Transcript The rise of GVCs

Global Value Chains
Challenges and opportunities for Australia
Agenda
 The rise of GVCs
 The challenge for government
 The structural challenge
 Opportunities – services and manufacturing
 Manufacturing in ASEAN
The rise of GVCs
 Half the world’s manufacturing imports are themselves
semi-finished inputs
 Around 70% of world service imports are intermediate
services
 Trade in intermediate goods and services account for
the majority of international trade
The rise of GVCs
The rise of GVCs
The challenge for government
Efficient import capacity = competitive exports
“The statistical bias created by attributing commercial value
to the last country of origin perverts the true economic
dimension of bilateral trade imbalances. This affects the
”
political debate and leads to misguided perceptions.
- Pascal Lamy, former WTO Secretary-General (Source: Lowy Institute)
The challenge for government
iPhone global value chain
Source: OECD, 2011
The challenge for government
 GVCs rely on coordinated, efficient movement of goods
across borders
 Government can help through trade facilitation reform
 ‘Hard’ infrastructure improvements
 ‘Soft’ customs and border policies and procedures
 Accreditation and mutual recognition
 Trusted Trader
 MRAs in FTAs
The structural challenge
Foreign value-added content of gross exports by country
Source: OECD, 2008, 2009, 2011
The structural challenge
Australia’s industry share of domestic and foreign value content of gross exports
Source: OECD, 2011
The structural challenge
Australia’s imported intermediate inputs used for exports, by import category
Source: OECD, 2008, 2009, 2011
The structural challenge
Australia’s domestic value-added embodied in intermediate exports to main
partner countries
Source: OECD, 2008, 2009, 2011
Summing up – where are we
Australia’s domestic value-added embodied in intermediate exports to main
partner countries
Source: OECD, 2008, 2009, 2011
Opportunities
“I think what we’re seeing is a big shift away from large,
vertically-integrated organisations, towards smaller, more
independent units of production. Global value chains have
emerged as a predominant form of activity in both
manufacturing and in services, and the two are increasingly
”
blurred.
- Roy Green, Dean, UTS Business School (Source: Manufacturers’ Monthly)
“Australia will never win a race to the bottom on price and
we should not seek to do so. Rather, the key to Australia’s
future prosperity is to gain a permanent seat at the high
value-added head of the GVC table. To that end, the impact
GVCs have on the service economy is a primary
”
consideration.
- Nicholas Humphries, Australia Customs and Border Protection Fellow, Lowy
Institute
Services and manufacturing
Services content of gross exports by country, gross and value-added terms
Source: OECD, 2011
Services and manufacturing
Services value-added embodied in manufacturing exports, by country
Source: OECD, 2011
Services and manufacturing
Source: OECD/WTO/Austrade
Manufacturing in ASEAN
 5% of global manufacturing
 Easy access for Australia + regional liberalisation
initiatives
 Average tariffs across ASEAN-6 virtually zero since 2010
 ASEAN 6 = 95% of regional GDP; US$225 billion attracted
to manufacturing from 2009-2013
Manufacturing in ASEAN
Source: Dealogic/McKinsey
Case: Thailand - Automotive
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Thailand’s 3rd largest industry – 12% of GDP
4th largest in Asia
3m vehicle p/a capacity; 1800 parts
suppliers
Growing aftermarket sector with 55% of
vehicles 5yrs+
Parts sector supplies 100% of local pickup
components, 60% of passenger car
components
Wrapping up
 Australia’s integration with GVCs is still tied to and
defined by resources and geography
 Services and to a lesser extent manufacturing are
bright spots of potential
 Government can help facilitation greater GVC
integration through trade facilitation reform
 Opportunity is right here, a short hop away
Thank you
Niels Strazdins
Head Research Manager
Export House, 2/22 Pitt St, Sydney
[email protected]