São Paulo – The Organisation for Economic Co-operation and Development (OECD) and the World Trade Organisation (WTO) released on Wednesday (16), in Paris, the new base for figures regarding international trade. Entitled Trade in Value Added Initiative (TiVA), it measures the global goods flow not by value but by added value in each country in terms of more products and services. The objective is to offer a more detailed view of the economy that, more and more, becomes dominated by global production chains.
The methodology considers that exports of a country depend on inputs from other nations. That is, to produce and export a car, a factory established in certain country buys parts from third parties, who, in turn, buy steel and rubber from others.
At the start of the initiative, the organisations are disclosing figures regarding 40 countries, including all members of the OECD, plus Russia, Brazil, China, India, Indonesia and South Africa, divided into 18 activities and considering 2005, 2008 and 2009. To the organisations, this allows better observation of the contribution of the service sector in global chains, the importance of import of partially manufactured goods for the performance of exports, the reality of interdependence of economies, the part played by emerging nations in productive chains and how the shock of demand and offer may impact on different links of these chains.
To the OECD and WTO, the value added trade indices already make clear the impact of the trade policies adopted by countries. One of the conclusions made based on the figures disclosed is that, although import taxes on manufactured products are down worldwide, the expansion of global production chains reveals a perverse effect of protectionism.
“Tariffs are cumulative when intermediate inputs are traded across borders multiple times. Downstream firms pay tariffs on their imported inputs and then face tariffs again on the full value of their exports, including on those same inputs,” shows the report.
The organisations warn that taxes make products more expensive before they get to the consumer, which inhibits demand and affects investment and production along the chain. In the evaluation of the OECD and WTO, protectionist measures on the imports of partially manufactured goods reduce competitiveness of a country on the international market. “Tariffs and other barriers on imports are a tax on exports”, say the organisations.
Apart from the tax question, both recommend the adoption of policies to reduce customs bottlenecks, eliminate unnecessary restrictions and improve the infrastructure of countries. They also suggest “unilateral” concessions by nations with regard to liberalisation of their markets and efforts for negotiation of trade agreements, especially multilateral ones.
More domestic
Brazil is among the countries analysed right from the start. The study, however, shows that the use of imported inputs and services in products exported from the country is lower than the average for OECD member states, which include developed and some emerging nations. “The high domestic content reflects both the country’s size and its specialisation in primary commodities and early stages of supply chains,” says another press statement by the organisations.
To give an idea, of the 18 categories researched, the one with the lowest nationalisation index is that of electric equipment, with 85% of Brazilian content. On average, the use of foreign content in merchandise and services exported by the country is below 10%.
Another identification based on 2009 figures is that the Brazilian trade surplus with China is 45% lower when using the value added methodology, as against the comparison with gross values. The figures drop from US$ 12.1 billion to US$ 4.9 billion. With regard to the United States, however, the positive result for Brazil climbs by 18%, from US$ 5.6 billion to US$ 6.6 billion.
The study also shows that services represent on average 40% of value added to Brazilian exports, while in comparison to the gross value of foreign sales they represent just 15%. That, according to the organisations, shows the importance of the area to competitiveness of the country on the foreign market. In developed nations like the United States, United Kingdom, France, Germany and Italy, services answer to over 50% of value added to exports.
Click on the link below to see a video about the methodology
www.youtube.com/watch?v=RZKX-0SK41U
*Translated by Mark Ament
