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 Improving Trade in Value Added (TiVA) Approach in Global Value Chain Analysis

Lin Jones and Zhi Wang

Selected presentation for the International Agricultural Trade Research Consortium’s (IATRC’s) 2022 Annual Meeting: Transforming Global Value
Chains, December 11-13, 2022, Clearwater Beach, FL.

Copyright 2022 by Lin Jones and Zhi Wang. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes
by any means, provided that this copyright notice appears on all such copies.
 Improving Trade in Value Added (TiVA)
Approach in Global Value Chain Analysis
Lin Jones
U.S. International Trade Commission (USITC)

Zhi Wang
George Mason University
2022 IATRC Annual Meeting
December 13, 2022

The views expressed here are solely those of the presenter. This presentation is not meant to represent the views of the
USITC or any of its Commissioners.
 Agenda

• Trade in Value Added (TiVA) Approach in GVC Analysis

• USITC and Regional TiVA Initiatives

• APEC TiVA Experience: Two-Stage Balancing Trade under the

Supply-Use Framework

• Improve TiVA Approach in GVC Analysis

• Q &A

2
 Trade in Value Added (TiVA) Approach in
GVCs Analysis

• Trade in Value added (TiVA):

• It is a statistical approach to measure global value chains
(GVCs) by estimating the sources of the value added (by
country and industry) in producing goods and services for final
consumption (OECD).
 Inter-country input-output (ICIO) tables are the underpinnings
of TiVA databases.
 It is the most feasible approach to develop comprehensive and
consistent measure for trade in value added that goes beyond
case studies of individual products (such as the iPod).

3
 Inter-Country Input-Output Table (ICIOT)
USE
Intermediate Use Final Use Total Use
Ctr 1 Ctr 2 Ctr 3 Row Ctr 1 Ctr 2 Ctr 3 RoW

1……n 1……n 1……n 1……n 1…e 1…e 1…e 1…e

1
.
Ctr 1 . ID1i,j IM1,2i,j IM1,3i,j IM1,rowi,j FD1i FM1,2i FM1,3i FM1,rowi O 1i
.
n
1
.
Ctr 2 . IM2,1i,j ID2i,j IM2,3 i,j IM2,rowi,j FM2,1,ci FD2i FM2,3i FM2,rowi O2i0-
.
Supply

n
1
.
Ctr 3 . IM3,1i,j IM3,2i,j ID3i,j IM3,rowi,j FM3,1i FM3,2i FD3i FM3,rowi O 3i
.
n
1
.
RoW . IMrow,1i,j IMrow,2i,j IMrow,3i,j IDrowi,j FMrow,1i FMrow,2i FMrow,3i FDrowi Orowi
.
n

Value-added V1j V2j V3j Vrowj

Source: author’s modification from Nadim Ahmad’s
Total supply O 1j O 2j O 3j Orowj
“Creating Global Input-output tables,” 2017

An ICIOT consists of four major matrices:

intermediate use, final use, direct value added, output. 4
 Leontief Input-Output Model
USE
Intermediate Use Final Use Total
Econ Econ Econ Econ Econ Econ Use
RoW RoW
1 2 3 1 2 3
1…… 1…… 1…… 1……
1…e 1…e 1…e 1…e
1
n n n n
𝑿𝑿 = (𝑰𝑰 − 𝑨𝑨)−𝟏𝟏 𝒀𝒀 = 𝑩𝑩𝑩𝑩
.

�𝑿𝑿𝒊𝒊 = 𝐕𝐕
�𝐁𝐁𝒀𝒀𝒊𝒊
Eco IM1,2 IM1,3 IM1,r FM1, FM1,ro
n1
. ID1i,j ow
FD1i 2
FM1,3i w
O 1i
𝒗𝒗𝒊𝒊 = 𝐕𝐕

A Y X
. i,j i,j i,j i i
n
1
.
Eco IM2,1i, IM2,3 IM2,r FM2, FM2,ro
. ID2i,j FD2i FM2,3i O2i0-
n2 . j i,j
ow
i,j
1,c
i
w
i
Supply

n
1 A: Direct input coefficient matrix
.
Eco
n3
.
IM3,1 i, IM3,2
ID3i,j
IM3,r
ow
FM3,
1
FM3,
2
FD3i
FM3,ro
w
O 3i B: the Leontief inverse matrix
.
X: industry gross output
j i,j i,j i i i
n

Y: final products
1
.
Ro IMrow, IMro IMro IDrow FMro FMro FMrow
FDrowi Orowi
V: direct industry value added
.

V
W .
1
i,j
w,2
i,j
w,3
i,j i,j
w,1
i
w,2
i
,3
i
n
� : diagonal industry value
𝐕𝐕
Value-added V1j V2j V3j Vrowj
Source: author’s modification from added matrix
Total supply O1 j O2 j O3 j Orow j Nadim Ahmad’s “Creating Global
Input-output tables,” 2017
5
 Major ICIO/TiVA Databases
• GTAP database (GTAP)
 Developed and maintained by the Center of Global Trade Analysis at
Purdue University.
 65 sectors; 141 countries and regions; 2004, 2007, 2011, and 2014.
• The World Input-Output database (WIOD)
 Developed by a consortium of eleven European research institutions.
 Two releases:
 2016 release: 56 sectors; 43 countries; 2000–14.
 2013 release: 35 sectors; 40 countries; 1995–2011.
• The OECD-WTO TiVA database (OECD)
• Launched by OECD and WTO in 2013.
• Released four editions: 2013, 2016, 2018, and 2021
• 2021 edition: 45 sectors; 66 economies; 1995–2018.
“The Similarities and Differences among Three Major Inter-country Input-output Databases and their Implications
for Trade in Value-added Estimates,” C. Degain, L. Jones, Z. Wang and X. Li (2014).
6
 USITC and Two Regional TiVA Initiatives
• APEC TiVA Initiative:
 Initiated in Spring 2014 under APEC GVC Work Stream 2: “APEC GVCs and
TiVA Measurement”
 Co-led by the United States (USTR, USITC, BEA) and China (MOFCOM, SIC)
 Major outputs:
 2005 and 2012 APEC TiVA databases; 34 sectors; 23 economies.
 Two APEC TiVA technical reports (2019 and 2021).
 Four APEC capacity building workshops.

• North America (NA) TiVA Initiative:

 Initiated in Fall 2014 to synergize the APEC TiVA effort
 Joint effort by USITC, BEA, Census, INEGI, Statistics Canada
 Major outputs:
 2012 the NA TiVA database; 100 sectors; 4 economies.
 Two NA TiVA White Papers (2018, 2022).
 A Proof of Concept: Estimating Extended Supply-Use Tables in Basic
Prices with Firm Heterogeneity for the United States (2018).
7
 Trade in a Single-Country Supply Table

Total Total
Imports Total supply at
domest supply at Margins and
Ind 1 Ind 2 Ind 3 …… Ind n purchaser’s
ic (c.i.f.) basic net taxes
price
supply price
Prd 1 O1,1 O2,1 O3,1 On,1 O1 IM1 S1(b) S1(p)

Prd 2 O1,2 O2,2 O3,2 On,2 O2 IM2 S2(b) S2(p)

Supply
Prd 3 O1,3 O2,3 O3,3 On,3 O3 IM3 S3(b) S3(p)

.
.

Prd m O1,m O2,m O3,m On,m Om IMm Sm(b) Sm(p)

TIO O1 O2 O3 On

In a single-country supply table, the import vector presents

a country’s total imports from the world by product.

8
 Trade in a Single-Country Use Table
Use
Total Final Use
Ind 1 Ind 2 Ind 3 …… Ind N Intermediate Exports Total use
use (Cons, Cap, Inv)

Prd 1 INT1,1 INT2,1 INT3,1 INTn,1 INT1 FIN1 EX1 U1(b or p)

Prd 2 INT1,2 INT2,2 INT3,2 INTn,2 INT2 FIN2 EX2 U2(b or p)

Prd 3 INT1,3 INT2,3 INT3,3 INTn,3 INT3 FIN3 EX3 U3(b or p)

.
.

Prd m INT1,m INT2,m INT3,m INTn,m INTm FINm EXm Um(b or p)

TVA V1 V2 V3 Vn

TIO O1 O2 O3 On

In a single-country use table, the export vector presents

a country’s total exports to the world by product.

9
 Trade in an ICIOT
USE
Intermediate Use Final Use Total Use
Ctr 1 Ctr 2 Ctr n RoW Ctr 1 Ctr 2 Ctr n RoW

1……n 1……n 1……n 1……n 1…e 1…e 1…e 1…e

1
.
Ctr 1 . ID1i,j IM1,2i,j IM1,3i,j IM1,rowi,j FD1i FM1,2i FM1,3i FM1,rowi O 1i
.
n
1
.
Ctr 2 . IM2,1i,j ID2i,j IM2,3 i,j IM2,rowi,j FM2,1,ci FD2i FM2,3i FM2,rowi O2i0-
.
Supply

n
1
.
Ctr n . IM3,1i,j IM3,2i,j ID3i,j IM3,rowi,j FM3,1i FM3,2i FD3i FM3,rowi O 3i
.
n
1
.
RoW . IMrow,1i,j IMrow,2i,j IMrow,3i,j IDrowi,j FMrow,1i FMrow,2i FMrow,3i FDrowi Orowi
.
n

Value-added V1j V2j V3j Vrowj

Source: author’s modification from Nadim Ahmad’s
Total supply O 1j O 2j O 3j Orowj
“Creating Global Input-output tables,” 2017

In an ICIOT, cross-border transactions, or inter-economy trade, is

balanced at global, bilateral, and sectoral levels by end use. 10
 The APEC TiVA Database Compilation Process

National Account (NA) Data

AUS SUTs NZL SUTs

BRNSUTs PER SUTs

CAN SUTs PHL SUTs

CHL SUTs RUS SUTs

PNG IOTs
CHN SUTs SGP SUTs

HKG SUTs THA SUTs

APECSUTs APECIOTs APEC TiVA Indicators
IDN SUTs TWN SUTs

JPN IOTs JPN SUTs USA SUTs

Step 1: gathering input data (2015-17)
KOR SUTs VNM SUTs

MYS SUTs EU28 SUTs Step 2: compiling, harmonizing, and balancing

MEX SUTs RoW SUTs input data (2017-19)

Goods and Services Trade Data Step 3: constructing APECSUTs; validating and
revising results; converting into APECIOTs and
computing TiVA indicators (2019-21)
11
 APEC TiVA Compilation Methodology
• Constructing a complete set of bilateral merchandise and services
trade statistics
• Disaggregating trade vectors in SUTs by trading partners and end
use
• Adjusting for special trade items
 Residents’ purchases abroad
 Non-residents’ domestic purchases
• Balancing global export supply and import demand, bilateral
trade by sector and end use, and total supply and use under the
APECSUT framework

12
 APEC Two-Stage Trade Balancing Approach

• Stage One: Stage one is balancing international trade statistics at

bilateral and sectoral level by end use.
• Stage two is rebalancing trade at global, bilateral, and sectoral
levels under the APECSUT framework.
• The principle of the APEC balancing approach: to preserve the
official data to the extent possible
• Adopting the optimization process
• Dictating a set of balancing conditions that results should meet
• Applying the official national account data (e.g., GDP by industries and by
major expenditure category) as controls and only relaxing them in an
optimization loop gradutely when there is no solution can be found
• Constraining the solutions within the upper and lower bounds based on
official statistics from different sources

13
 Stage One: Balancing International Trade
Statistics at Bilateral and Sector Levels

• Merchandise trade statistics:

 FOB vs. CIF adjustment
 Re-export adjustment
• Services trade statistics
 Pulling data from available official sources (APEC direct submission,
OECD, WTO, IMF)
 Using a top-down approach to fill in missing data points
 49 EBOPS categories (12 major categories and 37 sub-categories)
• Estimating international transport margin services
 Air, sea and other transport for freight; and freight insurance
 Demand: merchandise trade statistics and OECD CIF estimates
 Supply: services trade statistics + residuals
 CIFs as part of the intermediate input of final APECIOTs

14
 Stage Two: Rebalancing Trade at Global, Bilateral,
and Sectoral Levels under the APECSUT
Framework
• Stage two used three models to achieve the final balancing:
 Model 1: Balancing global export supply and import demand
� 𝐼𝐼𝐼𝐼𝐼𝐼𝑐𝑐.𝑖𝑖.𝑓𝑓. = � 𝐸𝐸𝐸𝐸𝐸𝐸𝑓𝑓.𝑜𝑜.𝑏𝑏. + � 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶

 Model 2: Rebalancing APECSUTs with results from Model 1

• ∑i(IDki,j + IMki,j)+Vkj = Okj
• ∑jIDki,j + FDki+ EDki= Oki
• ∑iFMki + ∑j IMki,j + ∑iREi,fob –∑iREmark-up= ∑world Mki,cif
• ∑iEDki, fob + ∑iREi,fob = ∑iEki, fob
• ∑iFCEki= ∑iFDki+ ∑iFMki + ∑iMGki + ∑i NTAXki

o Model 3: Applying results from stage one and model 1 and 2 to

construct bilateral trade matrices that meet all balancing
conditions
15
 Improving TiVA Approach in GVC Analysis

• Having high-quality TiVA data is critical for systematic GVC

analysis that goes beyond product/industry case studies.
• Improving the underlying input data
 Increasing the adoptions of SUTs; improving services trade statistics;
reducing bilateral trade discrepancies
 Building statistical capacity; collaborating with national statistical agencies
• Improving TiVA compilation methodologies
 Sharing detailed technical documentation and best practices
 Developing methodologies to treat special trade items and incorporate firm
heterogeneity

• Improving global TiVA governance

 Providing transparency and harmonizing compilation methodologies via
international collaboration.
16
 For more information:
USITC TiVA Portal

Questions? [email protected]