Archive:Global value chains

New publication (downloadable PDF): Global Value Chains and Economic Globalization - Towards a New Measurement Framework - Dr. Timothy J. Sturgeon, Industrial Performance Center, MIT

This article takes a look at global value chains (GVC) from the perspective of European Union (EU) structural business statistics produced and disseminated by Eurostat.

When the EU 2020 strategy for growth was first communicated to the European Parliament and the Council, it was stated that "success in the intensively interacting new world economy depends on enterprises’ ability to access international markets and exploit global value chains." (more information in this PDF file - ) Part of the strategy is an industrial policy for the globalisation era, and the Commission sees a need to cover "every part of the increasingly international value chain – from access to raw materials to after-sales service" (see).

Globalisation - © M. Schmiemann

Economic globalisation – policy needs, statistical evidence and links

Challenges to the traditional view

Patchwork - © M. Schmiemann

Figure 1: Stakeholders

The traditional statistical image of economic globalisation is patchwork, for several reasons. The compilation of national accounts and other economic and business statistics is complicated by globalisation. Traditionally, official statistics have focused on measuring the economy by domestic activities. With a more globalised economy, cross-border production arrangements have become more common and influence the economies of most countries. It has thus been, and continues to be, a very challenging task for national statistical institutes and their respondents alike, to compile and provide information on international activities and affiliates and contractors abroad. The issue of measuring global value chains is further complicated, in several dimensions, by the increased economic importance of multinational enterprises. First, there is the issue of multiple international legal and organisational domains. Second, there is the challenge of defining GVCs in statistically measurable elements and terms; going from theory to practice. Third, there is the complexity in measuring processes, as statistics traditionally conceptualise and measure tangible phenomena in terms of inputs and outputs opposed to processes and forms of organisation in between these two.

There is thus a clear need to go beyond the domestic view/approach and the patchy image of available information, and move towards a holistic framework as enterprises are increasingly transferring parts of their production processes to other countries.

Traditional statistical units and trade and business statistics give only a limited national perspective and do not provide a comprehensive analytical framework for users.

The problems for relevant statistics on global value chains are therefore that:

• there is no consistent framework for a narrative for users;
• there is no coordinated measurement approach;
• the currently available data of interest is patchy at best and produced with a "domestic" view at national level within national boundaries (as in GDomesticP)

Prior work by stakeholders

Workshop - © M. Schmiemann

Figure 2: Sketch of GVC projects

Early work by Eurostat on extending business statistics to account for trans-national activities included the development projects on inter-enterprise relations, on demand for services, and on business services, now part of mandatory data collections in Eurostat's business statistics framework.

Much additional relevant data is available within Eurostat, e.g.:

• the comprehensive list of globalisation indicators is under revision - see Work Package 1 'Economic globalisation indicators' on the 'Global Value Chains' ESSnet project page;
• data on international trade in goods and services;
• foreign affiliates statistics (FATS) (see also here);
• balance of payments (BoP) (ESMS metadata file — bop_esms)
• EuroGroupsRegister (EGR);
• Information on European multinationals and proposals from the ESSnet on profiling;
• External trade by Enterprise Characteristics with its direct link to international activities;
• Foreign direct investment (FDI).

For a short summary see here.

A particular pivotal role is played by the data collections on International sourcing, which are currently being extended to provide more data on global value chains and sourcing by enterprise function.

In June 2011, a workshop bringing together experts from all relevant stakeholders was held in Luxembourg – for the presentations delivered at the event click here. In addition, a multitude of documents have been drafted and studies are being done. Just to mention a few, the OECD has hosted related events and drafted stock taking papers, there is the European Commission-sponsored world input/output tables (WIOD) project, other Commission activities on the internationalisation of value chains and security of supply, on trade in value added and the framework of the European Competitiveness report. Other international organisations may provide inputs, such as the UNECE Guide 'Impact of Globalization on National Accounts'; the World Trade Organization (WTO) has set up a Made in the World Initiative (MIWI) to support the exchange of projects, experiences and practical approaches in measuring and analyzing trade in value added etc. There are several case studies on global value chains, such as the iPod example, the Barbie doll, the iPhone and Boeing's dreamliner.

These initiatives all shed light (often circumstantial, especially the product/case studies) on different dimensions of global value chains and international production and sourcing, yet the overall framework is missing.

Eurostat's approach

Eurostat has recently embarked upon an ambitious project to address some of those shortcomings with the following objectives:

• Establish a reference framework which will be internationally accepted, a manual providing a conceptual frame, metrics and a narrative for users to describe the data framework around international sourcing, global value chains, and economic globalisation in general;
• Provide a draft set of indicators for global value chains and economic globalisation in general;
• Describe the extent of international sourcing – status quo and future plans: How many enterprises source internationally and establish global value chains;
• Investigate the importance of a number of motivation factors for the enterprise to carry out international sourcing activities and value chain structuring: Cost reductions, and the reduction of labor costs in particular, figure as prominent motives in the literature on sourcing and global value chains;
• Identify the destinations of international sourcing – in particular the destinations for the international sourcing of core vis-à-vis support functions using the business function approach;
• Evaluate the impacts of international sourcing activities on enterprises – especially the impact on domestic employment;
• Describe the establishment and structuring of value chains and ways and strategies of going global;
• Decompose existing value chains beyond available circumstantial evidence (iPods, cell phones, aircrafts) and analyze the usefulness for the collection of statistical evidence;
• Identify correlations to the productivity/profitability of enterprises and to the domestic employment situation; The core of the project is built by an ESSnet on measuring global value chains and international sourcing, followed by microdata linking, and by international expertise procured under contract, with a view to developing and promoting a manual by 2013.

Timetable of milestones in the approach

Tentative timetable of major milestones in the project:

• End-2011: Contract for external expertise concluded

• 2011: ESSnet on GVCs and renewed GVC survey ongoing

• Oct 2012: International workshop on global value chains

• End-2012: Deliverables from external contract: draft conceptual framework and indicators (manual-style with narrative and data sources) 2012: Start of microdata linking in National Statistical Institutes

• 2013: Enlargement of the conceptual framework and its promotion Results from the ESSnet, survey with microdata linking, framework established Participation in a session in the 2013 ISI conference

Contact: Pekka Alajaasko

See also

• International sourcing of business functions

Further Eurostat information

Publications

• Features of International Sourcing in Europe in 2001-2006 - Statistics in focus 73/2009
• Global Value Chains and Economic Globalization - Towards a New Measurement Framework (Dr. Timothy J. Sturgeon, Industrial Performance Center, MIT - PDF file)
• The governance of global value chains (Gary Gereffi, John Humphrey and Timothy Sturgeon - UN - PDF file)
• Increasing returns and economic geography (OECD - PDF file, 1.26 MB)
• International sourcing by business function (Statistics Denmark)
• International Sourcing in Europe - Statistics in focus 4/2009
• Plans for International Sourcing in Europe in 2007-2009 - Statistics in focus 74/2009
• Services outsourcing in the EU (Eurofound - PDF file)
• Trade in intermediate goods and services (OECD - PDF file)
• Trade in value added (World Bank - PDF file)

Database

• Structural business statistics (sbs) (New activity classification (NACE Rev. 2), see:

International sourcing statistics survey 2007 (iss_07)

Background Information - collection round 2007 (iss_bckinfo)

International sourcing activity - collection round 2007 (iss_souract)

Plans for and barriers on international sourcing - collection round 2007 (iss_planbarr)

Dedicated section

• Structural Business Statistics: globalised businesses

Methodology / Metadata

• International sourcing statistics - all activities (ESMS metadata file — iss_esms)
• International trade in services, geographical breakdown (ESMS metadata file — bop_its_esms)

External links

• OECD - Staying Competitive in the Global Economy: Moving Up the Value Chain (Synthesis Report)
• UNECE - Impact of globalization on national accounts
• WTO - Made in the World Initiative (MIWI)