Gross output flows in global value chains

In recent years, with GVCs facing increasing frequency and intensity of supply disruptions, new tools are required to better understand the risks associated with GVC participation. Compared with Trade in Value-Added (TiVA) indicators, gross output indicators reflect that systemic GVC shocks, such as natural disasters or geopolitical events, typically disrupt the entire, i.e. accumulated, value of the shipment of a good, rather than only the value-added in the disrupted country. This means that the intermediate inputs sourced from/sent to a specific partner country may be counted more than once when goods or services cross borders multiple times.

Like TiVA indicators, gross output indicators account for:

• Direct trade reliance, for example, inputs sent from country A to country B directly, and
• Indirect or “hidden” trade reliance, for example, inputs sent from country A to country B via country C.

The indicators are based on the OECD’s Inter-Country Input-Output (ICIO) database available for all 76 TiVA countries for the time period of 1995-2020.

The FIR and FMR are import and export side measures, respectively. They can be interpreted as the share of total domestic output exposed to foreign disruptions in GVCs — upstream disruptions for FIR and downstream disruptions for FMR. Overall, both FIR and FMR account for (1) the size of direct and indirect exposure to a partner in the value chain; and (2) the distance to this partner in the value chain, i.e. the length of the value chain.

FPEM and FPEX are import and export side measures, respectively, which decompose a country’s exposure to inputs sourced from/sent to foreign trade partners through 1) the “face value” exposure stemming from direct trade links and 2) the “hidden” exposure caused by indirect trade links. Together, the two components  capture a country’s total exposure through both direct and indirect trade links, otherwise known as the “look through” indicators.

Additionally, the indicators are normalised (by total inputs – domestic and foreign – on the sourcing side, and total sales – domestic and foreign – on the selling side), ensuring that they range between 0% and 100% and provide an assessment of the size of direct and indirect gross output exposures.