Globalization indicatorsThe Import Content Of Export

The case of the Netherlands

Marjolijn Jaarsma

Statistics Netherlands

April 27th 2004

AgendaGlobalization

Definitions, causes and characteristics

OECD introduction ‘globalization’ indicators

Monitoring globalization with new indicatorImport content of export

Internationalization of production processes

Problems in case of the NetherlandsRe-exports

New model

Economic globalization

New phase in international economic transactions, characterized by increasing economic interaction and integration among countries

Trade in goods and services increasingly matched by international investment and multinational activity

International framework has changed

Standard (trade) indicators become less telling New indicators needed, capable of looking beyond surface FT and FDI

How to ‘capture’ globalization

Globalization indicator(s) developed by OECDFocused on internationalization of production processes rather than international trade and investment

‘Import Content Of Export’The necessity to import in order to be able to export

Fraction import in an average unit of export

Relative integration with and dependence on foreign production

A high import content of export not necessarily bad

Internationalization of productionAnalysis of (internationalization of) production processes

Input-output tables (Netherlands)Supply consists of intermediate deliveries and deliveries to final demand (e + r)Use consists of intermediate deliveries, import and primary inputs

Total Uses input-output tables OECD Olisnet (40*40 sectors)Intermediate deliveries

e r

f

m

Use Supply

Agriculture Manufacturing Services Export Domestic demand Total

Agriculture 20 10 15 15 5 65 Manufacturing 15 25 15 20 5 80 Services 15 20 25 10 5 75 Import 5 15 10 5 5 40 Value added 10 10 10 5 5 40 Total 65 80 75 55 25 300

Input-output analysis (1)Sector output depends on final demand and intermediate demand (which depends on...)

Output cycle

How much output must each sector produce?

: total amount of final demand

: unity matrix

: matrix of technical coefficients

Amount of output each sector needs to produce in order to satisfy final and intermediate demand

I

fAIx 1

Leontieff inverse

A

f

Agriculture Manufacturing Services Agriculture 20 10 15 Manufacturing 15 25 15 Services 15 20 25 Total output 65 80 75

Agriculture Manufacturing Services Agriculture 0.31 0.13 0.2 Manufacturing 0.23 0.31 0.2 Services 0.23 0.25 0.33

Input-output analysis (2)Also imports needed to satisfy intermediate and final demand Matrix MC resembles matrix A

Ratio of import flow to sector output

Vector x: Amount of Dutch outputAdjusted Leontieff inverse excludes imports

Leontieff inverse essential in OECD indicator

dfMCAIx 1( fAIx 1

To From

Agriculture Manufacturing Services Export Domestic demand

Total imports

Agriculture 15 10 10 15 5 55 Manufacturing 10 15 10 15 5 55 Services 10 10 15 15 5 55 Non-competing imports 5 5 5 5 5 25 Total imports 40 40 40 50 20 190

Agriculture Manufacturing Services Agriculture 0.23 0.13 0.13 Manufacturing 0.15 0.19 0.13 Services 0.15 0.13 0.2

Import content of export‘Manual of economic globalization indicators’

Import Content of Export indicator

: share of import per sector of sector output

: Leontieff inverse (adjusted!)

: share of export per sector in total sectoral export

Yields a single figure for whole economyRequires the use of Total Uses input-output tables and Import Flows tables (OECD Olisnet)

E

eAIm 1

m

1 AI

Ee

Import content of Dutch exports

ICOE risen from 33.6% in 1995 to 34.7% in 1997

Decline also found in FT – picked up after 1998

33.0

33.2

33.4

33.6

33.8

34.0

34.2

34.4

34.6

34.8

1995 1996 1997 1998

%

Problems

Differences classificationFT data: commodity flows

Input-output tables: economic activity

Re-exports Focusing on m and e/E yields structurally lower ICOE

Important activity for Netherlands

Extracted from trade data and represented separately

Re-exports not reported separately for many other OECD countries; somehow assigned to sectoral exports

Different interpretation ICOE indicator between countriesIndicator might not be ready for cross-country comparison

Use Supply

Agriculture Industry Services Export Domestic demand Total

Agriculture 20 10 15 15 5 65 Industry 15 25 15 20 5 80 Services 15 20 25 10 5 75 Import 5 15 10 5 5 40 Value added 10 10 10 5 5 40 Total 65 80 75 55 25 300

New model – Adjusted ICOEOriginal indicator

: Sum of all intermediate import flows entering sectors of production (as a share of output)

Leaves out re-exports in m and E

Expand composition vector m to include re-exportsMatrix of intermediate import flows (MC)

Matrix of re-exports, as a share of sectoral export

Further manipulationsImport content of export; subdivided for each intermediate delivery

E

eAIm 1

Use From

Agriculture Manufacturing Services Export Domestic demand Total

Agriculture 15 10 10 15 5 55 Manufacturing 10 15 10 15 5 55 Services 10 10 15 15 5 55 Non-competing imports 5 5 5 5 5 25 Total 40 40 40 50 20 190

!

m

ICOE

Input-output tables 40*40 9*9Clusters of economic activity

ISIC rev. 3 Description

1 15/19 Food, beverages, tobacco, textile, textile products, leather and footwear

2 20/22 Wood, wood products, pulp, paper, printing and publishing

3 23/25 Coke, refined petroleum products, nuclear fuel, chemical products, rubber and plastic products

4 26/29, 36, 37 Heavy manufacturing industry and remaining manufacturing activity 5 30/33 ICT sector

6 34, 35 Transport equipment

7 40/45 Utility sectors and construction 8 50/55 Trade, repair, hotels, restaurants

9 1/15, 60/99 Residual group: Agriculture, quarrying, transport, storage, post, telecommunications, financial and business services, government and other services

Import content of export per deliveryTo deliver 1 unit of export, sector j needs intermediate deliveries from sector i, which consist for x% of imports

Intermediate deliveries sector 5 (ICT) receives from sector 5, consist for 67.86% of imports

Useful for detailed analysis of internationalization production

1 2 3 4 5 6 7 8 9 1 26 49 39 52 36 40 36 36 28

2 40 28 35 36 32 31 39 30 27

3 66 68 35 51 57 58 48 55 55

4 48 41 48 39 54 42 39 48 44

5 80 75 77 80 68 68 74 79 77

6 64 66 56 64 68 43 65 88 56

7 2 2 2 2 2 2 1 2 1

8 1 1 1 1 1 1 1 1 1

9 29 29 49 31 37 37 17 17 11

Adjusted ICOEObjective indicator

Monitoring globalization (1 figure) cross-country

Import content Dutch exportsWhole economy, including re-exports

36.8

37.0

37.2

37.4

37.6

37.8

38.0

1995 1996 1997 1998

%

ConclusionInitial indicator overlooks part of Dutch tradeAdjusted calculations lead to higher import content of Dutch exports

On aggregate basis, cross-country comparison possibleDisaggregated suitable for in depth analysis

The fraction imports in an average export unit approximately 40%Further questions mjra@cbs.nl

Including re-exports Excluding re-exports Difference 1995 37.6% 33.6% 4.0 1996 37.1% 33.9% 3.2 1997 37.8% 34.7% 3.1 1998 37.8% 33.6% 4.2