Introductory remarks by Angel Gurría, OECD Secretary-General (Watch the webcast of the press conference)
Paris, 16 January 2013
(As prepared for delivery)
Ladies and Gentlemen,
Let me welcome you to this release of the preliminary OECD-WTO Database on Trade in Value-Added. It is a pleasure to present this new tool together with Pascal Lamy and I thank the WTO for the fruitful cooperation over the last two years. I also thank Mr Karel De Gucht, European Commissioner for Trade, and Mr Tim Grosser, Minister of Trade of New Zealand, for joining us today.
This new Database, including preliminary data for 40 countries, can play an important role in understanding better what is going on in global trade, investment and production patterns, and in helping us to improve our policies.
Global Value Chains have become a dominant feature of today’s global economy. A good produced in the EU and exported to the US includes components from China and Japan, using raw materials and services from Australia, Russia or India. Indeed, today we have to think about goods and services as “made in the world”.
This growing process of international fragmentation, driven by technological progress and trade policy reforms, challenges our conventional wisdom on how we look at and interpret trade policies and trade flows.
As goods and services cross borders several times at different stages of processing, conventional trade statistics may not tell the whole story. There can be “multiple counting” that distorts our view of the economic importance of trade to economic growth and employment. They may also misrepresent the structure and size of bilateral trade balances.
The tool which we are sharing with you today systematically reveals what was hidden before. This release shows where value is actually created. Let me outline three key points to illustrate why this matters.
First, this new data improves our understanding of the opportunities offered by international trade. It shows more clearly than ever before how much any country’s capacity to sell to the world depends on its readiness to buy from the world. It shows why and how blocking imports damages a country’s own productivity growth and ultimately its competitiveness. We can see, for example, that about one-third of the total value of motor vehicles exported from Germany actually comes from other countries, and that about 40 percent of the total value of China’s electronics exports comes from foreign sources.
Second, this tool provides new insights on how to improve individual countries’ competitiveness. Gross trade figures suggest that services account for less than one quarter of global trade. These new data illustrate clearly that services are also embodied in manufacturing trade. Our new data shows that over 50 percent of the value added in manufactured goods exported from the US, the UK, France Germany and Italy, comes from services. So, if you want to improve your manufacturing performance, you must look at the performance of your service sectors as well.
Finally, the Database can help us design policies to better reflect the reality of international value chains. For example, when you measure tariffs on value added, as opposed to gross value, the level of protection can double! Within a global value chain, administrative costs at borders can deter firms from locating part of a value chain in that place. The OECD has estimated that taking practical measures in customs and border administration can reduce trade costs by as much as 10 percent!
Trade negotiations will have to catch up with this new reality. The new insights provided by this Database could change the way countries negotiate trade agreements and illustrate again the self defeating nature of protectionism. But beyond trade, it will also give us insights into a wide range of policy areas.
We will be undertaking further work to understand what global value chains might imply for the compensation of labour, jobs – an essential question for all economies today – and the role of capital, income flows, R&D, intellectual property and ICT networks.
Ladies and Gentlemen,
This is exciting pioneering and relevant work. It is yet another example of how international organisations can work together, as we have done on this occasion with the WTO. In the coming months we will be expanding the coverage and improving our methodologies. We will be looking to governments to support this important work.
In May, when leaders and Ministers gather at OECD for our annual Ministerial meeting, we will release a comprehensive report on the policy implications for trade, investment and domestic policies, as well as the potential benefits from engaging in global value chains. I look forward to sharing further insights and new recommendations with you at that time.