Some insights from the WTO’s data on country participation in Global Value Chains
William Mwanza, tralac Researcher, comments on the WTO’s new trade in value-added and global value chains statistical profiles
The World Trade Organisation (WTO) has recently released data on 61 countries’ participation in Global Value Chains (GVCs), which can be viewed here.
According to data from the International Trade Centre (ITC), the 61 profiled countries accounted for about 90% of global trade in the period 2010 to 2014. The main overall exporters in 2014 were China, US, Germany, Japan and South Korea (in that order). The main importers were US, China, Germany, Japan, and UK.
Each WTO country profile traces the evolution of value added content in gross exports from 1995 to 2011; participation in GVCs according to forward or backward linkages; the role of services in exports of manufactures and in total exports; the share of intermediates in imports and exports; some trade facilitation figures; and inflows and outflows of foreign direct investment.
Each profile also highlights the main export destinations of an individual country according to domestic and foreign value added in 2011. In this year, Germany was the biggest export destination, followed by the US, China, UK, and Japan. While there is trade between some of the major and emerging economies, there is a noticeable trend across the profiles whereby countries tend to trade most with other countries within close geographical proximity. This is the case in North and South America, as it is in Europe and East Asia. It emphasises how regional value chains are an intrinsic part of participation in GVCs.
South Africa and Tunisia are the only two African countries on the list of profiled countries. Their reported data highlights some important considerations for other African countries, which as is evident from the profiles are participating the least in GVCs.
Comparing the years 1995 and 2011, it is noted that South Africa has increasingly participated in value added trade. This is evident by a reduction in domestic value added (DVA) sent to the consumer economy from 66.4% to 54% in the respective years; accompanied by an increase in domestic value added sent to third economies from 20.5% to 26.%, and in foreign value added (FVA) content of exports from 13.1% to 19.5%. In 2011, its top industry exports were in mining, basic metals, and wholesale and retail trade. Reflecting its level of industrialisation, DVA accounted for significant shares in total gross exports of these products at 91.8% for wholesale and retail trade, 87.9% for mining and 67.2% for basic metals. Its top three destinations for exports with value added content were China, India and the US (which are noted to be more global destinations than the regional trend mostly noted across the profiles). Again, DVA accounted for 80% or more in total gross exports to these countries.
South Africa’s high DVA content in its exports is reflected in its greater participation in forward linkages (where its exports form inputs into other countries exports), than in backward linkages (where imports from other countries form inputs into its own exports). In 2011, its forward linkages were 26.5% and its backward linkages 19.5% of its total gross exports. The total percentage of its forward and backward linkages of 45.9% was slightly lower than the average of developing economies and developed economies at 48.6% and 48%, respectively. The sectors in which it participated in forward linkages the most were mining, wholesale and retail trade, and transport and storage. The top exporters of South Africa’s inputs through GVCs were (again global), namely China, Germany and Japan. The sectors in which it participated in backward linkages the most were basic metals, mining, and petroleum products, and its top foreign input providers were Saudi Arabia, the US and China.
The profile also highlights the role of services value added in South Africa’s exports. Here again, domestic services contributed more to exports of manufactures and to total exports, than did foreign services. Wholesale and retail trade and transport and storage contributed most to both manufactured exports and total exports. Other community and social services contributed more to the manufactures, and financial intermediation to total exports. The US and the UK were the biggest foreign service providers to both manufactured exports and total exports. China was the third biggest service provider to manufactured exports, while Germany the third biggest provider in terms of total exports. In 2013, inward FDI amounted to US$140 billion, with 91 billion of this in services and 32 billion in manufactures. Outward FDI was lower at US$95.8 billion, although with a higher annual % change at 15.1% over 2005 to 2013. Inward FDI’s rate was at 7.7% over the same period.
In terms of trade facilitation, South Africa’s figures were just about better than world averages in the reported variables. Based on 2015 figures, costs to export at the border were reported at US$1830 per container against a world average of US$1841, while costs to import were US$2080 against US$2084; time to export at the border was 16 days against a world average of 22, while time to import was 21 days against 25. The number of documents required to export was 5 against a world average of 6, while documents required to import was 6 against an average of 8.
Like South Africa, Tunisia has increasingly participated in GVCs through value added components in its exports over the period 1995 to 2011. During this period, DVA sent to its consumer economy decreased from 63% to 49.3%, while DVA sent to third economies increased from 12.3% to 18.3%. Meanwhile, FVA content of exports increased more significantly from 24.7% to 32.4%. Its top export industries were transport and storage, textiles and electrical machinery. DVA accounted for the highest percentage in gross exports in transport and storage at 80.6%, followed by textiles 54.9%. FVA accounted for a bigger share in gross exports of electrical machinery, at 54.3%, with DVA in this industry’s exports at 45.7%. Tunisia’s top export destinations were France, Italy and Germany, with DVA accounting for between 65% and 70% of total gross exports to each of these countries, while FVA accounted for between 30% and 35%.
Tunisia participated in GVCs more through backward linkages than it did through forward linkages. In 2011, its forward linkage participation was mostly in mining, transport and storage and wholesale and retail trade. The top exporters of Tunisia’s inputs through GVCs were France, Italy and Germany. Its backward linkage participation was mostly in electrical machinery, textiles, and transport and storage. The top foreign input providers were again France, Italy and Germany.
In terms of services value added content of exports, foreign services contributed more to exports of manufactures than domestic services at 23% and 10.2%, respectively. With regard to total exports, domestic services (34.5%) contributed more than foreign services (16%). Wholesale and retail trade, transport and storage, and other business services contributed the most to both exports of manufactures and total exports. France, Italy and Germany were the top foreign services providers to both exports of manufactures and total exports.
Tunisia’s trade facilitation figures for 2015 were significantly positive. The cost to export and import at the border were at US$805 and US$910, which were way below the world averages of US$1841 and US$2084, respectively. Time to export and import was 16 days and 20 days, again below the world averages of 22 days and 25 days. The number of documents required to export and import was 4 and 6, against a world average of 6 and 8, respectively.
South Africa and Tunisia’s profiles highlight some important considerations for African countries as they seek greater integration into GVCs.
As noted earlier, GVCs generally take a regional dimension (i.e. based on geographical proximity) particularly when it comes to exports with higher value added content. Hence, the role of regional integration agreements in facilitating such participation is vital, especially in developing regional value chains.
One way of integrating into GVCs is through forging effective networks with countries that are already participating in them such as South Africa and Tunisia – with much consideration having to be how this can be done within their forward and backward linkages in different sectors, taking into account the DVA and FVA contents in each. While drawing lessons from their global and European trade partner profiles, respectively, there is also the need for analysing value added trade networks with global partners either directly or through countries such as South Africa and Tunisia – with emphasis on how such networks currently or could potentially feed into regional value chains.
Analysis at the regional and national levels will be important in this regard. A positive step in this direction is a recently released report on regional value chains in the Southern African Customs Union (SACU), which is available here. This work was commissioned by the World Bank and includes a contribution from tralac. Such work will also be important for other regions in Africa and should inform efforts towards continental integration. It will also be important for efforts to forge value added trade networks with countries and regions outside the continent, such as the EU under the Economic Partnership Agreements (EPAs), the US under the African Growth and Opportunity Act (AGOA), and on a bilateral basis with East Asian and South American countries. Current developments outside the continent such as negotiations towards the megaregionals, and the rebasing and performance of the Chinese economy will have to be taken into account.
As the WTO profiles demonstrate, considerations of the role of services and investment in GVC participation will also be important, as will be that of trade facilitation at individual country and regional level. Although not highlighted in the profiles, sound regional infrastructural networks will also be vitally important for effective participation in GVCs by African countries.