China’s experience tells us that liquidity-constrained manufacturers might therefore benefit more from import liberalisation and from the fragmentation of production across borders.
The past 20 years of globalisation have witnessed a dramatic expansion in the fragmentation of production across countries. Firms today can not only trade in final goods, but also conduct intermediate stages of manufacturing by importing foreign inputs, processing and assembling them into finished products, and re-exporting these to consumers and distributors abroad. While processing trade contributes just 10% of EU exports, at over 50% it has been a major driving force behind the rapid growth of Chinese exports (Cernat and Pajot 2012).
China, global supply chain, global value chain
Reinvigorating the trade policy agenda: Think supply chain!
Bernard Hoekman, Selina Jackson 23 January 2013
The revolution in manufacturing – increasingly known as ‘global value chains‘ – has changed the world of trade policy as much as it has changed the global industrial landscape. This column discusses new research suggesting that border management and transport and telecommunications infrastructure services matter far more than trade tariffs. Improving infrastructure and management would increase global GDP far more than the complete elimination of tariffs. However, it won’t be easy. Tackling supply chain barriers will require dynamic and responsive national and international trade policymaking procedures that are more in step with industrial practices.
International supply chains have become a fundamental feature of global commerce, with goods being processed – and value being added – in the multiple countries that are part of the chain.
Global governance International trade
barriers to trade, SMEs, global supply chain, small and medium-sized enterprises
How much global trade governance should there be?
Simon Lester 20 January 2013
Trade agreements have become ‘deeper’ over recent years, and there are initiatives in the pipeline to globalise deeper trade governance through mega-regional agreements (such as the Trans-Pacific Partnership). This column argues that trade agreements in general – and the WTO in particular – should focus on what they do best, reducing protectionist barriers. Broader issues such as intellectual property and regulatory expropriation should be left to governments to deal with on their own. Governments that handle these issues most effectively will be the winners in the new world of supply-chain trade.
Trade agreements seem to be getting deeper, intruding on policy areas that were traditionally viewed as matters of purely national concern (WTO 2011, 2012). This differs considerably from the WTO’s original focus on protectionism (Lester 2013).
WTO, RTAs, BITs, global supply chain