IDEAS home Printed from https://ideas.repec.org/a/bla/chinae/v30y2022i3p210-238.html
   My bibliography  Save this article

Is Bilateral Value Added in Trade between China and EU Countries Efficient?

Author

Listed:
  • Haiou Mao
  • Ling Xiong

Abstract

By applying stochastic frontier analysis, and replacing total export with value added in exports as a more accurate measure of domestic content embodied in exports, we estimate the trade efficiency between China and EU countries and analyze the determinant factors. The results show that the value added in trade between China and EU countries is running at a low level of efficiency, and the trade efficiency has an obvious imbalance between export and import. Our calculation of unexplored trade potential indicates that western EU countries, such as France, Germany, Italy, and Spain together are China's top trading partner with the highest unexploited trade potential. Based on the principal component analysis of 14 trading‐related variables, trade efficiency determinant results show that the tangible trade infrastructures of both exporter and importer matters most, including airports, container shipping, Internet, and broadband infrastructures. Meanwhile, intangible trade infrastructures, including customs procedures and domestic business environments, has a significant, but smaller influence on trade efficiency. Our important findings shed light on practical trade policymaking to encourage Sino‐EU trade collaboration.

Suggested Citation

  • Haiou Mao & Ling Xiong, 2022. "Is Bilateral Value Added in Trade between China and EU Countries Efficient?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(3), pages 210-238, May.
    • Handle: RePEc:bla:chinae:v:30:y:2022:i:3:p:210-238
    DOI: 10.1111/cwe.12424
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/cwe.12424
    Download Restriction: no
    File URL: https://libkey.io/10.1111/cwe.12424?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Coşar, A. Kerem & Demir, Banu, 2016. "Domestic road infrastructure and international trade: Evidence from Turkey," Journal of Development Economics, Elsevier, vol. 118(C), pages 232-244.
    2. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(3), pages 411-432, September.
    3. Alicia Garcia Herrero & Jianwei Xu, 2017. "China's Belt and Road Initiative: Can Europe Expect Trade Gains?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 25(6), pages 84-99, November.
    4. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2014. "Tracing Value-Added and Double Counting in Gross Exports," American Economic Review, American Economic Association, vol. 104(2), pages 459-494, February.
    5. Portugal-Perez, Alberto & Wilson, John S., 2012. "Export Performance and Trade Facilitation Reform: Hard and Soft Infrastructure," World Development, Elsevier, vol. 40(7), pages 1295-1307.
    6. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
    7. Magee, Christopher S.P., 2008. "New measures of trade creation and trade diversion," Journal of International Economics, Elsevier, vol. 75(2), pages 349-362, July.
    8. Matthias Hackler, 2020. "Rapprochement amid readjustment: how China sees issues and trends in its changing relationship with the EU," Asia Europe Journal, Springer, vol. 18(2), pages 251-258, June.
    9. Geetha Ravishankar & Marie M. Stack, 2014. "The Gravity Model and Trade Efficiency: A Stochastic Frontier Analysis of Eastern European Countries' Potential Trade," The World Economy, Wiley Blackwell, vol. 37(5), pages 690-704, May.
    10. Gabriela Ortiz Valverde & Maria C. Latorre, 2020. "A computable general equilibrium analysis of Brexit: Barriers to trade and immigration restrictions," The World Economy, Wiley Blackwell, vol. 43(3), pages 705-728, March.
    11. Mau, Karsten, 2017. "US policy spillover(?) – China’s accession to the WTO and rising exports to the EU," European Economic Review, Elsevier, vol. 98(C), pages 169-188.
    12. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October.
    13. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-160, February.
    14. Michael Hübler & Axel Herdecke, 2020. "The US trade dispute: blunt offense or rational strategy?," Applied Economics Letters, Taylor & Francis Journals, vol. 27(9), pages 690-696, May.
    15. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    16. Sunghoon Chung, 2020. "Understanding the role of China's domestic market in the (unequal) growth of world economy," The World Economy, Wiley Blackwell, vol. 43(8), pages 2199-2221, August.
    17. K. Kalirajan, 1999. "Stochastic varying coefficients gravity model: An application in trade analysis," Journal of Applied Statistics, Taylor & Francis Journals, vol. 26(2), pages 185-193.
    18. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    19. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
    20. Knill, April & Lee, Bong-Soo & Mauck, Nathan, 2012. "Bilateral political relations and sovereign wealth fund investment," Journal of Corporate Finance, Elsevier, vol. 18(1), pages 108-123.
    21. Robert Stehrer, 2012. "Trade in Value Added and the Valued Added in Trade," wiiw Working Papers 81, The Vienna Institute for International Economic Studies, wiiw.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Tutu Boadu & Camara Kwasi Obeng & Isaac Dasmani & William Gabriel Brafu‐Insaidoo, 2021. "Assessing Ghana's bilateral exports potential and gap," African Development Review, African Development Bank, vol. 33(4), pages 634-647, December.
    2. Ebaidalla Mahjoub Ebaidalla & Mohammed Elhaj Mustafa Ali, 2018. "Assessing the Intra-Arab Trade Integration and Potential: Evidence from Stochastic Frontier Gravity Model," Working Papers 1247, Economic Research Forum, revised 07 Nov 2018.
    3. Coelli, Tim J., 1995. "Recent Developments In Frontier Modelling And Efficiency Measurement," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 39(3), pages 1-27, December.
    4. Zuniga Gonzalez, Carlos Alberto, 2009. "Technical efficiency of organic fertilizer in small farms of Nicaragua: 1998-2005," MPRA Paper 49352, University Library of Munich, Germany, revised 24 Sep 2010.
    5. Giannis Karagiannis & Stelios Katranidis & Vangelis Tzouvelekas, 1999. "Measuring Productive Efficiency of Seabass and Seabream Farms in Greece," Working Papers 9911, University of Crete, Department of Economics.
    6. Magdalena Olczyk & Aleksandra Kordalska, 2017. "Gross Exports Versus Value-Added Exports: Determinants and Policy Implications for Manufacturing Sectors in Selected CEE Countries," Eastern European Economics, Taylor & Francis Journals, vol. 55(1), pages 91-109, January.
    7. Pantzios, Christos J. & Rozakis, Stelios & Tzouvelekas, Vangelis, 2006. "Evading Farm Support Reduction via Efficient Input Use: The Case of Greek Cotton Growers," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 38(3), pages 555-574, December.
    8. Robert C. Feenstra, 2017. "Statistics to Measure Offshoring and its Impact," NBER Working Papers 23067, National Bureau of Economic Research, Inc.
    9. Sun, Chuanwang & Zhan, Yanhong & Gao, Xiang, 2023. "Does environmental regulation increase domestic value-added in exports? An empirical study of cleaner production standards in China," World Development, Elsevier, vol. 163(C).
    10. Bo Meng & Ming Ye & Shang‐Jin Wei, 2020. "Measuring Smile Curves in Global Value Chains," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(5), pages 988-1016, October.
    11. Forsund, Finn R. & Sarafoglou, Nikias, 2005. "The tale of two research communities: The diffusion of research on productive efficiency," International Journal of Production Economics, Elsevier, vol. 98(1), pages 17-40, October.
    12. Tong, Q. & Swallow, B. & Zhang, L. & Zhang, J., 2018. "Risk Attitude, Technical Efficiency and Adoption: An Integrated Approach to Climate-Smart Rice Production in the Jianghan Plain, China," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277311, International Association of Agricultural Economists.
    13. Boya Zhang & Shukuan Bai & Yadong Ning & Tao Ding & Yan Zhang, 2020. "Emission Embodied in International Trade and Its Responsibility from the Perspective of Global Value Chain: Progress, Trends, and Challenges," Sustainability, MDPI, vol. 12(8), pages 1-26, April.
    14. Lionel Fontagné & Ann Harrison, 2017. "The Factory-Free Economy. Outsourcing, Servitization, and the Future of Industry," PSE-Ecole d'économie de Paris (Postprint) halshs-02923043, HAL.
    15. Mahdi Ghodsi, 2020. "Is Austria’s economy locked-in in the CESEE region? Austria’s competitiveness at the micro-level," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(3), pages 669-693, August.
    16. Bo Meng & Norihoko Yamano, 2017. "Compilation of a regionally extended inter-country input–output table and its application to global value chain analyses," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 6(1), pages 1-38, December.
    17. Benkovskis Konstantins & Wörz Julia, 2018. "“Made in China”: how does it affect our understanding of global market shares?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(2), pages 1-26, June.
    18. Mahdi Ghodsi & Robert Stehrer, 2022. "Trade policy and global value chains: tariffs versus non-tariff measures," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(3), pages 887-916, August.
    19. Tunç, Gül İpek & Akbostancı, Elif & Türüt-Aşık, Serap, 2022. "Ecological unequal exchange between Turkey and the European Union: An assessment from value added perspective," Ecological Economics, Elsevier, vol. 192(C).
    20. Nazir Muhammad Abdullahi & Olufemi Adewale Aluko & Xuexi Huo, 2021. "Determinants, efficiency and potential of agri-food exports from Nigeria to the EU: Evidence from the stochastic frontier gravity model," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(8), pages 337-349.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:chinae:v:30:y:2022:i:3:p:210-238. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/iwepacn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.