Gross vs value-added exports: Relevance for measuring competitiveness in a small open economy

Geopolitical developments in recent years have reshaped trade patterns in small open economies. In particular, sanctions imposed on Russia following the Russia–Ukraine conflict have increased trade between Russia and Western countries via third countries, boosting re-export activities. Technically, these do not qualify as traditional re-exports; instead, they represent intermediated trade, which is recorded as exports in official statistics. As a result, trade volumes and structures can be distorted by the export of goods not domestically produced, affecting the assessment of export competitiveness. Armenia provides an illustrative case, as its membership in the Eurasian Economic Union (EAEU) has positioned it as a hub for intermediated trade. This paper assesses the comparative advantages of Armenia as a small open economy under conditions of a high share of intermediated trade. The study applies a simultaneous analysis of comparative advantage indicators based on gross and value-added exports. The results show that value-added measures provide a more accurate assessment, as they isolate domestically generated value from imported components embodied in exports. In particular, re-export activities led to overestimation of the metals sector's competitiveness and an underestimation of the food, beverages, and tobacco sector when using gross export data. Combining both indicators allows for more informed trade and industrial policy decisions.