1. Global Value Chains: Analytical and Policy Framework
By J. Steven Landefeld, Senior Adviser and Consultant to the United Nation’s Statistical Division
Fifth World KLEMS Conference
June 4-5, 2018
Harvard University

2. Gross vs. Value-Added Trade

3. Cross-Boder vs. Ultimate Creditor/Debtor (UBO for FDI)

4. GVC Satellite Accounts
Satellite Accounts Based on SNA BPM
Indirect Estimates Using Global Input-Output Tables
Trade in Value-Added
Ulitimate Beneficial Owners and Creditors and Debtors
Improved data through reconciliation, decomposition, and collection
Complete set of national accounts
Production, income, distribution of income, international transactions, prices, terms of trade, KLEMs, capital, and financial accounts

5. GVC Analytical and Policy Framework
Economic Development Policy, Competitiveness, and Upgrading
Policy Issues:
Infrastructure
Training/skills
Education
Niches/Gaps in Supply Chain
Special tax, regulatory, zoning and other incentives
Protective tariffs
Detailed GVCs for key products especially well suited for development, competitiveness, and upgrading
Probably also need GVC SUT cross-industry estimates for range of key products supplemented with extended SUT and other tables (for prioritizing and targeting policies/investments across industries)

6. GVC Analytical and Policy Framework: Trade Policy
Perspective:
Iphone (Only $6 of $500 “Made in China” accrues to China)
U.S. China Bilateral Deficit (TIVA 30% lower/Bank of Italy 40%)
Tariffs, Preferential and Multilateral Trade Agreements:
Use of Extended SUT/GVC accouts vs. Bilateral Analysis
20% import adjustment tax for US: +$719 billion vs. -$214 billion, or from +3.7% vs. -1.1% of U.S. GDP.
Direct + Indirect trade, plus price, efficiency, and terms of trade effects

7. Tariff Example: Cross Border Adjustment Tax
U.S. Imports/Exports-substitution (+$719 billion, X and GDP)
Impact of foreign content in U.S. exports (-$87 billion, X and GDP)
Impact of U.S. content in U.S. imports (-$25 billion, X and GDP)
Impact on MNE competitiveness and VA (-$138 billion, MNE VA and GDP)
Terms of Trade (-$666 billion, one-time reduction in real GDI)
MFP reduction (-$18 billion, GDP)
Total Impact (-$214 billion vs. +$719 billion) or

8. GVC Analytical and Policy Framework: Trade Policy
Tariffs, Preferential and Multilateral Trade Agreements:
Use of extended world I-O shows reduction of even low U.S. E.U. tarrifs can produce significant gains. (Feenstra et. al 2017).
Analysis of China-U.S. trade liberalization produces net job losses with bilateral data, but net job gains, mainly in services, using world I-O data. (Feenstra et al, 2016)
Offshoring by MNE’s lowers measured US GDP and Productivity by 0.25% and Value added in R&D intensive industries by 8% (Mataloni et al, 2017)

9. GVC Analytical and Policy Framework
Tax Policy:
Firm location
By country, by industry, by size, by organizational structure, use of IT,…
Income and Financial Flows vs. Physical Location
Short-Run vs. Long Run Effects ON Location and Financial Flows
SR use of MNE tax saving by type (compensation, profits, saving, investment,..)
LR impact on MNE Saving and Investment, Competitiveness, and Efficiency
All require aggregate and detailed breakdowns
Extended SUTs
MNE operations data
UBO FDI financial data

10. GVC Analytical and Policy Framework
Monetary Policy:
Risk assessment: U.S. Financial Crisis
Regulation: Post-financial crisis
Accurate measurement of inflation and productivity
GVCs and challenges for price and output measurement
All require aggregate and cross country data on:
UBO, whom to whom, or ultimate creditor/debtor
Cross-country MNE finance data to assess mobility of capital and possible response to regulatory changes
Improved measures of GVC/international prices, quantities, and I-O coefficients

11. GVC Analytical and Policy Framework
The Impact of Offshoring on Labor Markets and Welfare
Trade flows
Employment
Compensation
Distribution of Income
All require extended SUT data in the aggregate, across industries, along with supplemental data on comensation, skills, etc.
Evolving view of impact offshoring offered by extended SUTs and other data improvements

12. GVC Analytical and Policy Framework
Environmental and Energy Policies
Security Policies for Critical Materials, Food Safety, and National Security
Both probably require some combination of broad extended SUT to set priorities, but focus likely to be more on product-specific GVCs.