Understanding Global Trade: Value-Added Measurement Importance

Trade, as the global economy's engine, reveals hidden value through international collaboration and complex supply chains.

### The Importance of Measuring Value-Added Trade in the Global Economy
* 🌍 Global trade has become increasingly complex, with products now being made of **components sourced from multiple countries** around the world.
* 💰 Traditional trade data often fails to capture the **full value of products**, as it doesn't account for the **various contributions from different countries** in the production process.
* 📊 The OECD-WTO Trade in Value-Added Initiative aims to provide a more accurate picture of trade by tracing the **value added by each country** involved in the production of goods.
* 📈 When looking at value-added trade data, countries' trade surpluses and deficits can change significantly compared to **traditional trade data**.
* 🏭 China, for example, shows **smaller surpluses with the U.S.** and **larger surpluses with Japan** when value-added data is considered.
* 💼 Value-added trade analysis can help identify who truly benefits from trade in terms of **income and job creation**.
* 🛒 Trade liberalization and improved logistics are essential to **fully harness the benefits of global value-added trade**.

[Music] trade is the engine of the global economy. More people, more goods, and more services are crossing borders today than ever before. But trade has changed dramatically in the 21st century. Through much of history, a good produced in the country was largely made a part source. Today, products are composed of parts from all over the world. To fully understand trade, we have to measure the value added at each point in the process. Imagine China exports a $100 smartphone to the United States. China may have only produced $10 or $20 of the total value of that phone. The rest of it was imported from elsewhere: graphic design from a California studio, computer code from programmers in France, a silicon chip from a factory in Singapore, precious metals mined in Bolivia. Many countries benefit from the export of this phone, but standard trade data does not reflect this. What's needed is a system for tracing the value that is added by all countries involved in producing this phone. The OECD WTO trade and value-added initiative aims to help people

understand that traditional trade data is not actually telling the whole story. Standard data shows that China has high surpluses with the United States and the European Union and a large deficit with Japan. Looked at in value-added terms, China surpluses and deficits decrease as Chinese exports have a high foreign content. Japan is another country that has run high trade surpluses with the United States and more recently with China. Value-added data reveals smaller surpluses with China and larger surpluses with the United States. This analysis can illustrate who actually benefits from trade and by how much in terms of both income and jobs. Trade improves competitiveness. Cheaper imports of parts and cheaper access to services bring benefits to consumers and companies alike. To realize the full potential, we need seamless border crossings, simpler customs procedures, sophisticated logistics, and more trade liberalization, especially in services. [Music] you [Music]

Made in the world: Better understanding global trade flows

OECD

Global trade has become more interconnected, with products now composed of parts from all over the world.

The value added at each point in the production process is crucial for understanding trade dynamics.

The OECD WTO trade and value-added initiative aims to trace and measure the contribution of all countries involved in producing goods.

Traditional trade data presents a misleading picture, showing China with high surpluses with the US and EU, and a deficit with Japan.

However, value-added data reveals that China's surpluses and deficits are smaller, as its exports have a high foreign content.

The analysis of trade data highlights the true beneficiaries of trade and emphasizes the need for seamless border crossings, simpler customs procedures, and more trade liberalization to maximize its potential.