Measuring trade in value added: how valid is the proportionality assumption?

Traditional trade statistics that originate in customs records is inadequate to measure the complex interdependencies in today’s globalized economy, or what is known as the global value chains. The article focuses on Russia–ASEAN trade. The author applies innovative methods of measuring trade in value added terms in order to capture the unobserved bilateral linkages behind the officially recorded trade flows. First, customs and balance of payments sources of bilateral trade data are briefly reviewed. For user, there are at least two inherent problems in those data: the inconsistencies in “mirror” trade flows and the attribution of the origin of a traded product wholly to the exporting country. This results in large discrepancies between Russian and ASEAN “mirror” trade data and, arguably, their low importance as each other’s trade partners. Next, the author explores new data from inter-country input-output tables that necessarily reconcile bilateral differences and offer greater detail about the national and sectoral origin or destination of traded goods and services. Relevant data are derived from the OECD-WTO TiVA database and are rearranged to obtain various estimates of Russia–ASEAN trade in value added in 2009. The main finding is that sizable amount of the value added of Russian origin is embodied in third countries’ exports to ASEAN members and ASEAN members’ exports to third countries. As a result, the cumulative flow of Russia’s value added to ASEAN members is estimated to be 62% larger than the direct gross exports, whereas for China and South Korea it is, respectively, 21% and 23% smaller. The indirect, unobserved value added flows can be largely explained by the use of Russian energy resources, chemicals and metals as imported inputs in third countries (China, South Korea) and ASEAN members’ own production. The contribution of these inputs is then accumulated along the value chain. Finally, the most important sectoral value chains are visualized for readers’ convenience. So far, it’s apparent that Russia is linked to ASEAN countries through intricate production networks and indirectly contributes to their trade with third countries.

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Trade in Value Added, Jobs and Investment

SSRN Electronic Journal ◽

10.2139/ssrn.2981581 ◽

2014 ◽

Cited By ~ 3

Author(s):

Nadim Ahmad ◽

Jennifer Ribarsky

Keyword(s):

Value Added ◽

Trade In Value Added

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BEYOND CONVENTIONAL TRADE: TRADE OPENNESS IMPLICATIONS OF TRADE IN VALUE ADDED

The Singapore Economic Review ◽

10.1142/s0217590820490053 ◽

2020 ◽

pp. 1-23

Author(s):

HALIT YANIKKAYA ◽

ABDULLAH ALTUN

Keyword(s):

Negative Impact ◽

Trade Openness ◽

Value Added ◽

Dynamic Panel Data ◽

Growth Effect ◽

Panel Data Estimation ◽

Export Shares ◽

Value Added Measures ◽

Data Estimation ◽

Trade In Value Added

This study compares the impacts of gross trade openness measures with trade openness in value-added measures on economic growth for the years 1995–2014 by employing a dynamic panel data estimation. Our findings suggest that although gross trade shares promote growth, using value-added trade shares magnifies this positive effect. Compared with gross terms, estimates also imply that while exports in value-added terms have much larger growth effect, imports in value-added terms have no significant impact. We then evaluate the impacts of tariffs on growth in terms of gross trade and trade in value added separately. Although our results imply the negative growth effects of gross import tariffs, this negative impact disappears for tariffs in value-added terms. These results reaffirm that trade protectionism has potential to lower global growth through reducing exports because it is clear that export shares regardless of their measurements and disaggregation levels promote growth. Our results indicate that countries should support not only exports of final products but also exports of intermediates. However, given the necessity of imports for exports, our results do not lend any evidence to discourage overall imports.

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Comments by Wen-jen Hsieh, on Global Value Chains and East Asian Trade in Value-Added

Asian Economic Papers ◽

10.1162/asep_a_00390 ◽

2015 ◽

Vol 14 (3) ◽

pp. 147-148

Author(s):

Wen-jen Hsieh

Keyword(s):

East Asian ◽

Value Added ◽

Global Value Chains ◽

Value Chains ◽

Trade In Value Added

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A Portrait of Trade in Value Added over Four Decades

10.3386/w22974 ◽

2016 ◽

Cited By ~ 10

Author(s):

Robert Johnson ◽

Guillermo Noguera

Keyword(s):

Value Added ◽

Trade In Value Added

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The Degree of Openness to Intra-Regional Trade - Towards Value-Added Based Openness Measures

Jahrbücher für Nationalökonomie und Statistik ◽

10.1515/jbnst-2006-0202 ◽

2006 ◽

Vol 226 (2) ◽

Cited By ~ 4

Author(s):

Ansgar Belke ◽

Lars Wang

Keyword(s):

Gross Domestic Product ◽

Bilateral Trade ◽

Trade Openness ◽

Value Added ◽

Domestic Product ◽

Regional Trade ◽

Traditional Concept ◽

Export Ratio ◽

Trade In Value Added ◽

Integration Area

SummaryThis study develops innovative measures of openness towards bilateral trade. The most widely applied openness indices are not able to accurately calculate the degree of trade openness. For example, the intra-regional export ratio which relates the value of exports of an integration area to the gross domestic product, can exceed 100 percent because trade is stated in gross terms, while the gross domestic product is expressed in value-added terms. This implies a negative value of domestic non-tradeables. The actual openness concept corrects the traditional concept by expressing trade in value-added terms instead of gross terms.

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