TRADE IN VALUE ADDED: ICELAND

Transcription

1 TRADE IN VALUE ADDED: ICELAND 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 Iceland 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 Despite being predominantly an exporter of upstream products - mining, basic metals and transport services - one-third of the total value of exports of Iceland reflected foreign content in 2011; a share that has nearly doubled since The export orientation of Icelandic manufacturers was very high in 2011, with three quarters (72.8%) of the total value-added driven by final demand. In value-added terms the United States was the most important destination market for Icelandic exports.

2 The role of foreign and domestic value added in exports The foreign content of Iceland's exports nearly doubled between 1995 (17.3%) and 2011 (33.2%), (Figure 1) and continued to grow throughout the economic crisis. Figure 1. Foreign value added content of gross exports by country percent, 2008, 2009, and 2011 (right insert = time series for Iceland) Of Iceland's total exports of domestic value-added in 2011, 59.6% reflected exports of intermediates, significantly higher than the equivalent share in 2009 (48.), in part reflecting the rebound in GVCs that were disproportionally affected by the crisis, and also significantly higher than 1995 (48.4%), (Figure 2). Iceland s share of intermediate inputs in total exports of domestic value added was below the OECD average, however (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 Transport & telecoms industry generated the greatest source (both direct and upstream) of domestic value added in 2011, accounting for 17.7% of the total value of exports. The next three most important industries were (16.), (14.1%), and Wholesale, retail & hotels (8.9%, in part reflecting tourism and upstream distribution services) (Figure 3a). The contributions made by all other industries were small. The largest foreign contributions were in the and Transport & telecoms industries, which together contributed 23.6% of Iceland's total exports. The three industries with the highest foreign value added shares in Iceland's exports in 2011 were Coke & petroleum,, and, with 49.7%, 49.3% and 48. respectively, compared to 35.6%, 37. and 33.7% in 1995 (Figure 3b). Figure 3a. Iceland'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. Iceland'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 Iceland's imports of intermediate products and services, nearly two-thirds (62.2%) was subsequently embodied in exports, significantly higher than the OECD average (39.3%) (Figure 4). This was also above the equivalent figure in 2009 (59.2%). The products with the highest shares were Electrical machinery, and, at 92.1%, 89.8% and 88.7% respectively. Figure 4. Iceland'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 Iceland Of the total domestic value added produced by the manufacturing sector in Iceland, nearly three-quarters (72.8%) reflected foreign final demand in 2011, higher than the equivalent figure in 2009 (68.6%) and 2008 (65.1%) (Figure 5), and being above the OECD average (41.9%). 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 Iceland) 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, 42.7% of Iceland's domestic value added was driven by foreign final demand, but significant differences exist across industries. (with just shy of 100.) and ICT & electronics (97.) had the highest level of export orientation in Iceland, with the lowest shares in Nonmetallic minerals (21.6%) and Wood & paper (21.9%) (Figure 6). Figure 6. Iceland'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, Germany (22.8%), the United Kingdom (9.6%) and the United States (7.9%) were the three most important Icelandic export market destinations. But in value-added terms the position of Germany is reduced significantly, reflecting the embodiment of Icelandic value-added in Germany's exports to final consumers, such as the United States, the United Kingdom and France. (Figure 7, top). For imports, Iceland's top three partners were the United States (14.3%), Norway (12.9%) and the United Kingdom (12.), while in value-added terms the United Kingdom displaced Norway in second place (Figure 7, bottom). Figure 7. Iceland'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 18% 16% 14% 12% 1 8% 6% 4% 2% SAU Gross imports Foreign value added in domestic final demand 4

6 Looking only at exports of intermediate goods and services, confirms Iceland's position as an upstream supplier to German manufacturing, which imported over one-quarter (27.9%) of all Iceland's intermediate exports in value-added terms in 2011; this represents a rebound of the crisis low point of 2009 (Figure 8). Figure 8. Iceland's domestic value added embodied in intermediate exports to main partner countries percent of total intermediate exports, in value added terms, 2008, 2009, and MLT The importance of services In 2011 the services content of total exports in Iceland was 58.2%, slightly above the OECD average of 54.3% (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, over one-third (36.8%) of the total value reflected services sector value-added, marginally below the OECD average (36.9%). Of this share, the Business services sector accounted for 11.2% of total gross exports, with the Wholesale, Retail & Hotels and Finance & insurance sectors accounting for 10. and 5.4% 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 around the OECD average for most industries and was highest in the (46.3%), (42.8%) and (38.8%) industries (Figure 11). Figure 11. Iceland'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, 32. of Iceland's total final domestic consumption reflected foreign content, of which Europe contributed 19.7 percentage points, NAFTA 5.4 pp, East and Southeast Asia 2.7 pp, South and Central America 1.7 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