New OECD, WTO standards changing the view of global trade

Want China Times, Staff Reporter 2013-05-28

Cargo containers at Lianyungang, Jiangsu province. (Photo/Xinhua)

According to a new method for measuring global trade embraced by the Organization for Economic Cooperation and Development and the WTO, the US remains the world's largest trade nation. China's trade surplus has been greatly scaled down and its trade surplus with Japan will be reversed to a trade deficit under the scheme.

After being processed and assembled in China, the shipment value of Apple smartphones, based on ex-factory prices, is calculated as the export value of China to the US, although the real added value pocketed by China amounts to only a fraction of the reported number. The great majority of the value actually belongs to Japan, South Korea, Germany and Taiwan.

In 2012, China racked up US$3.87 trillion in foreign trade, the highest worldwide, surpassing US$3.82 trillion for the US.

Shanghai's First Financial Daily points out that, given the trends of globalization, cross-border investments and the share of intermediary goods in global trade, old measurement methods are inaccurate. They err after repeated calculations in trade value and understate intermediary-goods trade, exaggerating the seriousness of the global trade imbalance.

To rectify the distorted data, the OECD and WTO jointly developed a "statistical system for trade added value" last year, taking into account only the actual added value of a nation in its participation in the global industrial chain. This replaces the previous method of making one calculation for either exports or imports every time certain goods pass through a nation's customs.

Based on previous measurements, China's export-import value topped US$2.49 trillion in 2009, 70% of the US$3.54 trillion registered by the US. Under the new data regime, China's total trade, based on added value, amounted to US$1.61 trillion in 2009, 59.8% of the US$2.69 trillion in the US. This results in the US remaining on top in total export-import value in 2012. The traditional methods greatly bloated the scale of global trade and the extent of trade imbalance, due to the repeated calculation of trade value, according to the report.

The "statistical system for trade added value" more realistically delineates the landscape of global trade. It helps nations around the world to have a more accurate grasp of their actual status in the global market, offering them a solid basis for understanding the development direction of their currency's exchange rate, said the report.

The new calculations also conform to a new trend in which intermediary goods play an increasingly large role, as production processes for goods now often takes place in a number of nations. The previous model measured the shipment of final products, whereas now intermediary products are bounced sometimes to multiple locations before becoming finished products. The previous figures are biased as well towards countries situated in the downstream sector of the global value chain. In the production process of Apple's mobile phones, for instance, China only takes charge of final assembly, which accounts for less than 10% of the products' ex-factory value. However, under the previous system, the entire value of Apple's mobile phones was included in China's export value.