Some interesting graphs from the WTO world trade reportPosted: October 21, 2014
I mainly work in applied trade and investment policy at the moment, and I like graphs, so here are some graphs from the latest WTO World Trade Report that tell (or could tell) interesting stories about the state of the global trade system at the moment:
Not only is the world starting to invest more of its money in developing countries, developing countries are beginning to invest more abroad as well:
Global value chains
The big thing in trade economics at the moment is trying to get a grips on the implications of commodity chains, or global value chains, or global supply chains, or dispersed production networks (we’ve yet to settle on a definitive term, although ‘global value chains’ seems to be winning, at least among the papers I read.) This graph shows the distribution of GDP per capita for countries that participate strongly in value chains and for countries that participate only weakly. It’s not clear which direction the causality runs here (are you more likely to be part of GVCs if you’re rich, or are you more likely to be rich if you’re part of GVCs?) or even whether there’s causality at all, but it’s a good way of getting a handle on the economic geography of trade networks:
Part of the reason global value chains are interesting is that it heightens the case for tariff reductions. We’ve always known that tariffs harm producers that use imported goods in making their final products, but this effect becomes even more important when participation in global value chains increases. With respect to tariff rates on parts and components, there’s been convergence between developed nation tariffs and developing nation tariffs over the past few decades:
Around the Asia-Pacific (perhaps elsewhere as well) you hear policymakers talking about ‘climbing the value chain’, or some similar verb. Everyone wants to be up at the high value-added end, where you get paid for, say, designing a car rather than putting it together. Of course, not everyone can actually be at the high end of value chains. This shows an index of position in value chains with the 1995 position as a green diamond and the 2008 position as a blue bar.
There seem to be some patterns in this data (for example, countries that were higher up the value chain in 1995 seem, on average, to be even higher in 2008) but it’s hard to tell because it’s not a particularly easy chart to read. When you have a comparison between two positions, I like to use a slope graph, which can make some of this a bit easier to see.