What is Value Added Trade-in (TiVA)?
Value-added trade-in (TiVA) is a statistical method used to estimate the source of value-added when producing goods and services for import and export.
- The value-added trade-in (TiVA) statistical method considers value-added in the production of goods and services consumed around the world.
- The TiVA method eliminates the double or multiple counting problem that is common in traditional trade statistics.
- The OECD analyzes trade policy, investment policy, and many other policy measures to help countries explain the value structure of their global supply chain.
Understand Value Added Trade-in (TiVA)
TiVA’s Organization for Economic Co-operation and Development (OECD) and World Trade Organization (WTO) joint initiative considers each country adding value in the production of goods and services consumed around the world. Purchased goods and services are made up of inputs from different countries around the world, but the flow of components in these global supply and production chains has not been accurately reflected in previous metrics. bottom.
TiVA indicators are designed to provide better information to policy makers by providing information and insights on commerce relationships between nations. TiVA tracks the added value added by each industry and country in the production chain to the final export and then assigns the added value to these source industries and countries. TiVA recognizes that exports in a globalized economy rely on the Global Value Chain (GVC), which uses intermediate items imported from different industries in many countries.
Traditional trade statistics record the total flow of goods and services each time you cross a border. This causes double-count or multi-count problems. For example, a traded intermediate item used as an export input may be counted several times in terms of trade value.
The TiVA approach avoids double calculations by taking into account the net trade flow between countries. For example, a mobile phone manufactured for export in China may require several components, such as a memory chip, touch screen, and cameras from foreign companies in South Korea, Taiwan, and the United States.
Foreign companies need intermediate inputs such as electronic components and integrated circuits imported from other countries to manufacture mobile phone components that are exported to Chinese manufacturers. The TiVA method allocates added value by each of these companies involved in the final manufacturing of mobile phone exports.
OECD Role in TiVA Measures
To improve and build TiVA methods, the OECD analyzes trade policy, investment policy, development policy, and various other domestic policies, and how policy makers benefit from their involvement in the global value chain. Helps determine if you can get it.
The International Input-Output (ICIO) system calculates indicators for measuring economic globalization. This includes trade-in jobs and skills that show the number and types of jobs supported by foreign end demand. ICIO and emission data generate trade-in materialized carbon estimates to highlight where carbon dioxide is consumed rather than produced. In addition, the OECD is evolving its accounting framework and national input-output tables to more accurately measure world trade.
One of the most common cases offered as an example of the global value chain is the case of Apple products. Cupertino designs its products in the United States, but it is assembled in China using inputs and intermediate steps from a huge number of companies in different countries, from Germany to Japan and South Korea.
Further complicating the manufacturing process is the relationships between the various companies involved in the process. For example, Foxconn, who is in charge of final assembly, has operations in Taiwan and mainland China. Both are involved in the manufacture and assembly of Apple products and their device components.
Complex replacement of components and supplier parts and the associated intermediate steps mean that errors occur in traditional systems where only the direct source of the part is accounted for. The TiVA accounting system creates a comprehensive dataset that can explain the added value to the device at each step of the manufacturing process.