New Method for Measuring Trade in Value-Added (TiVA)

The Organization for Economic Cooperation and Development (OECD) and the World Trade Organization (WTO) on Wednesday launched a joint initiative to develop a new method for measuring Trade in Value-Added (TiVA).

The joint OECD-WTO initiative breaks with traditional measurements of trade which record gross flows of goods and services each time they cross borders.

It seeks instead to analyse the value added by a country in the production of any good or service that is then exported, and offers a fuller picture of commercial relations between nations.

The new indicators showed that business competitiveness and export performance are increasingly tied to countries’ integration into global production chains and a willingness to open markets to wider imports.

“We no longer live in a world where goods are made entirely in one country, that sees imports as ‘bad’,” said OECD Secretary General Angel Gurria, during the launch of the new database with WTO Director-General Pascal Lamy, EU Trade Commissioner Karel de Gucht and New Zealand Trade Minister Tim Groser.

He said the new data indicated that “countries’ capacity to sell to the world depends on their ability and readiness to buy from the rest of the world.”

“Our new work with the WTO allows us to see more clearly than ever before how blocking imports will damage a country’s own competitiveness. Trade negotiations have to catch up to these new realities, and countries need to implement policies that help their firms better manage their place in international value chains,” the OECD chief addressed.

The TiVA indicators are important because they better reflect the significantly higher contribution made by services in global value chains.

Based on the new calculation, the share in world’s trade in service doubles when you take into account added value, said WTO chief Lamy during the function.

The indicators also show the role of imports of intermediate goods and services in export performance, the true nature of economic interdependencies, the role of emerging economies in Global Value Chains (GVCs) and how supply and demand shocks might impact on downstream and upstream production.

The preliminary results of the new database show that China’s bilateral trade surplus with the United States shrinks by 25 percent on a value-added basis, reflecting the high level of foreign-sourced content in Chinese exports.

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