Writing on the Lowy Institute for International Policy’s blog (“The Interpreter”), Dr. Stephen Grenville, a trade policy expert based in Australia asks: “Are we measuring international trade correctly?”
In light of the rise in recent decades of multinational supply chains (so-called “global value chains”), Grenville suggests that conventional trade statistics are not providing a true picture of trade activity because they fail to account for the value of inputs in the production process that have been “unbundled”.
The familiar example of the iPad is used to explain that while the product is assembled in China, only about $10 of its total production costs takes place there with the vast majority of its cost coming from inputs made in other countries, including the intellectual property and design input from Apple in California.
Grenville points to a new data model developed by Australia’s central bank which incorporates value-added statistics and that offers to supply new insights about a country’s economy and trading relationships. “These value-add statistics don’t replace the conventional gross statistics,” Grenville says, but “they provide a valuable alternative perspective, sometimes with policy implications.”