2 Structure of value-added
The objective of this section of RIVA is to provide insight into how an economy’s exports are produced and utilized. This helps understand the value-added structure of an economy’s exports — dependence on cross-border production sharing, extent of final and intermediate exports, and how this changes perception of trade balances. The broader insights gained in this section can form the basis to guide users in undertaking more detailed GVC analyses in ‘Backward linkages’ and ‘Forward linkages’ discussed in subsequent sections of this guide.
In this example we consider Thailand’s value-added export structure in its exports to the world. Take a look at the Structure of value added section on the website to examine structure of value-added for Thailand, or any other economy you may be interested in.
To get started with this analysis, click on the ‘Structure of value-added’ section on the navigation bar. From here, choose your exporting economy of interest (in this example, Thailand) and importing economy (in this example, World) from the drop-down menu as shown:
Figure 2.1: Structure of value added: Choosing exporting and importing economies
You can change the year of interest or exporting sector in a similar manner. In this example, we maintain the pre-selected year, i.e. 2017, and the pre-selected exporting sector, i.e. ‘All sectors’.
The first visualization you will see after making these selection is shown below:
This tree map visualization contains a number of useful insights. The question above the graph already gives you an indication of what to expect: ‘How are Thailand’s exports of all sectors to World produced and utilized?’. To break this question down, Thailand is the exporting economy of interest and we are considering its exports to the World (importing economy) for all exporting sectors. In particular, we are concerned with understanding how these exports are produced (share of foreign input is used in production) as well as how they are utilized (share of intermediate and final exports, and domestic value-added).
The visualization provides a number fo insights, described below:
You can examine the value-added breakdown of exports. For example, we can see that foreign production consumed by the importer (backward linkages) accounts for 20.61% of Thailand’s gross exports to the world. Hover your mouse over the ‘Foreign production consumed by the importer’ to see more details: you will see this amounts to $49.24 billion.
In a similar manner, you can examine any section of the tree map for any of the 6 value-added components to get more details on Thailand’s value-added structure of exports to any partner economy.
There are also 2 additional values — below the question and above the graph — that complement the results in the graph. The first (Thailand’s gross exports to World: $238.86 billion) is simply the sum of all the $ values in the tree map, i.e. the total value of Thailand’s exports to the importer (in this case, World). The second (Thailand’s gross exports to World: $238.86 billion) is self explanatory. While in this case both the values are identical (given that the importer is the world), when considering an individual economy or group of economies these two values are useful to compare the importance of the chosen importer relative to the world.
You can download the graph and underlying data by simply clicking on the three horizontal bars icon on the top right corner of the graoh and choosing your preferred format for download.
The second visualization you will see scrolling down on this page is shown below:
This bar graph shows the difference between value-added trade balance and gross trade balance, when considering Thailand’s exports to the world.
Gross trade balance simply refers to the difference between Thailand’s gross exports to the world and its gross imports from the world. Hovering your mouse over the red bar (Gross trade balance), you can see that this amounts to 26.1% of Thailand’s gross exports to the world. This indicates that Thailand has a trade surplus with the world, i.e. it exports more than it imports goods and services with the world.
Value-added trade balance refers to the difference between Thailand’s domestic-value added in exports to the world, and the total domestic value-added in exports from all individual countries to Thailand. Hovering your mouse over the blue bar (Value-added trade balance), you can see that this amounts to 22.3% of Thailand’s gross exports to the world — indicating a value-added surplus.
Comparing these two trade balances highlights that Thailand’s trade balance when measured from a gross perspective overestimates its trade surplus. Thailand’s gross trade balance being greater than its value-added trade balance indicates high imported content in its exports. While this comparison may not very useful when considering gross and value-added trade balances between a country and the rest of the world, equivalent figures when considering an individual exporter and importer (say United States and China) can provide interesting perspectives on topical issues regarding trade balances.
The third (and final) visualization you will see scrolling further down this page is shown below:
This bar graph is designed to help you compare the results for Thailand’s value-added structure of exports (to the world) with equivalent results for all other economies in the same sub-region (in this case South-East Asia). In this regard, the graph shows relative percentage shares for the 6 different value-added components account for in gross exports to the world across all South-East Asia economies. One among many possible insights from this graph is that Viet Nam and Singapore have the largest share of ‘Foreign production consumed by the importer’ (i.e. backward linkages) amounting to over 35% of their gross exports to the world — highlighting that these economies use a large share of intermediate inputs from other economies for their own export production. This is something that can be explored in more depth in the ‘Backward linkages’ section of the website to understand which economies contribute most of these intermediate inputs, and which exporting sectors in Viet Nam and Singapore use majority of these imported intermediates for their own production.
There are also a number of additional insights that this graph offers us through its interactive features. Simple hover your mouse over any of the bars in the graph to see relevant information:
For example, hover your mouse over the red bar (Domestic production used in the importers exports) for Malaysia. You will see that domestic production used in the importer’s exports (i.e. forward linkages) accounts for 20.18% of Malaysia’s exports to the world. This is also shown in absolute terms ($44.97 billion).
In a similar manner, you can examine the value-added structure for any South-East Asia economies’ exports to the world (or any importing economy of your choice).
You can also click on any of the legend items to remove a selected region from the graph. Click it again to add it back in.
Finally, you can also download the graph and underlying data by simply clicking on the three horizontal bars icon on the top right corner of the graph and choose your preferred format for download.