Great Graphic: New Insight into Global Trade

This Great Graphic is a new tool developed by the OECD and the World Trade Organization.   It allows a more sophisticated understanding of modern trade of goods and services in which the production process has been fragmented. It is not simply global supply chains that we are interest in, but the valued-added chains. The quaint counting of good as they pass over borders is no longer as useful and indeed may be misleading given current practices.

Using this tool, one can see the role of imports in exports. It allows one to decompose the content of gross exports into domestic and foreign content. One can also see bilateral trade flows based on value-added. It offers greater insight into trade imbalances, competitiveness. The OCED provides a note here that explains the insight that can be gleaned.

In my book, Making Sense of the Dollar, I questioned the conventional measure of trade in light of globalization. I suspect the kind of information that the OCED/World Bank make available will, over time, change the way we think about trade.