TRADE IN VALUE ADDED: IRELAND

Transcription

1 TRADE IN VALUE ADDED: IRELAND The international fragmentation of production in global value chains (GVCs) challenges the way we look at the global economy. Today, what you do - the activities a firm or country is involved in - matters more for growth and employment than what you sell - the products that make up final sales or exports. Understanding how GVCs work and how they affect economic performance is essential, as is determining which policies help derive the greatest benefits, and reduce the risks. The OECD-WTO Trade in Value Added (TiVA) database facilitates analysis of GVCs by measuring trade in value-added terms to generate new insights about the commercial relations among economies and the process of value creation. Drawing on the third version of the TiVA database, this note describes Ireland s trade patterns in value-added terms, with a view to informing policy debates in a range of areas, including trade, innovation, and investment. Accompanying this note is a User Guide designed to assist interpretation and provide context to the indicators presented: Key findings At 43., Ireland's foreign content of exports was amongst the highest in the OECD in Irish manufacturers had the second highest export orientation in the OECD; with 82.6% of total domestic value added driven by foreign demand. Nearly 7 of all intermediate imports were used in producing exports, with similar shares across most imported products. As a significant exporter of services, Ireland had the third highest rate of services content of exports (67.) in 2011.

2 The role of foreign and domestic value added in exports The foreign content of Ireland's exports increased to 43. in 2011, compared to 41.9% in 2009 and 43.4% in 2008 (Figure 1), and was 5.1 percentage points higher than in Figure 1. Foreign value added content of gross exports by country percent, 2008, 2009, and 2011 (right insert = time series for Ireland) % 42% 4 38% 36% 34% Of Ireland's total exports of domestic value-added in 2011, 60.6% reflected exports of intermediates, higher than the equivalent share in 2009 (55.9%), in part reflecting the rebound in GVCs which were disproportionally affected by the crisis, and also higher than in 1995 (55.4%) (Figure 2). Ireland's share of intermediate inputs in total exports of domestic value added was below the OECD average of 61.. Figure 2. Domestic value added content of gross exports by end-use category by country percent, 1995 and Intermediate goods and services 2011 Final goods and services 2011 Total 1995 Intermediate goods and services

3 Agriculture Wood & paper Non-metallic minerals Other manufactures Wholesale, retail & hotels Transport & telecoms Finance & insurance Business services Other services Total Agriculture Wood & paper Non-metallic minerals Other manufactures Wholesale, retail & hotels Transport & telecoms Finance & insurance Business services Other services Direct exports by the industry generated the greatest source (both direct and upstream) of domestic value added in 2011, accounting for 12. of the total value added of exports. The next three most important industries were Business services (11.6%), Wholesale, retail & hotels (8.7%), and Finance & insurance (8.4%) (Figure 3a). The largest foreign contributions were in the and Business services industries, which together contributed 21.2% of Ireland's total exports. The three industries with the highest foreign value added shares in Ireland's exports in 2011 were Coke & petroleum, and Other manufacturing, with 68., 59.1% and 58. respectively, compared to the 36.3%, 46.2% and 38.9% in 1995 (Figure 3b). Shares rose in nearly all key export sectors, except ICT & electronics which fell by around 10 percentage points between 1995 and 2011, possibly reflecting upgrading. Figure 3a. Ireland's industry share of domestic and foreign value content of gross exports percent of total gross exports, 2011 DVA contribution to gross exports, 2011 FVA contribution to gross exports, Figure 3b. Ireland's foreign value added content of gross exports 1995 and 2011 FVA share of gross exports, 2011 FVA share of gross exports,

4 Agriculture Wood & paper Non-metallic minerals Other manufactures Utilities Wholesale, retail & hotels Transport & telecoms Finance & insurance Business services Other services Total Of the total value of Ireland's imports of intermediate products and services, 69. was subsequently embodied in exports, significantly higher than the OECD average (39.3%) and above the equivalent figure in 2009 (66.9%) (Figure 4). The products with the highest shares were, and ICT & electronics, at 79.8%, 77.9% and 76.4% respectively. Figure 4. Ireland's imported intermediate inputs used for exports, by import category percent of intermediate imports, 2008, 2009, and The destination of domestic value added produced in Ireland Of the total domestic value added produced by the manufacturing sector in Ireland, 82.6% was driven by foreign final demand in 2011, higher than the equivalent figure in both 2009 (80.6%) and 2008 (77.) (Figure 5), and the second highest rate in the OECD, at over twice the OECD average (41.9%) in Figure 5. Manufacturing domestic value added in foreign final demand by country, percent of total manufacturing value added, 2008, 2009, and 2011 (left insert = time series for Ireland) Note: Final demand excludes inventories: See also 3

5 Agriculture Wood & paper Non-metallic minerals Other manufacturing Wholesale, retail & hotels Transport & telecoms Finance & insurance Business services Total Manufactures Total At the total economy level, 59.6 % of Ireland's domestic value added was driven by foreign final demand, but significant differences exist across industries. (90.4%) and (88.) had the highest level of export orientation in Ireland, with the lowest shares in Non-metallic minerals (41.6%) and equipment (51.2%) (Figure 6). Figure 6. Ireland's domestic value added in foreign final demand, percent of value added by industry, 2008, 2009, and Note: Final demand excludes inventories: See also In gross terms, the United States (19.9%), the United Kingdom (14.7%) and Germany (10.3%) were the three most important Irish export market destinations, with the same rankings in value-added terms but with a marginally higher share of exports going to the United States (Figure 7, top). For imports, Ireland's top three partners were the United States (27.9%), the United Kingdom (22.8%) and the Netherlands (10.3%), again with the same rankings in value-added terms (Figure 7, bottom). Figure 7. Ireland's exports to and imports from main partner countries percent of total gross and value added exports and imports, Gross exports Domestic value added embodied in foreign final demand Gross imports Foreign value added in domestic final demand 4

6 Looking only at exports of intermediates goods and services, Ireland's major export destinations in 2011 were: the United States (19.), the United Kingdom (12.6%), Germany (10.2%) and China (5.9%) (Figure 8). Figure 8. Ireland's domestic value added embodied in intermediate exports to main partner countries percent of total intermediate exports, in value added terms, 2008, 2009, and The importance of services In 2011 the service content of total exports in Ireland was 67., significantly above the OECD average of 54.3%. Of the total services value added embodied in Ireland's exports nearly half (49.4%) reflected foreign content, significantly above the OECD average (21.8%) (Figure 9). Figure 9. Services content of gross exports by country, gross and value-added terms, percent of total gross exports, Domestic VA content Foreign VA content OECD average SNA service export share Note: SNA services export shares include re-exports in the denominator, and include any actual differences in free on board and basic prices (the distribution margin provided by resident distributors to resident exporters) in goods. 5

7 Agriculture Wood Paper, print, publsh Non-metallic minerals Other manufacturing For exports of manufactured goods alone, 40. of the total value reflected services sector value-added, above the OECD average (36.9%). Of this share, the Business services sector accounted for 22. of total gross exports, with the Wholesale, retail & hotels and Finance & insurance industries accounting for 7.1% and 4. respectively (Figure 10). Figure 10. Services value added embodied in manufacturing exports, by country, percent of total gross exports, 1995 and Construction Wholesale, retail & hotels Transport & telecoms Finance & insurance Business services Other services 1995, Total At the individual sectoral level, the services content of exports was highest in the Paper, Print & Publishing industry (54.2%), Other manufacturing (47.4%) and the industry (42.2%) (Figure 11). Figure 11. Ireland's Services content of gross exports, by exporting industry and service category percent of gross exports by industry 2011 Construction Wholesale, retail & hotels Transport & telecoms Finance & insurance Business services Other services OECD average

8 The origin of domestic consumption In 2011, 41.9% of Ireland's total final domestic consumption reflected foreign content, of which Europe contributed 25.6 percentage points, NAFTA 10.1 pp, East and Southeast Asia 2.4 pp, South and Central America 0.5 pp and other regions 3.1 pp (Figure 12). Figure 12. Foreign value added content of domestic consumption by country by source region, Europe NAFTA East and Southeast Asia South and Central America Other regions Further Information The information included in this note is based on the 2015 edition of the Trade in Value Added (TiVA) database.» Access the data at Please contact us with your questions at tiva.contact@oecd.org 7