Where Does Value-Added Flow in Gross Exports, Mr. Newton? Global Supply Chains and New Regionalization's Effects in the Asia-Pacific

Abstract

The New Trade Theory proposes that participating in global supply chains (GVCs) enhances productivity and economies of scale. However, recent events like the COVID-19 pandemic and Ukraine crisis have exposed the vulnerabilities of GVCs to global risks. This study investigates the relationship between gross exports and the domestic value-added content of such exports, considering various factors, including labor productivity, especially in Belt and Road Initiative countries (A-P Belt and Road Initiative [BRI]). We analyze the role of GVCs using cross-sectional and panel data from the 2021 OECD Trade in Value-Added. Over the period from 2009 to 2018, we observed that countries with increasing productivity exported goods, services, and value-added to other countries experiencing similar productivity. Our findings indicate that export concentration contributes to increased value-added exports. However, we could not validate the effects of R&D spending, the real effective exchange rate, foreign direct investment inflows, and A-P BRI membership contributions using the difference-in-differences method.