GLOBALIZATION & FOREIGN TRADE SEPTEMBER 2013 Rahmet USLU Gülçinay MUMCU

OUTLINE A- GLOBALIZATION & TRADE IN VALUE ADDED B- IMPORTANCE OF TRADE IN SERVICES STATISTICS September 2013 Ministry of Economy

A- GLOBALIZATION & TRADE IN VALUE ADDED September 2013 Ministry of Economy

Trade in Value Added With globalization, global value chains (GVCs) have become a dominant feature of today’s global economy. The (growing) process of international fragmentation, challenges our conventional wisdom on how we look at and interpret trade. Measuring Trade in Value Added is important for understanding the supply side of trade and identifying the sources of competitiveness. September 2013 Ministry of Economy

Trade in Value Added Globalisation of production necessitates new trade statistics due to the fact that current trade statistics may lead to misguided decisions. The (last) exporter country which makes only assembly can be awarded wrongly as if it produces the full commercial value. In response, international institutions carry out studies to develop a database of Trade in Value-Added indicators. September 2013 Ministry of Economy

“Trade in Value Added” and “Double Counting” September 2013 Ministry of Economy

Trade in Value Added Apple’s Example Source: Trade İn Value-added: Concepts, Methodologies And Challenges (Joınt OECD-WTO NOTE) September 2013 Ministry of Economy

Trade in Value Added The indicators of trade in value-added are derived from input-output tables. There are many ongoing works which are carried out by international institutions in the measurement of trade in value-added. One of them is the joint OECD-WTO Trade in Value Added initiative. The recent Trade in Value Added database was released in May 2013. September 2013 Ministry of Economy

Trade in Value-Added (TiVA) indicators include: Decomposition of gross exports by industry into their domestic and foreign content The services content of gross exports by exporting industry (broken down by foreign/domestic origin) Bilateral trade balances based on flows of value added embodied in domestic final demand Intermediate imports embodied in exports September 2013 Ministry of Economy

In Turkey, the latest input-output tables were published in 2002. Trade in Value Added In Turkey, the latest input-output tables were published in 2002. Keeping the input-output tables up to date is essential. In addition frequent revision is necessary. September 2013 Ministry of Economy

Trade in Value Added Turkish Statistical Institute (TurkStat) has been trying to develop statistics for 2012 through questionnaire. A method is needed for providing continuity and keeping the data updated. A method that will allow the data to be collected in one repository and will ensure data flow continously. September 2013 Ministry of Economy

B- IMPORTANCE OF TRADE IN SERVICES STATISTICS September 2013 Ministry of Economy

Turkey's Services Trade 2012 SERVICE EXPORTS Total Exports (42 billion $) Tourism (25,6 billion $) Transportation (11,1 billion $) Services Account Surplus (22,9 billion $) 13

Turkey's Services Trade Turkey's Share in Global Services Exports (%) Source: WTO 14

Turkey’s Services Trade Travel 25.6 billion dollars of revenue in 2012. 6th in the world in terms of revenue Regarding number of visitors; 6 th in the World and 4 th in Europe (2011 and 2012) Tourism growth in 2000-2012 period; Turkey: %11,4 Construction 2nd in terms of the number of top constructing companies (ENR) According to CB 1 billion dollars of revenue on average 7th in the world in terms of revenues September 2013 Ministry of Economy 15

Turkey’s Services Trade Logistics Europe’s biggest truck fleet (45000 trucks /1400 companies) 25. Biggest flight fleet in the world (1 million flight in 2011 / 460.000 international) Privatization of railway transportation services and the high-speed railway projects are carried out rapidly. So we expect increase in exports of rail transportation services. 11th in the world in terms of receipts Telecommunications 500 million dollars of revenue 12th in the world in terms of 2012 receipts September 2013 Ministry of Economy 16

Why Trade in Services Statistics Matter? GATS Follow-up of Uruguay Round commitments Progressive liberalization principle Request-offer procedures, bilateral& plurilateral negotiations Statistics are of crucial importance in order to submit requests to Members or assess the requests meaningfully TISA (Trade in Services Agreement)&FTA’s (Free Trade Agreements) Demise of the Doha Round Negotiations Start of a comprehensive TISA agreements among 23 countries More comprehensive FTA’s covering “trade in services” , “investment” , “government procurement” Bilateral trade in services statistics are vital to undertake negotiations. (Going to the market without knowing how much you have in your pocket) September 2013 Ministry of Economy 17

Why Trade in Services Statistics Matter? High-Level Bilateral Meetings (JETCO etc.) Without “trade in services data” agenda is missing Service exporters only react (give feedback) when there is serious problems High-level contacts are chosen according to sub-sectors traded Increasing trade in services volume with regional trading partners September 2013 Ministry of Economy 18

Why Trade in Services Statistics Matter? Policy Making “Trade in Services Agenda” No single institution responsible for “trade in services” before 2011 Public Administration Reform Package By 8 June 2011, Ministry of Economy is assigned for legislative arrangements and implementation of them regarding “trade in services” Policy making is sensitive both to sectors (even sub-sectors) and to countries. There is an increasing need for sectoral and country-based statistics September 2013 Ministry of Economy 19

Why Trade in Services Statistics Matter? BOP approach and Current Account Deficit (CAD) High “net errors and omissions” (some of which may have arised from missing “trade in services” data) CAD is one of the most important macroeconomic indicators Turkey has a significant trade volume and needs more accurate data to manage current account particularly “trade in services” operations Obligations arising from EU Acquis Turkey has started accession negotiations in 2005 EC directive 184/2005 on community statistics concerning balance of payments ITS must be compiled with wide sectoral coverage and with enough geographical breakdown September 2013 Ministry of Economy 20

What Are The Recent Problems? Developing bilateral statistics (compilation of trade in services statistics by trade partners) Increasing the level of detail of existing data on trade in services (specifically construction and transportation) Compilation of detailed sectoral statistics (such as, computer related, audio-visual, health and related, professional and education services sub-sectors) September 2013 Ministry of Economy 21

Trade in Value Added References OECD, Trade Policy Implications of Global Value Chains, http://www.oecd.org/sti/ind/Trade_Policy_Implicatipns_May_2013.pdf OECD-WTO, Trade In Value-Added: Concepts, Methodologies And Challenges (Joint OECD-WTO Note) https://www.google.com.tr/search?q=a+set+of+international+input-output+tables+with+bilateral+trade+links&rlz=1C1GTPM_trTR528TR528&oq=a OECD-WTO Database on Trade in Value-Added, http://www.wto.org/english/res_e/statis_e/miwi_e/tradedataday13_e/oecdbrochurejanv13_e.pdf September 2013 Ministry of Economy