Assessing Export Competitiveness through the Lens of Value Added
WORLD ECONOMY, 40 (2):275-296; 10.1111/twec.12362 FEB 2017
Abstract: Extensive changes in the organization of world trade over the last two decades have renewed concerns about countries’ ability to compete in export markets. The impact could be especially large in industries that participate in global value chains (GVCs). This study assesses the recent export performance of 56 countries in five industries associated with GVCs using an index of normalised revealed comparative advantage (RCA) that can be compared across industries and countries and new data on the domestic value added in exports from the OECD's Trade in Value-added database. For a number of the GVC industries, countries identified as the most competitive based on gross exports are often found to be less competitive when evaluated in terms of domestic value added. Business services are an important exception; several countries appear more competitive on a value-added basis than based on conventional measures of gross exports. Despite concerns about hollowing out, a number of major industrial countries remain highly competitive in one or more GVC industries, even from the perspective of domestic value added. A value-added approach to RCA provides insights that are not apparent from an exclusive focus on gross exports.