Globalisation of production skews trade figures

The global value chains of transnational corporations are skewing international trade figures, according to a United Nations Conference on Trade and Development (Unctad) report released on recently. Entitled ‘GVCs (global value chains) and Development: Investment and Value Added Trade in the Global Economy’, the report says “relentless zigzagging” across borders of goods and services as they are upgraded means that some 28% of the value of this trade – or about US$5 trillion – is overstated through double counting. The export value of copper ore extracted in one country, for example, counts once as a contribution to that nation’s gross domestic product (GDP), but then is counted again – as many as several times – as it progresses from raw to upgraded to finished goods as it is exported after processing by other countries, according to the report. It found that global trade was increasingly dominated by what is described as “complex and circuitous routes” followed by goods and services as they are upgraded into finished products. Value chains administered by TNCs now account for 80% of the $20 trillion in global trade each year, it found. “Global value chains are everywhere. They show that investment and trade are two sides of the same coin. Policy-makers have to take into account both sides when thinking about economic growth and development,” says Unctad secretary-general Supachai Panitchpakdi.