Economics Dictionary of ArgumentsHome
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| Value chain: In economics, a value chain is the full range of activities that a business or a series of businesses perform to create a product or service. This process includes every step from the initial design and sourcing of raw materials to production, marketing, delivery, and even post-sale services. Each stage adds value to the final product. See also Production, Trade, Trade policy, International trade._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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IMF Working Papers on Value Chains - Dictionary of Arguments
Jaumotte I 4 Value chains/Tariff policy/Tariff impacts/Eugster/Jaumotte/MacDonald/Piazza: The increases in bilateral tariffs between the US and China applied to goods at different places in the value chain (e.g., from steel to washing machines), while tariffs on and among other countries were much less affected. This raises the question to what extent countries and sectors not directly targeted by US and Chinese tariffs would also be affected, either through lower demand for their intermediate exports, which for instance were assembled in China, higher costs for intermediate inputs or lower competition in export markets. Several theoretical contributions have investigated this question and stressed that while China and the US are hurt the most by higher bilateral tariffs, other countries may either benefit or suffer depending on their sectoral composition (see IMF 2019(1) and references therein). >US Import Tariffs, >Tariff responsivity, >Tariff impacts, >Tariffs. Among mostly OECD countries, average tariff levels had declined from roughly 4.5% in the mid1990s to about 2% in 2015, with substantially more pronounced declines in cases such as India, China and many countries in Eastern Europe ((…)* . By 2008-09, when progress in trade liberalization slowed, tariffs generally constituted a very small share of the costs of international trade (e.g. Hummel, 2007(2); Escaith, 2017(3)). Falling tariffs, together with improved transportation and communication technologies have contributed to an increasingly tight integration of production (…) by an increase in average global value chain (GVC) participation rate.** Final goods often combine value added from multiple locations and components that cross borders several times on their way to the eventual consumer. In such a world, exporters from different countries not only compete with each other and with domestic producers, they also supply intermediate inputs, which may be further processed and re-exported to the rest of the world. Jaumotte I 6 To our knowledge, we*** are the first paper to estimate jointly not only the effects of domestic protection and tariffs on inputs, but also of tariffs that are further down in the value chain or imposed on competitors. This is particularly relevant in the current context. Given China’s role as a global production hub, higher tariffs on its exports may indirectly affect firms all over the world. However, our paper also highlights a general issue, as omitting the additional tariff measures potentially biases the estimated effects of included tariffs and underestimates spillovers to parts of the economy not directly targeted.**** >Value chains/Economic theories, >International trade, >Production, >Production structure, >Production theory, >Production factors, >Productivity. Jaumotte I 14 Labour productivity: Labor productivity seems most strongly affected by the upstream and downstream tariffs, whose coefficients are negative and statistically significant (…). Results for total factor productivity follow the ones for labor productivity quite closely. *For example, between 1995 and 2015 value added weighted tariffs on manufacturing goods declined from 32% to 11% in the case of India, from 20% to 7% for China and from 14% to 0.7% for Romania. **Global value chain (GVC) participation is defined as the sum of forward- and backward GVC participation, where backward GVC participation refers to the share of foreign value added in gross exports and forward GVC participation is the ratio of domestic value added contained in inputs sent to third economies for further processing and export, over the country’s total gross exports. *** Johannes Eugster, Florence Jaumotte, Margaux MacDonald, and Roberto Piazza. (2022). The Effect of Tariffs in Global Value Chains. IMF Working paper 22/40. International Monetary Fund. **** Studying the effects of domestic protection in isolation can bias the effect of a tariff due to omitted variables. When looking at a particular sector for example, the estimated effects of reduced domestic protection could be exaggerated if the tariff reduction is part of a reciprocal international agreement. In such a context, the effect of easier access to the market of the partner country (captured in our downstream tariff) could provide additional benefits but may also be offset if competitors enjoy similar benefits (captured by our diversion tariff). This issue becomes more complex when studying the effects beyond a particular sector, as the sectoral interaction can lead to spillovers, including to a priori non-tradable sectors. 1. Caceres, Carlos, Rui Mano and Diego A. Cerdeiro, 2019. "Trade Wars and Trade Deals: Estimated Effects using a Multi-Sector Model," IMF Working Papers 2019/143, International Monetary Fund. 2.Hummels, David 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer. 3.Escaith, Hubert, 2017. "Accumulated trade costs and their impact on domestic and international value chains" in Global Value Chain Development Report 2017 - Measuring And Analyzing The Impact Of GVCs on Economic Development, World Bank Group 2017_____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
IMF Working Papers Jaumotte I Florence Jaumotte Johannes Eugster Margaux MacDonald, The Effect of Tariffs in Global Value Chains. IMF Working paper 22/40. International Monetary Fund. Washington, D.C. 2022 |
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