Measuring Value-Added Trade: Implications for Macroeconomic Policy

Transcription

1 Measuring Value-Added Trade: Implications for Macroeconomic Policy Ranil Salgado (with Mika Saito) Trade and Policy Review Division International Monetary Fund

2 Outline Changing Patterns of Global Trade and Implications for Value-Added Trade Why Improving Value-Added Trade Measurement is Important Why it is NOT

3 The growth of trade relative to output in the last few decades is partly driven by the emergence and the growth of global supply chain.

4 The foreign value added (FVA) share in gross exports has almost doubled since 1970, and the growth in FVA share has accelerated in recent years FVA share of gross exports Growth in FVA share Contribution of FVA exports to growth in exports/gdp Table 3. Share of Foreign Value Added (FVA) in Gross Exports HIY (2001) 1 Update 2 Source: Fund staff estimates using OECD input-output tables Hummels, Ishii, and Yi (2001). 28 countries are included in HIY: Australia, Canada, China, EU15, Hong Kong SAR, Indonesia, Japan, Korea, Mexico, Taiwan Province of China, Malaysia, Singapore, Thailand, and the United States countries included in the update are: EU-15, Australia, Brazil, Canada, Switzerland, China, Czech Republic, Hungary, Indonesia, India, Israel, Norway, New Zealand, Poland, Russian Federation, Slovak Republic, Taiwan Province of China, Turkey, and the United States.

5 The Asia supply chain is more integrated compared to those in North America or Europe. Table 4. Hub's VA Contained in Gross Exports Total In imports from the hub 2 In imports from the neighbors 1 China Mexico EU accession Source: Fund staff estimates using Koopman and others (2010). 1 For China, Australia, Hong Kong, India, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand, Vietnam, and the rest of E. Asia are included; for Mexico, Canada, Brazil, and Latin America are included; and for EU accession countries, EFTA, and Russia are included. 2 For China, Mexico, and EU accession countries, hubs are Japan, the United States, and the EU respectively.

6 Why Improving Value-Added Trade Measurement is Important? Improve exchange rate assessments Improve our estimates of the impact of changes in relative prices, including that on global rebalancing Help us understand how disruptions to supply chains can have spillover effects Political economy considerations: bilateral balances can matter

7 Gross Exports (US$ billion) The extent FVA in exports of advanced countries and EMEs has contrasting implications for trade patterns and trade balance. Figure 2. Foreign Contents in Gross Exports Shares above the bar chart indicate FVA share in gross exports. Shares in parentheses exclude FVA from Euro Area (0.196) (0.135) Service ROW USA EA non EA 400 OEA JPN CHN DVA CHN JPN USA DEU Source: IMF Staff estimates using OECD Input-Output Tables, COMTRADE and OECD STAN data.

8 Higher FVAin exports can cushion the impact of relative price changes on downstream country s external balances Table 5. LR Impacts of Relative Price Shocks on External Balances (Percent of national GDP, unless otherwise noted) Scenario 10-percent 10-percent appreciation depreciation Country China United States Preshock Postshock Preshock Postshock Current Account Balance o/w Trade Balance Exports Imports Memorandum items (percent change from pre-shock level): Exports -10.9% 13.7% Imports 1.7% -6.7% Nominal GDP -2.3% 1.0% Sources: WEO; DOTS; and Fund staff estimates.

9 Simulated Impact (percent change) Adjustments to relative price changes are smaller for sectors with larger FVA shares, though the size of the sector in each country also matters 18.0 Figure 5. Simulated Impact of Exports by Sector HT MHT MLT LT CHN JPN USA Euro Source: UN Comtrade and Fund staff estimates.

10 Gross Exports (US$ billion) The EMEs have been the user of foreign inputs of the so-called high-technology exports. Figure 3. Foreign Contents in Gross Exports: High-Tech Sectors Shares indicate FVA share in gross exports Service ROW USA EA non EA OEA JPN CHN DVA CHN JPN USA DEU Source: IMF Staff estimates using OECD Input-Output Tables, COMTRADE and OECD STAN data.

11 Change in Gross Exports (US$ billion) The EMEs have also been the source of foreign inputs of high-technology exports Figure 4. Source of Change in Exports of Advanced Countries (DEU, JPN, USA) during Shares indicate the change in foreign value added exports in the overall change in exports Manufacturing LT MLT MHT HT Service ROW USA EA non EA OEA JPN CHN DVA Source: IMF Staff estimates using OECD Input-Output Tables, COMTRADE and OECD STAN data.

12 Adjustments to relative price changes are smaller for supply chain partners, revealing resilient relationships Figure 6. Contribution to Adjustment in Trade Balance (Percent) Supply chain contribution to adjustment in trade balance is smaller than its importance as a trading partner would suggest... Euro Area China Japan USA Share of TB/GDP adjustment within supply chain Supply chain share in total trade Source: UN Comtrade and Fund staff estimates.

13 Bilateral balances, if discussed for political economy considerations, are better measured with value added, rather than gross, trade data. Table 1. U.S. Trade Balance (Percent of GDP) World Asia o/w China o/w China excl. FVA o/w China excl. FVA from Asia Memorandum: U.S. bilateral trade balance with China U.S. data imports data only Chinese data Source: DOTS; WEO; OECD I-O Tables; and Fund staff estimates. 1 FVA contained in exports to and from China are excluded. 2 FVA from Asia contained in exports to and from China are excluded.

14 Why is it NOT Important? Macroeconomists focus on overall balances, not bilateral ones--that is, gross data already give us the correct information. Table 2. China's External Balance: 2008 (Percent of GDP) Gross VA 1 Trade balance exports imports Current account balance Memorandum: FVA contained in exports Source: DOTS; WEO; OECD I-O Tables; and Fund staff estimates. 1 FVA contained in exports are excluded and imports are assumed to contain no domestic value added.