Syndicate content

February 2016

Picture Trade: To Understand GVCs, Connect the Dots

Gianluca Santoni's picture
The increasing salience of global value chains and their analysis has created tremendous demand for “mapping” these chains. How can we quantify the ‘value’ along a chain? How can we visualize the connections between each link?

These are questions we’ve been seeking to answer at the World Bank Group. And we’ve developed a new visualization tool, accessible through our World Integrated Trade Solution database, which allows the public to explore the quantifiable reality of GVCs.

To give you an example of how it works, let’s look at the automotive sector—a very prominent and commonly discussed GVC.

Sturgeon and Memedovic developed a methodology to break down the automotive production chain into final goods—those purchased by the consumer—and intermediate goods—those purchased by other manufacturers as inputs to be used in their own production. They identify three main GVC ‘nodes’: Automotive components (made by suppliers); engines, transmissions, and body assemblies (made by automakers); and finished motor vehicles. Table 1 shows the main exporting country within each of these nodes and its relative market share within that node.
 
Table 1: Main exporter by automotive GVC node, 2014
Main exporter by automotive GVC node, 2014

Table 2 goes one step further. By digging into the trade data, we can identify the most important products for each GVC node, in terms of their relative weight on world trade. This also helps us, in part, to identify which products or activities along the production chain are most significant or add the most value.
 
Table 2: Most traded product by automotive GVC node, 2014
Most traded product by automotive GVC node, 2014

Perhaps not surprisingly, the most exchanged automotive input ‘made by suppliers’ in 2014 falls under the classification HS870899—‘parts and accessories.’ Now, to better understand exactly how these parts and accessories move along the GVC, we can use our Global Trade Network tool on WITS to map all of the bilateral trade flows for HS870899. [1]
 
Figure 1: Global Trade Network visualization for HS870899 - Supplier perspective, 2014
Global Trade Network visualization for HS870899 - Supplier perspective, 2014

Putting trade and investment at the center of the G20

Marcus Bartley Johns's picture


Photo by Marcus Bartley Johns

It might not have made the leading global headlines but, three weeks ago, there was a significant new development in global governance of trade and foreign investment. In Beijing, China convened the first meeting of a new working group in the G20 to pursue initiatives in these areas: the G20 Trade and Investment Working Group (TIWG). Over two days, officials from G20 members and invited governments, along with the World Bank Group and other international organizations, discussed the future direction of trade and investment in the G20.
 
This is a promising step. There is no doubt that the G20 can have an impact in this area. The G20 accounts for three-quarters of world trade; half of global inward Foreign Direct Investment (FDI) and two-thirds of global outward FDI; and 80 percent of global output. Actions taken by the G20 also have a clear impact on developing countries outside the G20, with around 70 percent of non-G20 developing-country imports coming from the G20 countries, and around 80 percent of those countries’ exports directed to the G20.

However, the G20 has yet to deliver its full potential on trade and investment.
 
In the wake of the financial crisis and the elevation of the G20 to a leaders-level forum, the group emphasized immediate post-crisis recovery, as well as such pressing issues as financial regulation and macroeconomic stability. Attention has since shifted to the need to restore growth in a still-weak global economy, defining the achievement of “strong, sustainable and balanced growth” as a key priority for the G20.

Spurring global growth via a new Trade Facilitation Agreement

Klaus Tilmes's picture

As the global economy struggles to emerge from its chronic slow-growth stall, policymakers are increasingly focused on an energetic opportunity to help jump-start economic growth: the adoption of the landmark Trade Facilitation Agreement (TFA) that is now nearing ratification and implementation. By helping reduce trade costs and by helping enhance customs and border agency cooperation, a recent WTO report has found, the successful implementation of the TFA’s provisions could boost developing-country exports by between $170 billion and $730 billion per year. The OECD has calculated that the implementation of the TFA could reduce worldwide trade costs by between 12.5 percent and 17.5 percent.
 
Buoying the spirits of those who hailed the broad support for TFA at December’s ministerial conference of the World Trade Organization (WTO) in Nairobi, 68 countries have already ratified the agreement. The number of county-by-country ratifications is fast approaching the total of 107 required for the TFA to go into effect. Adopted in December 2013 at the WTO’s conference in Bali, the TFA is the WTO’s first-ever multilateral accord, having won approval from all 162 WTO member nations. The agreement contains provisions for expediting the movement, release and clearance of goods traveling across borders. It also sets out measures to promote cooperation among customs and border authorities on customs compliance issues.

A recent seminar at the World Bank Group – convened by the Trade Facilitation Support Program (TFSP) of the Trade and Competitiveness Global Practice (T&C) – explored the provisions of the TFA and learned of the increasingly active role of the private sector in supporting the TFA’s enactment. Awareness and momentum are building as a new coalition of private-sector firms – the Global Alliance for Trade Facilitation – mobilizes business support for TFA’s effort to speed and strengthen cross-border commerce. As the seminar heard from Norm Schenk, who serves as the chairman of the International Chamber of Commerce’s (ICC) Commission on Customs and Trade Facilitation, members of the alliance plan to meet in Washington this week to explore strategies for promoting the TFA’s adoption.