TRADE IN VALUE ADDED: NORWAY

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1 TRADE IN VALUE ADDED: WAY 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 Norway 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 17.2% in 2011, the foreign content of Norway's exports has been broadly stable over the last two decades, with movements partly reflecting oil prices. Export orientation in manufacturing has also been stable over the last two decades, with about 5 of total manufacturing value-added exported. Over 9 of the value added produced by the Basic metals industry was exported in Over one-third (35.) of the total value of manufacturing exports reflected services content in 2011, below the OECD average (54.3%), reflecting the significant share of oil exports that have relatively low services content. When measured in value added terms, the United States becomes Norway s second most important trading partner on both the import and export side.

2 The role of foreign and domestic value added in exports Although broadly stable over the last decades, the foreign content of Norwegian exports decreased by 2.7 percentage points between 1995 and The foreign content of Norway's exports stood at 17.2% in 2011, compared to 17.6% in 2009, but was higher than the pre-crisis level of 16.3% in 2008 (Figure 1). While relatively low compared to similar sized economies, this largely reflects Norway s specialisation in oil. Figure 1. Foreign value added content of gross exports by country percent, 2008, 2009, and 2011 (right insert = time series for Norway) As a significant exporter of oil, 82. of Norway's total exports of domestic value-added in 2011 reflected exports of intermediates, higher than in 2009 (76.3%) and 1995 (74.4%), and significantly above the OECD average (61.) (Figure 2). 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 40.2% of the total value added of exports. The next three most important industries were Transport & telecoms (10.9%), Wholesale, retail & hotels (7.2%) (reflecting in part tourism and upstream distribution services to exporters), and Business services (4.) (Figure 3a). The largest foreign contributions were in Transport & telecoms and industries, which together contributed 7.3% of Norway's total exports. The three industries with the highest foreign value added shares in Norway's exports in 2011 were Basic metals (41.6%), (40.7%), and (35.7%), compared to 37.3%, 38.4% and 33.9% in 1995 (Figure 3b). Figure 3a. Norway'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. Norway'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 Norway's imports of intermediate products and services, 44.8% was subsequently embodied in exports, above the OECD average (39.3%) and above the share in 2009 (41.4%) (Figure 4). The products with the highest import shares were (74.), (56.) and Coke & petroleum (54.). Figure 4. Norway'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 Norway Of the total domestic value added produced by the manufacturing sector in Norway, nearly half (49.8%) reflected foreign final demand in 2011, higher than in 2009 (47.7%) and the OECD average (41.9%) but lower than in 2008 (51.9%) (Figure 5). 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 Norway) 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, 37.1 % of Norway's domestic value added was driven by foreign final demand, but significant differences exist across industries. (92.6%) and (76.1%) had the highest rates of export orientation in Norway, with the lowest shares in Business services (25.2%) and Finance & insurance (30.) (Figure 6). Figure 6. Norway's domestic value added in foreign final demand percent of value added by industry, 2008, 2009, and Note: Final demand excludes inventories: See also ttp:// In gross terms, the UK (23.3%), Sweden (9.3%) and Germany (8.1%) were the three most important Norwegian export market destinations. While in value-added terms, the top three export destinations were the UK (17.7%), the United States (11.1%), and Germany (8.9%), reflecting in part Norwegian valueadded embodied in other partner s exports to the US (Figure 7, top). For imports in gross terms, Norway's top three partners were Sweden (14.8%), the UK (7.8%) and Germany (7.7%), while in value-added terms they were Sweden (11.6%), the United States (8.6%), and Germany (8.3%) (Figure 7, bottom). Figure 7. Norway'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 16% 14% 12% 1 8% 6% 4% 2% Gross imports Foreign value added in domestic final demand 4

6 Looking only at exports of intermediates goods and services, Norway's major export destinations in 2011 were: the UK (32.), France (9.4%), Germany (7.6%), and Sweden (6.6%) (Figure 8). Figure 8. Norway'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 Norway was 39.3%, below the OECD average of 54.3%, reflecting the significant share of oil exports, which have relatively low services content ( 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, 35. of the total value reflected services sector value-added, slightly below the OECD average (36.9%). Of this share, the Business services sector accounted for 11.6% of total gross exports, with the Wholesale, retail & hotels and Transport & telecoms industries accounting for 10.9% and 4.8% 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 in most sectors and was highest in (44.), Paper, print & publish (41.9%) and Textiles & apparel (41.3%) (Figure 11). Figure 11. Norway'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, 19.6% of Norway's total final domestic consumption reflected foreign content, of which Europe contributed 12.2 percentage points (pp), NAFTA 2.0 pp, East and Southeast Asia 3.1 pp, South and Central America 0.5 pp and other regions 1.9 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