TRADE IN VALUE ADDED: AUSTRIA

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1 TRADE IN VALUE ADDED: TRIA 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 Austria 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 Austria has seen a steady trend increase in integration within GVCs over the last two decades, with the foreign content of exports rebounding to 27.6% in 2011 from a crisis low of 24.9% in Germany is by far Austria's largest trading partner in both value-added and gross terms, but valueadded relationships are smaller for both imports and exports, reflecting high interdependencies in cross-border value chains. Nearly half of all Austria's intermediate imports were subsequently embodied in exports in Austrian industries have a high degree of export orientation, with between 3 and 8 of all value-added driven by foreign consumers. Over one-third of the value of exports in nearly all manufacturing sectors reflected services content.

2 The role of foreign and domestic value added in exports The foreign content of Austria's exports has been on a steadily increasing trend over the last two decades, rising by 6.3 percentage points between 1995 and 2011 (a relative increase of about one-third). But despite the recovery from the crisis low of 24.9% in 2009 shares in 2011 (27.6%) remain marginally below the precrisis high of 27.8% in 2008 (Figure 1). Figure 1. Foreign value added content of gross exports by country percent, 2008, 2009, and 2011 (right insert = time series for Austria) Of Austria's total exports of domestic value added in 2011, 58.3% reflected exports of intermediates, slightly lower than the OECD average (61.) and higher than the equivalent shares in 2009 (53.7%), in part reflecting the rebound in GVCs which were disproportionally affected by the crisis, and higher than in 1995 (52.7%) (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 Wholesale, Retail & Hotels industry (reflecting tourism and upstream distribution services to exporters) generated the greatest source of domestic value added in 2011, accounting for 13.7% of the total value added of exports. The next three most important industries were at 6.7%, Business services at 6.3%, and Transport & telecoms at 5.3% (Figure 3a). The three industries with the highest foreign value added shares in Austria's exports in 2011 were Coke & Petroleum,, and, with 78.9%, 47.8%, and 45.4% respectively, compared to figures of 35.3%, 44.8% and 32.6% in 1995 (Figure 3b). Shares remained broadly stable in most industries, except notably those requiring significant commodity inputs and where price increases may have pushed shares up. Nevertheless, significant increases occurred in Other Transport Equipment, Electrical, and Other Manufacturing. Figure 3a. Austria'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, % 16% 14% 12% 1 8% 6% 4% 2% Figure 3b. Austria'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 Austria's imports of intermediate products and services, nearly half (49.2%) was subsequently embodied in exports, significantly above the OECD average (39.3%) and marginally higher than in 2009 (47.1%) (Figure 4). The products with highest import shares were, Basic metals and, at 68.1%, 67.8% and 65.1% respectively. Shares changed relatively little in most sectors in recent years. Figure 4. Austria'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 Austria Nearly two-thirds (62.3%) of the total domestic value added produced by the manufacturing sector in Austria was driven by foreign final demand in 2011, slightly higher than the equivalent figure in 2009 (60.1%) but lower than in 2008 (64.) (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 Austria) 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, one-third (33.8%) of Austria's domestic value added was driven by foreign final demand. (82.8%,) and (74.6%) had the highest level of export orientation in Austria, with the lowest shares in Business services (29.1%) and Agriculture (37.) (Figure 6). Figure 6. Austria'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 both value-added and gross terms, Germany is by some distance Austria's most important trading partner. But Germany's importance as a final consumer of Austrian value-added and source of imported value-added is considerably smaller, partly reflecting the high degree of integration within cross-border value-chains. 25.6% of Austria's value-added exports went to Germany in 2011, 6.0 percentage points less than in gross terms, while 30.7% of Austria's imports were sourced from Germany, 7.7 percentage points less than in gross terms. The United States emerges as a more important trading partner in value-added terms (the second most important destination for exports and the third most important source of imports), (Figure 7, bottom). Figure 7. Austria'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, Austria's major export destinations in 2011 were: Germany (29.4%), Italy (8.4%), China (6.1%), and the United States (4.3%) (Figure 8). Figure 8. Austria'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 sector s share of total exports of domestic value added in Austria was 56.9%, slightly above the OECD average of 54.3%; one fifth of which reflected foreign services, around the OECD average. (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 As for exports of manufactured goods alone, 37.6% of the total value reflected services sector value-added, slightly above the OECD average (36.9%). Of this share, the Business services sector accounted for 12.4% of total gross exports, with the Wholesale, Retail & Hotels and Transport & Telecoms industries accounting for 12.4% and 5. 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 Textiles & Apparel (42.4%), Paper, Printing & Publishing (42.3%) and industries (41.) (Figure 11). The Business Services industry was the most important source of services value added embodied in manufacturing exports in Figure 11. Austria'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, over one-quarter (27.) of Austria's total final domestic consumption reflected foreign content, of which Europe contributed 19.2 percentage points, East and Southeast Asia 2.1 pp, NAFTA 1.4 pp, South and Central America 0.4 pp with 3.9 pp from other regions (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