Timon Bohn, Steven Brakman, Erik Dietzenbacher, 15 June 2021

Global value chain analyses to examine the income gains from trade are particularly complicated by ownership relations between headquarters and subsidiaries. The consequence is that the value added generated within one country may well result in income in another country. This column presents the income perspective as a framework to deal with this complication. Trade deficits become smaller for wealthy countries and larger for developing countries. Discussions on ‘unfair’ trade should take the income perspective on board.

Yuqing Xing, 11 November 2019

In order to pursue ‘fair trade’, the Trump administration has imposed a punitive 25% tariff on $250 billion’s worth of Chinese goods. However, conventional trade statistics greatly exaggerate the US trade deficit with China. This column uses the iPhone as an example to demonstrate how the trade deficit is inflated and why value-added should be used to assess the bilateral trade balance. If multinational enterprises, including Apple, shift part of their value chains out of China, China may no longer play a central role in global value chains targeting the US market. Depreciation of the yuan will be insufficient to counter the effect. 

Koen De Backer, Sébastien Miroudot, Davide Rigo, 19 April 2018

Multinational enterprises that produce goods rely on services to organise their value chain, so barriers to investment in services are likely to affect their production. The column uses a new and comprehensive OECD database to measure the share of services in the exports of multinational enterprises, and also in the output of their foreign affiliates. The results suggest that policymakers may need to focus more on the services that support manufacturing industries.

Alejandro Cuñat, Robert Zymek, 15 October 2017

A large portion of international income differences remains poorly understood. It is traditionally attributed to cross-country differences in total factor productivity, which cannot be measured directly. This column argues that the importance of total factor productivity has been overstated because differences in countries’ patterns of international linkages have been overlooked. Using input-output data for 40 countries, it shows how the assumption that economies are closed has led traditional development accounting to overestimate total factor productivity.

Robert Johnson, Guillermo Noguera, 22 July 2012

The internationalisation of supply chains has been revolutionising international trade and trade policy for years. This column argues that expansion of international supply chains helps explain the so-called ‘distance paradox’, i.e. the fact that geography is still a powerful shaper of trade patterns despite declines in transport costs. It also argues that trade policy has played a prominent role in driving the expansion of global supply chains.


CEPR Policy Research