International Trade in Value Added Terms: Methodological Issues

876
DOI: 10.20542/0131-2227-2018-62-1-5-15

V. Varnavskii (varnavsky@imemo.ru),
Institute of Control Sciences, Russian Academy of Sciences, 65, Profsoyuznaya Str., Moscow, 117997, Russian Federation;
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation 

Acknowledgements. The article was prepared at the Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences and supported by a grant from the Russian Science Foundation (project no. 14-28-00097 “The optimization of Russian external investment ties under deterioration of relations with the EU”).


Abstract. The article is aimed to investigate and discuss methodological issues and challenges related to the measurement of international trade in value added terms. Basing on the analysis of the concept of Global Value Chains (GVCs) and the substance of related theoretical categories, the author gives his own vision of the place that the Trade in Value Added (TiVA) concept occupies in the modern economic theory. It is pointed out that various approaches to the definition of value added, global chains, global value added chains, global import intensity, and other terms appeared recently. The author focuses on the problem of double-counting of intermediary goods (that leads to overstatement of the importance of trade) and on the estimations of the differences between exports in value added terms (so-called domestic value added embodied in foreign final demand) and gross exports. Such discrepancies reach as much as 25% of gross flows. Special attention is paid to the use of the World Input–Output Database (WIOD) in the analysis of the international trade. Its usefulness is illustrated by applying it to both intermediate goods and final products of Russian manufacturing exports. The author agrees with those economists who believe that conceptual framework of international trade in value added has been enhanced in the latest decade. Following Koopman et al. (2010) it is shown that a country’s exported value added can be broken down into three large components, including domestic value added, returned domestic value added and foreign value added. The author’s conclusion is as follows: Global Value Chains should not be regarded in themselves. They appear only where their total benefits exceed their total costs including transactional and other costs.

 

Keywords: international trade, value added, exports, imports, global value chains, Trade in Value Added (TiVA) 


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For citation:
Varnavskii V. International Trade in Value Added Terms: Methodological Issues. World Eonomy and International Relations, 2018, vol. 62, no. 1, pp. 5-15. https://doi.org/10.20542/0131-2227-2018-62-1-5-15



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