Social Sciences in China (Chinese Edition)

No.9, 2015

 

Gross Trade Accounting Method: Official Trade Statistics and Measurement of the Global Value Chain

(Abstract)

 

Wang Zhi, Wei Shangjin and Zhu Kunfu

 

The revolution in the global value chain has resulted in the rapid growth of international trade in intermediate goods, making traditional statistics on total trade volume seriously misleading for our understanding of the pattern of world trade. This article extends the method of decomposing a country’s gross trade flows put forward by Robert Koopman and others to research at the sectoral, bilateral and bilateral sectoral levels, decomposing international trade flows at all levels into value-added exports, returning domestic value-added, foreign value-added and purely double-counted trade in intermediate goods, etc. These are divided into sixteen pathways depending on tradable goods’ value source, territory of final absorption and absorption channels. In doing so, we build up a systematic framework of correspondence between traditional international trade statistics and the system of national accounts. This new accounting system reveals the methodological limitations of some widely used indicators in international trade research, including the balance of trade, vertical specialization, value-added exports, revealed comparative advantages, etc. We then re-interpret these indicators.