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International Trade Costs, Global Supply Chains and Value-added Trade in Australia

Author

Listed:
  • Gerard Kelly

    (Reserve Bank of Australia)

  • Gianni La Cava

    (Reserve Bank of Australia)

Abstract

We examine how the structure of Australian production and trade has been affected by the expansion of global production networks. As conventional measures of international trade do not fully capture the impact of global supply chains, we present complementary estimates of value-added trade for Australia. These value-added trade estimates suggest that the United States and Europe are more important for export demand than implied by conventional trade statistics, as some Australian content is exported to those locations indirectly via east Asia. The estimates also highlight the importance of the services sector to Australian trade, as the services sector is integral to producing goods exports. We also find that, compared to thirty years ago, Australian production now involves more stages of production, a greater share of production occurs overseas, and more production occurs towards the start of the supply chain. For Australia, these structural adjustments mainly occurred during the 1990s, and we provide evidence that similar adjustments have occurred elsewhere in the world driven by several factors, including lower international trade costs, deregulation of markets that produce intermediate goods and services, and economic development in emerging economies, such as China.

Suggested Citation

  • Gerard Kelly & Gianni La Cava, 2014. "International Trade Costs, Global Supply Chains and Value-added Trade in Australia," RBA Research Discussion Papers rdp2014-07, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2014-07
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    File URL: https://www.rba.gov.au/publications/rdp/2014/pdf/rdp2014-07.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sean Langcake, 2016. "Conditions in the Manufacturing Sector," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 27-34, June.
    2. Thomas Carr & Kate Fernandes & Tom Rosewall, 2017. "The Recent Economic Performance of the States," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 1-12, March.
    3. Gerard Kelly, 2014. "Chinese Rebalancing and Australian Exports," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 23-30, December.
    4. Manalo, Josef & Perera, Dilhan & Rees, Daniel M., 2015. "Exchange rate movements and the Australian economy," Economic Modelling, Elsevier, vol. 47(C), pages 53-62.
    5. Paflioti, Persa & Vitsounis, Thomas K. & Teye, Collins & Bell, Michael G.H. & Tsamourgelis, Ioannis, 2017. "Box dynamics: A sectoral approach to analyse containerized port throughput interdependencies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 106(C), pages 396-413.
    6. Dai, Feng & Liu, Ruixiang & Guo, Hao & Du, Xiuhong, 2020. "How does intermediate consumption affect GVC positions? - A comparison between China and US," China Economic Review, Elsevier, vol. 63(C).
    7. Guonan Ma & Ivan Roberts & Gerard Kelly, 2016. "A Rebalancing Chinese Economy: Challenges and International Implications," RBA Annual Conference Volume (Discontinued), in: Iris Day & John Simon (ed.),Structural Change in China: Implications for Australia and the World, Reserve Bank of Australia.
    8. Geoff Weir, 2018. "Wage Growth Puzzles and Technology," RBA Research Discussion Papers rdp2018-10, Reserve Bank of Australia.

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    More about this item

    Keywords

    fragmentation; supply chains; trade costs; value-added trade;
    All these keywords.

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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