Global value chains (GVCs), and more generally globalisation, have been a dominant feature of the global economy in recent decades, emerging as a result of the slicing and dicing by enterprises of previously integrated production processes into a chain of internationally dispersed tasks.
With such increased interconnectedness comes increased complexity. To improve our understanding of the nature of global trade and production, and international economic interdependencies, in 2013 the OECD and WTO launched the Trade in Value Added (TiVA). The current database provides data for 61 countries broken down by 34 industries.
However, it is clear that within those industries, firms vary significantly with respect to the degree and way in which they integrate into GVCs and in turn contribute to economic growth and employment. For example, SMEs typically face larger barriers to trade than larger firms, especially MNEs.
More granular statistics that drill down to firm characteristics on the basis of their varying intensities of integration, can provide: new insights on the nexus between international trade, international investment, and production; new insights on potential disparities between different categories of firms; and, of course, through higher granularity, more robust estimates than macro-based estimates.
Globalisation in Finland: Granular insights into the impact on businesses and employment
A new report, published jointly by the OECD and Statistics Finland, showcases the additional insights innovative linking of microdata can bring to analyses of globalisation and its impact on businesses and jobs.
- Finland has a much higher degree of integration in global value chains (GVCs) than previously thought, with one-third of the value of exports reflecting foreign content - 10 percentage points higher than estimates based on aggregated data.
- Comparative advantages in knowledge-based services have offset declining competitiveness in manufacturing. In value-added terms, services exports now outweigh manufacturing.
- One in five jobs are supported by exports, with growth in jobs sustained by services exports offsetting contractions in manufacturing exports.
- Firms with higher participation in GVCs have significantly higher wages and lower wage disparities.
- Women work disproportionately in industries with only indirect links to GVCs, or in sectors adversely affected by foreign competition, resulting in gender pay-gaps.
Key findings in 7 slides
- The potential impacts of Covid-19 are likely to be differential – disproportionately affecting micro firms (less than 10 employees) and the low-skilled.
Nordic countries in Global Value Chains
Global Value Chains play an important role for small open economies like the Nordic Countries. This report, which reflects the work of a close collaboration between the OECD Statistics Directorate and Nordic Statistical Offices, analyses how, in the Nordic countries, different types of firms including SMEs (dependent and independent), large enterprises, foreign and domestically owned enterprises, and trading and non-trading companies, engage in GVCs and help shape Nordic countries’ roles in GVCs.
- The contribution of SMEs to exports is twice as large as traditional trade statistics suggest
SMEs, even when not exporting directly, play an important role as upstream providers of goods and, notably, services, to those enterprises that do export abroad. More than than half the domestic value added content of Nordic exports originates in SMEs – around three-quarters of which reflecting services – and half of this value reflects upstream integration in supply chains typically controlled by large enterprises.
- SMEs that are part of a larger enterprise group (‘dependent SMEs’) are important channels of exports for other domestic firms
Dependent SMEs in the Nordics are typically much more export orientated (direct and indirect exports) than other (‘independent’) SMEs. Their exports are more geared towards Europe, likely reflecting their integration into the wider regional production network of their (domestic or foreign) parents. They generate important upstream spill-overs in the wider economy, even if they import a relatively large share of inputs.
- Domestic MNEs generate significant backward linkages and are a key export channel for upstream domestic enterprises
MNEs headquartered in Nordic countries have well developed domestic supply chains that provide an important channel to export markets for upstream suppliers. In Denmark and Finland for example, domestic MNEs generate 1.1 to 1.6 units of additional upstream value added for each unit they produce themselves. Foreign multinationals active in the Nordic countries only generate 0.6 units for foreign owned firms; in part reflecting the fact that foreign investment in the Nordics is more orientated towards services and serving domestic markets (as upstream suppliers).
- High import content and large domestic linkages go hand in hand
While imports are often seen as direct competition to domestic suppliers, this report shows that firms with a high import content of exports also generate the most domestic backward linkages for each unit of value added that they produce and export.
World Bank-OECD 2015 report on Inclusive Global Value Chains
First results of the OECD’s work to highlight the role played by different types of firms - in particular SMEs - in GVCs were presented in the joint World Bank-OECD report to G20 Trade Ministers in 2015. A key finding of this work was the significant contribution to overall exports made by SMEs through their upstream and indirect participation, which in many countries and sectors outweighed their direct contribution.
OECD Statistics and Data Directorate at email@example.com